Examining the Town Planning Scheme of India and Lessons from Land Readjustment in Japan

ADBI Working Paper Series

EXAMINING THE TOWN PLANNING

SCHEME OF INDIA AND LESSONS

FROM LAND READJUSTMENT

IN JAPAN

Vibhu Jain

No. 1037

November 2019

Asian Development Bank Institute

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the numbering of the papers continued without interruption or change. ADBI’s working papers

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Suggested citation:

Jain, V. 2019. Examining the Town Planning Scheme of India and Lessons from Land

Readjustment in Japan. ADBI Working Paper 1037. Tokyo: Asian Development Bank Institute.

Available: https://www.adb.org/publications/examining-town-planning-scheme-india-lessons-

land-readjustment-japan

Please contact the authors for information about this paper.

Email: [email protected]

Vibhu Jain is an urban consultant at the World Bank.

The views expressed in this paper are the views of the author and do not necessarily reflect

the views or policies of ADBI, ADB, its Board of Directors, or the governments they

represent. ADBI does not guarantee the accuracy of the data included in this paper and

accepts no responsibility for any consequences of their use. Terminology used may not

necessarily be consistent with ADB official terms.

Working papers are subject to formal revision and correction before they are finalized and

considered published.

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ADBI Working Paper 1037 V. Jain

Abstract

Land is a scarce resource; hence, efficient land management techniques are critical for its

procurement and development. The land readjustment (LR) mechanism is one such land

assembly tool, which many countries, including Japan, have adopted, and is known as the

Town Planning Scheme (TP Scheme) in India. This is the concept of replotting or reshaping a

parcel of land to develop it with amenities and services, such as roads, parks, social

infrastructure, and utilities.

In India, the TP Scheme was institutionalized more than 100 years ago, but legal, institutional,

and financial challenges have caused scant implementation, with successful cases are mostly

concentrated in the state of Gujarat. Japan has been far more successful in implementing the

scheme, developing one-third of the urbanized land through the LR mechanism (Matsui 2018).

The experience of continuously implementing many LR projects in Japan has made the

Japanese LR system mature in terms of the approval process, land replotting techniques, and

financing, contributing to quicker and smoother implementation.

The way forward for India could be to scale up the use of the TP Scheme by gathering skilled

resources and drafting a competent financial framework for executing projects, learning from

success stories, and self-evolving through continuous implementation.

Keywords: land pooling, India, land readjustment, Japan, urbanization

JEL Classification: R31, R4, R23

ADBI Working Paper 1037 V. Jain

Contents

1. INTRODUCTION ......................................................................................................... 1

1.1 Concept of Land Readjustment (LR) ............................................................... 1

1.2 Need for the Study .......................................................................................... 1

1.3 Objectives ........................................................................................................ 2

1.4 Methodology and Scope of the Paper ............................................................. 3

2. THE TOWN PLANNING SCHEME (TP SCHEME) OF INDIA ..................................... 3

2.1 Introduction to the TP Scheme and its Key Features ...................................... 3

2.2 Historical Implementation of the TP Scheme in India ...................................... 5

2.3 TP Scheme Procedure .................................................................................... 6

2.4 Legal and Institutional Framework................................................................... 8

2.5 Lessons from the Success of the TP Scheme ............................................... 10

2.6 Challenges Limiting the Scaling Up of the TP Scheme ................................. 11

3. LAND READJUSTMENT IN JAPAN .......................................................................... 12

3.1 History of the LR Scheme and Related Laws ................................................ 13

3.2 Comparative Features of the LR Scheme in Japan and India ....................... 15

3.3 Success Factors of the LR Scheme in Japan................................................ 17

4. PRELIMINARY LEARNINGS AND CONCLUSION ................................................... 17

REFERENCES ..................................................................................................................... 19

ADBI Working Paper 1037 V. Jain

1. INTRODUCTION

1.1 Concept of Land Readjustment (LR)

The concept of land readjustment (LR) is not new and has been present since the

late nineteenth century. The essence of this concept is to service the land with

infrastructure and amenities in peri-urban areas, which are likely to grow haphazardly in

the absence of any regulated plan. States undertake this by appropriating and

consolidating a portion of land from the land rights holders for infrastructure development

and returning the replotted, reshaped, and regularized parcels of serviced land. This

helps in achieving multiple objectives—providing infrastructure and public facilities in an

organized manner, increasing the usage and values of land, and containing haphazard

development through systematic land use planning.

