How Urban Development is Driving Land Prices in India

Urbanisation is expected to be on the rise in India in the coming decades. According to a UN study, 50% of Indians will live in urban locations by 2050. The government policies reflect this transition, as a host of schemes have been introduced to facilitate streamlined urban development.

So far, we have enough evidence to suggest that one of the key effects of urbanisation has been the appreciation of land value. This has been evident in the organic urbanisation of metropolises like Mumbai and Delhi. Even the planned urban development of satellite cities and towns leads to the appreciation of land prices.

The Great Indian Urban Sprawl

Perhaps the most organic effect of urbanisation is the natural growth of cities and towns over time. A classic example in this regard would be Delhi. 46% of it was considered an urban area in 1991, but in 20 years, it increased to more than 75%.

The National Capital Region concept added impetus to Delhi’s urban development, as it added 53,600 square kilometres to Delhi’s 1483 square kilometres. Land investment in these new urban areas has become lucrative, as seen in the 450% increase in land prices between 2019 and 2024 on the Yamuna Expressway.

The same can be said about Mumbai, originally measuring only 68 square kilometres. But now it has expanded all across Navi Mumbai, Ulhasnagar, Mira Bhayandar, etc., forming the 4,355 square kilometres of the Mumbai Metropolitan area. Even in this case, land prices have been the direct beneficiaries. In Vashi, for instance, the asking rates like ₹3,44,000/sqm can be seen on realty websites these days. Back in 2015, ₹12,760/sq m was considered expensive!

Infrastructure Boost

While organic urbanisation is boosting land prices in metros, infrastructural developments are opening up the land market in smaller towns and suburbs.

• The Navi Mumbai Airport Influence Notified Area (NAINA) is expected to spike land prices in adjacent areas from ₹4,200/ sq ft to ₹16,200 in the next five years.
• The new Bengaluru airport has hiked the residential prices in North Bengaluru localities from ₹1,800/sq ft to ₹4,500/sq ft between 2020 and 2024.
• Government initiatives like YEIDA, metro lines, and Film City have appreciated land prices around Jewar airport by 1.4 times in the last five years.
• Land prices in satellite towns of Chennai have risen 1.5 times with the development of the peripheral ring road. Places like Parandur may see land development and price appreciation with the proposed greenfield airport.

See the table below for details –

Social Patterns Around Urbanisation and Land Demand

As urban pockets expand, the population in India also becomes rapidly urbanised. World Bank data shows that the urban population growth rate has been on the rise in the last two decades.

With population holding capacity finite in cities, urban areas are expanding to accommodate the migrants and their budget. Satellite towns are meeting this land demand, with Tier-II and III cities accounting for 44% of all land acquisitions in India.

Plotted developments in these emerging urban locations are attracting investors for residential as well as commercial development. An average appreciation plot price of 10-15% has been observed in plotted developments across India.

Summing Up

The organic urban development of metros and cities, along with their peripheral expansion, has attracted the population towards urban locations. This has made land a lucrative asset not just in localised metropolises but across vast urban centres. As these urban centres continue to expand, land value continues to rise.