UNIT I

UNIT-I
Land economics: definition, objectives and scope;
Economic rent, land use and land values; Impact of
economic forces on urban structure and land use pattern;
Bid rent theory; Cities without land markets - use of land
in socialist contexts; Regulatory frameworks determining
land values and land uses.
 LAND ECONOMICS

What is Land????
In economics, land comprises of all naturally occurring
resources as well as geographic land.
Land resources include agricultural land, forestland,
residential, commercial and industrial land, recreational land,
water bodies such as lakes and rivers, garbage dumps,
hazardous waste sites and historical sites and national
monuments.
 LAND ECONOMICS
agricultural land
 LAND ECONOMICS

forestland, water bodies such as lakes and rivers

LAND ECONOMICS

residential
 LAND ECONOMICS

commercial
 LAND ECONOMICS

industrial land
 LAND ECONOMICS
garbage dumps, hazardous waste sites
 LAND ECONOMICS

historical sites and national monuments.

 LAND ECONOMICS
What is Economics????
The branch of knowledge
concerned with the description and
analysis of the production,
distribution and consumption of
goods and services.

Land is a type of goods

•Bought and sold in the market.
•Owned, rented, or leased.
•Valued in monetary terms (price,
rent, tax).

Land is also different from all

other goods
•Fixed Supply
•Immobility
•Heterogeneity
•Dual Nature:
 LAND ECONOMICS
Land Economics

Land economi
cs is a branch
of the
economics
field which
focuses on
the use of
land and the
role of land in
economics.
 LAND ECONOMICS
Land economics deal with man’s economic use of land
which controls or affect the use of resources.

Whatever man does with land has its own impacts.

 LAND ECONOMICS
1. Land is a
productive
resource
2. Agriculture
and food
security
3. Housing and
urban
development
4. Industrial
development
5. Natural
resource
extraction
6. Land
ownership
and property
rights
 LAND ECONOMICS
Objectives of Land Economics
• To identify the economic relationship of
man & land
• To control the use of land use planning.
• To find the optimal mix of development
and conservation efforts to ensure that
land use changes are environmentally
sustainable and economically efficient.
• To provide a base for real estate planning
& land use value.
• To stimulate other factors of production
i.e. capital, labor etc.
• Essential for urbanization in perspective
of growth & development.
 LAND ECONOMICS
Scope of Land Economics

• The scope 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.
 LAND USE & LAND VALUES

Proposed land use plan 2015

 LAND USE & LAND VALUES
Land Value
• Land value can be defined as
the monetary cost of the land.
• It can be the cost of
undeveloped land or a built
property, but land value is
primarily associated with a
vacant plot.
• When discussing the
importance of a built structure
the term “property value” is
more appropriate.
 LAND USE & LAND VALUES
Factors Affecting Land Value
• The land value is determined by the economic principle of
highest and best use of land which produces the highest net
return in any term, over a period.
• It is determined by the specific character of the land such as
land use, location, accessibility, aesthetics, etc.
• The property value is dependent on the structural attributes,
land rates, land use and the location of the land.
 LAND USE & LAND VALUES
Factors Affecting Land Value
 LAND USE & LAND VALUES
Factors Affecting Land Value
1. Physical Attributes
• These include quality of location, topography, climate, availability of water, sewer lines,
etc.
• More and better facilities are attributed to a higher price of land.
• Topography further has a direct effect on the construction cost and thus the overall
development cost. The facilities thus developed on an uneven land will have a much
higher cost as compared to the flat plain.
 LAND USE & LAND VALUES
Factors Affecting Land Value

2. Accessibility to Economic Activities

• The more easily economic activity is accessible, the more is the
value of the land. For example, most of the metropolitan cities have
the maximum land values at the center, or at the central business
district of the city. This is because of the nearness to the economic
activities and workplace.
• Most important factor which led to the development of various land
price models in urban economics.
 LAND USE & LAND VALUES
Factors Affecting Land Value

