Land Value Capture as a Planning Tool for Managing Peri-Urban Expansion in India

Abstract

Rapid urbanization in India has resulted in extensive peri-urban expansion characterized by unplanned land development, infrastructure deficits, and speculative land markets. Public investments in transport and infrastructure significantly increase land values in these areas; however, the benefits of such investments are largely captured privately, while public agencies face financial constraints. Land Value Capture (LVC) mechanisms provide a means to recover a portion of publicly generated land value increments and reinvest them in urban infrastructure and planned development. This study examines LVC as a spatial planning tool rather than merely a fiscal mechanism, with specific emphasis on its role in managing peri-urban expansion. A qualitative and comparative methodology is adopted using secondary data, policy review, and case study analysis of international and Indian examples, including São Paulo, Germany, Mohali, and Bengaluru. The findings indicate that land-based LVC instruments such as land pooling and land readjustment are particularly effective in peri-urban contexts as they enable infrastructure provision before development and reduce speculative growth. The paper proposes a strategic framework for integrating LVC into peri-urban planning in India to support infrastructure-led, equitable, and sustainable urban expansion.

Introduction

The text examines peri-urban expansion in Indian cities and the challenges arising from rapid, infrastructure-led growth beyond formal municipal boundaries. Public investments such as highways, metro corridors, and airports significantly increase land values in peri-urban areas, but the resulting gains are largely captured by private landowners, while public agencies struggle to finance infrastructure. This imbalance leads to unplanned development, environmental degradation, and high future service costs. The paper argues that Land Value Capture (LVC) should be viewed not only as a fiscal instrument but also as a planning tool capable of guiding compact, infrastructure-led, and equitable peri-urban growth.

The literature review highlights that peri-urban areas are characterized by weak institutional control, fragmented governance, and speculative land markets. Global research identifies various LVC mechanisms—such as betterment levies, impact fees, premium FAR, transferable development rights, land pooling, and land readjustment—as effective tools for managing peri-urban and greenfield development. In India, however, these mechanisms are applied inconsistently and remain poorly integrated with statutory planning frameworks.

Using a qualitative and comparative methodology, the study analyzes international cases from São Paulo and Germany alongside Indian cases from Mohali and Bengaluru. The cases demonstrate that market-based and land-based LVC mechanisms can successfully finance infrastructure, guide density, and ensure planned development when supported by strong institutions. Conversely, fragmented governance and inconsistent valuation practices limit effectiveness, as seen in Bengaluru.

The results show that peri-urban areas experience the highest land value appreciation, that land-based LVC enables infrastructure provision before development, and that LVC can reduce speculative land behavior by linking development rights to planning controls. Based on these findings, the paper proposes a framework for peri-urban India that integrates LVC into planning laws, strengthens institutions, aligns LVC with infrastructure and growth corridors, ensures transparent valuation, and reinvests captured value locally. This positions LVC as a proactive planning mechanism for sustainable and equitable peri-urban development.

Conclusion

Peri-urban expansion poses significant challenges for rapidly urbanizing regions in India, particularly in terms of infrastructure financing and spatial governance. This paper demonstrates that Land Value Capture mechanisms offer an effective strategy for addressing these challenges by converting publicly generated land value appreciation into resources for infrastructure-led development. Land-based LVC instruments such as land pooling and land readjustment emerge as particularly suitable for peri-urban contexts. Strengthening institutional capacity and integrating LVC with planning frameworks can transform peri-urban expansion into a planned, equitable, and financially sustainable process.

References

[1] Smolka, M. (2013). Implementing Value Capture in Latin America. Lincoln Institute of Land Policy. [2] MoHUA (2017). Value Capture Finance Policy Framework. Government of India. [3] UN-Habitat (2016). Urbanization and Development: Emerging Futures. [4] Webster, D. (2002). On the Edge: Shaping the Future of Peri-Urban Regions. [5] Bertaud, A. (2018). Order Without Design. MIT Press.

Copyright

Copyright © 2025 Ar. Prabhat Kumar Mishra, Ar. Ankita Gupta. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.