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An overview of Land Economics in Urban Planning

Land resource is important for the economic activity, social perspectives and can be defined as geographical area. Yet there is more to land than which requires us to understand a few terms of economics and also those dealing with natural resources and agricultural means associated with it. These leads to provision of levy, benefits to the community and living hood of the people.

During industrialization the land acts as raw material through which resources are extracted. This extraction require the input of labour to obtain the final product / services. The extracted resources such as water, minerals, petroleum or any other product is then sold in the market as the final market or after processing and value addition. The final product provides with the money which is used to pay the wages and covers the cost of production. This trade provides government with revenue and tax as well depending on the product and associated cost.

Considering the case of agricultural activity, the land is put to use for growing crops. The input is in form of labour, fertilisers, seeds and other products. The crop then requires additional input in form of  sunlight, water so as to provide the farmer with final yield. Farming provides the entire world with the food to eat and at the same time act as an economic activity.

The growth in population over the 20th century and past decades, land is considered as a scare resource. This is very well understood and observed in urban areas which land prices are sky rocketing. Thus it is important to understand the basics of urbanisation, its impact and the context of land economics. The need of urban planning is also highlighted so as to use the land resource judiciously.

Land Pooling

Introduction to Land Economics

  • Land economics can be defined as the economic relationship between land & man. These economic relationships are affected by the physical location, geographical characteristics & other properties like attributes of land.
  • The economic relation of land can be viewed as the total sum of natural & manmade resources over it. This wide concept also comprises of water, earth surface, building, sites, structures, mineral resources, water resources & other natural phenomenon like sunlight, rain & wind.
  • Land economics deal with man’s economic use of land (depending upon the physical, economical, technical, institutional factors etc) which controls or affect the use of resources.
  • Talking from our own point of view here, the concept of land can be viewed widely as the total sum of the natural and man-made resources over which possession of the earth gives control. This wide concept also comprises of water, ground and earth surface, and this also comprises of sites, buildings, lands, mineral resources, water resources and forest resources and this also include natural phenomenon such as sunlight, rain, wind, and changing temperatures, including location in respect to market and other areas.

Overall, it can be said land economics focuses on the relationship between population, land use, distribution of land & revenue/economic relation.

Scope of Land Economics

  • Rural land economics deals With (land & water utilisation, rural land market price & reclamation, conservation, zoning, land use control)
  • Urban land economics deals with (problems of urbanisation, housing, redevelopment of industrial &commercial land use & distribution, urban real finance & marketing, monitoring)
  • The scope of land economics therefore embraces both the urban and rural land utilization and exploitation. Its role in factor of production, utilization of labour and capital respectively.
  • Also the scope of land economics in Urban Planning remain towards society welfare, preservation of culture and ensuring adequate proportion of land for existing and upcoming settlement respectively.
  • As Land is one of the limited resource, overall demand for land is been increasing with increase in population. So here the land economics lead a vital role in order to regulate supply of land in market and promoting the use of land in sustainable manner.

Objectives of Land Economics

  • To identify the economic relationship of man & land
  • To control the use of land use planning
  • To identify properties & attributes of land
  • To provide a base for real estate planning & land use value.
  • It also stimulates other factors of production i.e. such as capital, labour etc.
  • Essential for urbanisation in perspective of growth and development.

Importance of Land Economics in terms of Urban Planning

Urban Planning is a strategic, technical and political process in which Land Economics have a leading role, acquisition of land through which authorities can work upon developed and design of land use and the built environment, including air, water, and the infrastructure passing into and out of urban areas, such as transportation, communications, and distribution networks.

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013(RFCTLARR Act, 2013), defines “land” so as to include the benefits that arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth. The Act also requires that the market value of land be calculated as the minimum land value specified under the Indian Stamp Act, 1899 for the registration of sale deeds in the area, where the land is located, or the average of the sale price for similar type of land located in the immediate areas adjoining the land being acquired. It is to be ascertained from fifty per cent of the sale deeds registered during the preceding three years, where higher price has been paid. This approach is suggested for determining the market value of land for acquisition.
The Land Acquisition Act of 1894 was made mainly to facilitate the government to procure privately held land for the purpose of developing public infrastructure and also for companies. After 120 years, this Act was replaced by the RFCTLARR Act, 2013. The Act has provided for fair compensation to those whose land is acquired permanently or temporarily, while bringing in enhanced transparency to the process of acquisition of land.

Guided Land Development model uses the provision of infrastructure as instrument to guide urban development. This is done in partnership with land‐owners who pay for the cost of providing services to their land and in return donate land for public infrastructure and a payment as betterment levy. This model, also proposed by the United Nations Economic & Social Commission for Asia & Pacific (UNESCAP), has been for guiding the conversion of privately owned land in the urban periphery. It uses a combination of traditional government role of providing infrastructure and the enforcement of land subdivision regulations. The key advantage of the approach is that it is less costly than outright land acquisition and more equitable than land banking. The principle behind guided land sub‐division is that the government agency proactively selects the direction where it feels urban development should take place and provides infrastructure in those areas. This acts as an incentive to encourage developer to invest in the planned area selected by the government agency. The cost effectiveness of guided land development approach results from the fact that land development is planned, designed and implemented with the land‐owners of the designated area, who donate land for roads and right of way for infrastructure and public spaces, as well as pay a betterment levy to meet the costs of the project. To finance the scheme, a loan is initially taken to build the infrastructure, which is paid .

Economic principles of land management:

Principle of supply & demand: -Explained by the 3 interrelated terms i.e. demand, supply& price.

  1. Law of demand: At a given level of land supply, if the price of a land increases then the quantity of demand decreases & vice versa.
  2. Law of supply: -At a certain level of land demand, if the price of land increases then quantity of supply increases.

Principle of anticipation

  • It holds that value is simply a function of present worth of future benefits i.e. people are paying in the present day for the future scenario.
  • When purchasing a property for investment the anticipated benefits are the future money. In other words, buyer is exchanging the present money for a property that will hopefully have more pricing in future.
  • The principle of anticipations is the basis for income approach. Under these principles, the past is only important because it tends to give an indication of what is supposed to be expected in future.

Principle of balance

  • It relates both to the property as well as environment in which the property is located.
  • It states that the property is valued when all the amenities are in proper proportion.
  • The principle of balance is also related to the land use. Under the ideal land use concept there would be a proper balance of commercial, residential, open space etc & in a neighbourhood. There would be a proper proportion of single-family residence.

Principle of conformity

  • It is similar to that of the principle of balance but it relates more to real estate or building characteristics.
  • It conforms that maximum value is achieved & maintained where there is reasonable conformity & non-uniformity among the properties.

Principle of substitutions

  • Substitution is the process of identifying alternative that would satisfy the same need, want or desire of purchase.
  • A purchaser should pay no more for a house, if it would cost to build or buy another one in that same cost.

Principle of externalities

  • It explains 4 major courses outside the properties that limits influences the value. The major sources are such as social, political, economic& environmental.
  • The value is subjective in nature & true action of buyer & Seller create & balance the value.

Author Bio: Anuyesh Mishra a 3rd Year student of Bachelor in Planning in College of engineering and technology Bhubaneswar.