Periphery Down town

Available land Price

Price Available land

 LAND USE & LAND VALUES
Factors Affecting Land Value
3. Neighbourhood Amenities
• The cost of land is also affected by
the availability of the facilities such
as shopping areas, medical
facilities, school, parks&
playgrounds, and other basic need
of the humans.
• This helps in saving the time of
people every day, the time saved
adds up the cost of land.
• Also, the reduced travel and
reduced trip distance will directly
have the monetary benefits of the
person residing in an area with
many such facilities in proximity.
 LAND USE & LAND VALUES
Factors Affecting Land Value
4. Present and Future Land Use
• The value of the land is also determined by the land use
permitted in the land premises.
• For example, if we compare the values of two lands of same
prices and same location but the land use permitted in the lands
are different, one is commercial and one is residential. In such
case the value of the land with the land use which has more rate
of return over a period of time will be valued more.
 LAND USE & LAND VALUES
Factors Affecting Land Value

5. Demand and Supply Function

• With the significant demographic changes in the cities with time,
the need for land also increases with the same factor, with the
increase in population there is an increase in economic and other
activities. This directly increases the demand in the land
components.
• For any site, there are specific points of transition in use, closely
related to the infrastructure and services, where a jump in
property value is likely to happen.
 LAND USE & LAND VALUES
Factors Affecting Land Value

6. Location and Transport Linkages

• The property located in the area of high level of infrastructure
facilities or the one located in or adjacent to the area of intensive
economic activities such as markets or industries have higher
values.
• Transport linkages are also crucial since they govern the mobility &
ease of movement to and from the area. Clearly defined hierarchy
of roads, efficient public transportation and lack of congestion are
some of the desired transportation attributes of any area.
 LAND USE & LAND VALUES
Land use involves the management and modification
of natural environment or wilderness into built
environment such as settlements and semi-natural
habitats such as arable fields, pastures, and
managed woods.

• Residential land use

• Commercial land use
• Industrial land use
• Agricultural land use
• Recreational land use
• Transport space
• Public land use or Open space
Outer Ring Road –
Whitefield corridor: Land
economics explains why IT-
related land prices shot up
drastically after the arrival of
IT parks (Infosys, Wipro,
ITPL). The economic activity
raised demand, increasing
land values and shifting land
from agriculture to
commercial/residential.
•Whitefield (IT boom)
•MG Road (CBD rent
competition)
•Devanahalli (airport push)
•Indiranagar (commercial
takeover)
•HAL townships (socialist-style
allocation)
•Metro corridors (regulatory
uplift)
•Divide your class into 8 groups
•Each group select one zone
•As a group take one black and white
printout of your zone.
•Each individual Collect guidance values
(Sub-Registrar) and market prices for 6–8
different areas in your zone (e.g., MG Road,
Koramangala, Whitefield, Yelahanka,
Bannerghatta Road, Kengeri).

•As a class come up with a common land

value legend

•Prepare a hand-drawn land value

gradient map.
 Approx Rent (₹ per sq Notes / Example
Area / Locality Type of Space
ft per month) Listing

A 3,100 sq ft furnished
Office / Premium office on MG Road at ~
MG Road / CBD ~ ₹ 80 – ₹ 180 / sq ft
commercial ₹ 130 / sq ft +
maintenance.

Varies with building

Whitefield Office spaces ~ ₹ 60 – ₹ 110 / sq ft grade, distance from
main road/IT parks.

Again depends on
Outer Ring Road
whether the space is
(Marathahalli – Office / Tech park ~ ₹ 51 – ₹ 182 / sq ft
Grade A, level,
Bellandur)
furnishings etc.

~ ₹ 125 – ₹ 200 / sq ft
(retail-high street) for
Indiranagar / Retail High Street / shops; Office ~ ₹ 55-₹
Koramangala Office 65 / sq ft for offices in
Koramangala /
Indiranagar

These are among the

Commercial Street /
most expensive
Brigade Road / High street Retail ~ ₹ 200 – ₹ 275 / sq ft
retail/front-footage
Church Street
areas in the city.