While the basic spirit of land readjustment remains the same, it differs between countries

in terms of its structuring, implementation and approval procedures, land value capture,

and eligibility of the use of this mechanism. Japan mainstreamed the land readjustment

approach in its urban development policy, after Germany and the UK pioneered it. Japan

has used the technique for more than a century, institutionalizing it in the early nineteenth

century and later enacting it through the Land Readjustment Law in 1954 to address the

post-World War II urban development challenges arising from massive destruction. In

India, people refer to it as land pooling, land consolidation, but most commonly the Town

Planning Scheme (TP Scheme). It follows the same basic concept of land readjustment

as in Japan but differs in use; for example, India mostly applies it to peri-urban areas and

uses it scantly for core area revitalization and post-disaster areas. Furthermore, only the

designated public authority implements it, with no or limited involvement of the private

sector.

The history of land readjustment procedures mostly lies in Europe. Nordic countries,

such as Finland and Sweden, used some land readjustment procedures 1000 years ago.

However, the first few documented cases of land readjustment are from Germany. The

United Kingdom (UK) promoted land readjustment policies and procedures in its

colonies, such as India, Palestine, and Australia, under the influence of the British

planners responsible for urban management. After WWII, the Republic of Korea; Spain;

Taipei,China; Germany; and Israel updated their land readjustment mechanism to fit the

post-war context. Later, Turkey attempted to improve its land legislation and Asian

countries, such as Nepal, Thailand, Indonesia, the Philippines, Malaysia, and Colombia

in Latin America, introduced a land readjustment mechanism (Felipe Francisco De

Souza 2018).

1.2 Need for the Study

The growing urbanization that migration and economic development cause generates

the need for controlling the urban sprawl and providing infrastructure and services in a

planned manner. According to the Organisation for Economic Co-operation and

Development (OECD), nearly 70% of the world’s population will be living in urban

areas by 2050. This means that most of the resources and activities will concentrate in

cities. Today, cities occupy 0.5% of the world’s surface but use 75% of its resources.

With urbanization increasing at a rapid pace and on a global scale, city managers

are facing pressing challenges—a lack of infrastructure, environmental pollution,

traffic congestion, waste disposal, and disaster response. Countries need to address

these issues swiftly to ensure a better future, with the support of the Sustainable

ADBI Working Paper 1037 V. Jain

Development Goals (SDGs), and to make cities and human settlements inclusive, safe,

resilient, and sustainable.

City planners and managers continuously endeavor to address urbanization issues,

including providing serviced land, containing the haphazard urban sprawl and slum

development, and facilitating adequate development opportunities. In this attempt, and

with the realization that land is a scarce resource, land management becomes a critical

aspect of urban development. It is a growing concern in many countries that land

acquisition may not be the most suitable mechanism for procuring land and servicing it.

It tends to affect lives and livelihoods by displacing people, takes away land rights from

the landowners, and sometimes does not capture the land value appropriately, affecting

the compensation and thus possibly making it financially non-lucrative for the

landowners. This has resulted in a quest to examine alternative frameworks for land

management, such as the land readjustment mechanism.

India has been experiencing an economic boom and subsequently a fast-paced

urbanization process. McKinsey Global Institute (MGI) projections show India’s urban

population soaring from 340 million in 2008 to 590 million in 2030. It took nearly

40 years (between 1971 and 2008) for the urban population in India to rise by nearly 230

million. It will take only half that time to add the next 250 million. The pace is

likely to increase further until 2050 (Shirish Sankhe 2010). To match the speed of

urbanization, in urban areas, including suburbs, the planning and development need to

be swift, efficient, and inclusive. Land acquisition has been a predominant tool for land

purchasing and development in the Indian context. However, the enactment of the Land

Acquisition, Rehabilitation, and Resettlement Act (LARR) in 2013 changed the scenario

and the attitude toward the land acquisition mechanism. Under LARR 2013, the state

offers better compensation to rural area dwellers than to urban dwellers, making land

acquisition from farmers for urbanization purposes a costly proposition for developing

authorities. At the same time, this law has made the acquisition process very time

consuming (Darshini Mahadevia 2018). This has led to the need for stronger use of

alternative land management frameworks, of which the TP Scheme is a promising one.

The national government in India supports the scheme and intends to promote it among

state governments. Recently, it conceptualized AMRUT (Atal Mission for Rejuvenation

and Urban Transformation), a national-level urban development program, as part of the

Smart Cities Mission of the Ministry of Housing and Urban Affairs (MoHUA). One of its

directives is to pilot the TP Scheme in 25 cities in India, with each city having from 50 to

500 hectares of area for development (Ministry of Housing and Urban Affairs,

Government of India 2018).

Since the use of the TP Scheme is not widespread in India yet, it is becoming imperative

to examine the reasons for its underutilization and determine how the country can scale

up its use. In this context, it is possible to analyze the success of the Japanese LR

Scheme to understand the provisions and procedures that India could adapt to its own

context. The fact that Japan has been applying land readjustment as an alternate

mechanism for more than a century and has developed one-third of the urbanized land

through the LR Scheme supports this.

1.3 Objectives

This paper aims to answer the following research questions, which define the objectives

of the study.

1. What is the Town Planning Scheme in India? What lessons can India learn from

the success stories? What are the challenges in scaling up the scheme?

ADBI Working Paper 1037 V. Jain

2. What is the Land Readjustment Scheme in Japan? What are the success factors

of LR in Japan?

3. How does the Japanese LR Scheme compare with the TP Scheme in India?

4. What are the lessons from India and Japan that India could apply to scale up its

TP Scheme?

1.4 Methodology and Scope of the Paper

This paper is based on a simple research methodology that involves two main

components: A) a literature review; and B) expert interviews. References for the

extensive literature study appear at the end of the paper. Discussions and interviews

with various experts, including town planners and consultants working on the TP Scheme

in India, accompanied the literature review.

The paper focuses on understanding the key reasons for the under-implementation of

the TP Scheme in India, despite a perceivably sound institutional, legal, spatial, and

financial framework for the scheme. It is unarguable that, while Japan and India are very

different in their geographical, political, and administrative frameworks, they are also

similar in terms of the presence of high-density areas, the scarcity of usable land, and

the historical presence of the LR mechanism as a land management technique. This

study aims to draw lessons from the Japanese LR mechanism that could highlight the

areas of intervention for scaling up the TP Scheme in India. It may not be possible to

transpose the lessons from Japan directly to the Indian setting, but they are surely

adaptable to suit the context. However, the paper limits itself to the initial findings and

recommendations and urges researchers to conduct a detailed examination and

research for on-ground application.

2. THE TOWN PLANNING SCHEME (TP SCHEME)

OF INDIA

2.1 Introduction to the TP Scheme and its Key Features

The basic concept of the TP Scheme is to pool together all the land (typically ranging

from 100 to 200 hectares) under different ownerships and redistribute it in a properly

reconstituted form after carving out the required land for open spaces, social

infrastructure, services, housing for the economically weaker section of the population,

and the road network. In this method, the public planning agency or development

authority temporarily brings together a group of landowners for planning under the aegis

of the state-level town or urban planning act. This process enables the development

authority to develop land without fully acquiring it and gives it positive control over the

design and the growth of the peri-urban area.

The size of the final plot (FP) is in proportion to the size of the original plot (OP), and

its location is as close as possible to the original plot. Value capture financing (VCF)

tools, such as betterment or development charges and the sale of reserved plots, can

finance the provision of urban infrastructure and amenities under the TP Scheme.