Lower compared to
Office / Tech Park CBD, but higher for
Electronic City ~ ₹ 40 – ₹ 90 / sq ft
spaces premium campuses.
(myhq)
HSR is a well-
Office / mixed ~ ₹ 60 – ₹ 85 / sq ft
HSR Layout connected, mid/high
commercial (myhq)
demand area. (myhq)
BID RENT THEORY
 BID RENT THEORY

• The bid rent theory is a geographical economic theory that

refers to how the price and demand for real estate change as
the distance from the central business district (CBD) increases.

Periphery CBD Periphery

• Land/property/rental unit costs increase the closer one gets to

a city's central business district.
• Land users all compete for the most accessible land within the
CBD. The amount they are willing to pay is called "bid rent".
 BID RENT THEORY

The farther you get from the CBD, the less competition you face for land
use.
This is because:

• Commerce will not be as common because businesses will want to

maximize profits by being located in as dense an area as possible.

• Social opportunities decrease in less densely populated areas, making

them less attractive to residents.

• Additionally, the cost of transportation (both in terms of time and money)

outweighs the benefit of cheaper rent outside the CBD. These factors
drive bid rent down relative to bid rent in the CBD.
BID RENT THEORY

CBD
 BID RENT THEORY
• The bid rent theory implies that cities will organically create
zones based on building function.
• The result is a pattern of concentric rings of land use, creating
the concentric zone model.

• This can generally be

shown in a "bid rent
curve", based on the
reasoning that the
most accessible land,
generally in the
centre, is the most
expensive land.
BID RENT THEORY
 BID RENT THEORY
• It could be assumed that, according to this theory, the poorest houses and
buildings would be on the very outskirts of the city, as this is the only location
that they can afford to occupy.
• In modern times, however, this is rarely the case, as many people prefer
to trade off the accessibility of being close to the CBD and move to the edges of
a settlement, where it is possible to buy more land for the same amount of
money (as the bid rent theory states). Likewise, lower-income housing trades
off greater living space for increased accessibility to employment.
• For this reason, low-income housing in many North American cities, for
example, is often found in the inner city, and high-income housing is at the
edges of the settlement.
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES

• Zoning regulations
• Land use planning
• Environmental regulations
• Historic Preservation Regulations
• Development control regulations
• Incentive & subsidy programs
• Infrastructure Development and Access
• Rent control
• Density charges
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES
Zoning Regulations:
• Zoning regulations dictate how land can be used and
developed within a specific area.
• The zoning regulations of a property can significantly impact its
value.
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES

Land Use Planning:

• Comprehensive land use plans and master plans created by
local governments outline the desired land use patterns for an
area.
• These plans can influence land values by designating areas for
specific uses, such as residential, commercial, industrial, or
open space.
• For example, land zoned for commercial use may have higher
value compared to land zoned for residential use due to
potential income-generating opportunities.
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES
Environmental Regulations:
• Environmental regulations can restrict the development and
use of land in environmentally sensitive areas.
• Properties with limitations due to conservation, wetlands, or
other environmental concerns may have lower values.
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES

Historic Preservation Regulations:

• Properties located within historic districts or designated as
historically significant may be subject to regulations that
restrict alterations and renovations.
• While these regulations can limit development, they can also
contribute to the uniqueness and potential value of the land.
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES

Development Regulations:
• Regulations related to
building codes, setbacks,
height restrictions, and other
development parameters can
influence the potential use
and value of a property.
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES

Incentive Programs:
• Governments may offer various incentives to encourage
specific types of land use or development, such as tax breaks
for green building projects, subsidies for affordable housing,
or grants for environmental conservation efforts.
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES

Infrastructure Development and Access:

• The presence of infrastructure like roads, utilities, public
transportation, and proximity to amenities can significantly
affect land values.
• Regulatory decisions related to infrastructure development
can influence how accessible and desirable a piece of land
becomes.
• Example - TOD
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES
Rent control:
• The objective is to prevent landlord from driving up the
prices of available housing to a level that middle and lower
income families can barely afford to pay.
• Example- Delhi Rent Control Act 1958

• In total contrast to the objective

outlined, the rent control leads
to lowering the quality of
housing stock and reduces the
supply of housing stock.
REGULATORY FRAMEWORKS DETERMINING LAND VALUES
AND LAND USES

Density charges:
• If the aim is to preserve undeveloped areas or restrict
urban sprawl, density charges may be used.
• Density charges are charges that vary with density of
structures and buildings in an area.
• If the new proposed buildings are in an area already
densely filled with buildings, no charge may be levied.
• Thus unspoiled areas may be preserved.
LAND MARKET
 LAND MARKET
• Land is unlike other commodities that can be bought and
sold in that it is immovable.
• Buildings upon it can be dismantled and moved elsewhere
but the land on which they stand cannot be moved.
• Only the rights to use the land can be bought and sold.
 LAND MARKET

• Land markets exist when and wherever it is possible to

exchange rights in land for agreed amounts of money or
services rendered.
 LAND MARKET

• With a few exceptions (such as Antarctica) the ultimate owner of the

land is the state, which retains the right to acquire private property for
public purposes and to control the manner in which the land is used
through planning legislation.
• Many societies permit private landownership with rights held either in
freehold, which represents the maximum degree of freedom for the
landowner, or leasehold in which there are greater limitations on how
and when the land may be used.
• Where private rights in land are recognised, they may be exchanged for
a consideration, usually money.
 LAND MARKET

• A land market can be said to exist when the number of these transactions
passes a critical threshold.
 LAND MARKET
Societies without land markets - use of land in
socialist contexts
LAND MARKET
LAND MARKET
 LAND MARKET
Societies without land markets - use of land in
socialist contexts

• Socialism is a political and economic system in which property

and the means of production, including land are owned in
common, typically controlled by the state or government.
• Socialism is based on the idea that common or public ownership
of resources and means of production leads to a more equal
society.
 LAND MARKET
Societies without land markets - use of land in
socialist contexts
• Private ownership of land may be restricted or heavily
regulated, with the belief that this approach ensures more
equitable distribution of resources and prevents the
concentration of wealth in the hands of a few individuals or
corporations.
 LAND MARKET
Societies without land markets - use of land in
socialist contexts
Different socialist countries have implemented various land ownership
models.
• State ownership: In some socialist countries, all land is owned and
managed by the state. The state may allocate land for various purposes,
such as agricultural production, industrial development, or housing,
through a centralized planning system.
• Cooperative ownership: Some socialist countries promote collective
ownership of land through agricultural cooperatives or community-based
organizations. The land is worked and managed collectively, and the
benefits are shared among the members.
• Land-use rights: In certain socialist countries, individuals or families may
be granted the right to use and cultivate land, but they don't have full
ownership rights. The state or collective retains the ultimate ownership
of the land, and the users may be subject to certain regulations or
restrictions.
 LAND MARKET
Societies without land markets - use of land in
socialist contexts
CHINA
• There is no private “freehold” land ownership in China.
• All urban land in China is owned by the Chinese government and is
commonly referred to as “state-owned land.”
• All rural and suburban land is owned by rural collectives (ie, local
groups of farmers) and is commonly referred to as “collective land.”
 LAND MARKET
Societies without land markets - use of land in
socialist contexts
CHINA
• Individuals or entities cannot own land outright. Instead, they can
acquire "land-use rights" through various means, such as leases or
long-term contracts.
• These land-use rights typically last for 40 to 70 years, depending on
the location and type of land.
 LAND MARKET
Societies without land markets - use of land in
socialist contexts
CHINA
• The government plays a central role in the allocation of land.
• Local governments are responsible for managing land supply. They
often auction land-use rights to developers, with the revenue from
land sales being an important source of income for local
governments.
• The process of converting rural land to urban land is subject to strict
regulations and approval procedures. This system helps control
urban sprawl and manage urbanization.
• The government uses this mechanism to influence the pace and
location of urban development.