Development authorities levy betterment charges on landowners to offset the cost of

infrastructure and service provision and sell the reserved plots on the open market

to finance the overall project development cost. Figure 1 below illustrates this land-

pooling mechanism, showing irregular plots reconfigured into proper shapes by laying

ADBI Working Paper 1037 V. Jain

the road network and the contribution of some lands to reserving a parcel of land for sale

on the open market.

Figure 1: Conceptual Land Pooling and Replotting under a Typical TP Scheme

Source: Town Planning and Valuation Department, Government of Gujarat.

The TP Scheme consists of micro-level plans that the state designates under the larger

city-level development plans. A landowner typically parts with up to 25%–40% (Practicing

Urban Planner 2018) of his or her land and pays betterment charges for the development

of the FP (with the provision of infrastructure and services), which is unique to the TP

Scheme. The scheme is applicable for the planning and designing of greenfield projects

or partially developed areas, such as new towns; infrastructure development through the

consolidation of land, such as roads and public parks; and the revitalization of downtown

areas. In some cases, the state has applied it for post-disaster rehabilitation, for example

Bhuj in Gujarat following a strong earthquake in 2001.

Local-level development authorities implement this scheme under the directives of

the state government, and they do not engage private developers directly for

implementation. Under this scheme, the development authority has the mandate to

reserve land for housing for the economically weaker section of the society (5%–10%)

(Balodia 2018), which it offers to low-income households, on the basis of the drawing of

lots, at a subsidized value when the construction is complete.

The commonly acknowledged merits of the TP Scheme in India are the following

(Ballaney 2008):

• The process has had a historical presence since 1915, and since then the

legislation has improved continuously to suit the changing context of

development.

• The scheme is a “win-win” one in which landowners receive serviced land with

incremented value and the development agency controls haphazard fringe

development and promotes planned urban growth.

• The TP Scheme respects land rights. It does not displace landowners but gives

them a regularized plot in the same parcel of land as close as possible to their

original plot, unlike the land acquisition mechanism, which entails forced

displacement.

ADBI Working Paper 1037 V. Jain

• The extensive consultation process with the landowners makes them feel

part of the planning process, which minimizes the potential resistance to

development. The procedure gives ample opportunities to the owners to put

forward their point of view to the authority and raise objections, if any.

• The process is transparent, follows a set procedure, and is fair, as all owners lose

the same proportion of land.

• The landowners offset the development cost by contributing betterment charges

and, through the sale of reserved land, making it a self-financing model, at least

partially if not fully.

• It is mandatory for the TP Scheme to reserve some areas for the economically

weaker section of the society, promoting equitable and inclusive social

development.

There are a few shortcomings of the TP Scheme’s concept and procedures that impede

the scalability of this tool (Ballaney 2008):

• The method is very comprehensive and hence time consuming. While the state

governments typically allocate 2–4 years to planning and implementing the TP

Scheme from the time of notification or showing intent, the process usually takes

longer than that given the amount of consultations and delays in the approval

required at multiple stages. In some places in Gujarat, the TP Scheme has

remained unfinished for more than 15–20 years (Balodia 2018).

• The complexity in executing the scheme requires established guidelines and

trained planners and officials, and the developing authorities do not always have

appropriate human resources. The success of the scheme is highly reliant on the

role of the Town Planning Officer (TPO), and, if this position holder is not a strong

candidate, then the scheme becomes a challenge. In fact, the TPO should have

the support of other skilled officers in managing the project, which is typically

large enough to be under the leadership of just one person.

• An assessment of the betterment charges takes place at the beginning of the

process, when the scheme is under preparation, to fund the infrastructure

development cost. Due to the inordinate delays in finalizing schemes, the cost of

infrastructure provision usually increases, creating a viability gap in meeting the

project development cost.

• The TP Scheme discriminates against land leaseholders and renters by not

allowing them to participate in the consultation processes during the planning,

designing, and implementation of the scheme. Only registered landowners

are engaged.

2.2 Historical Implementation of the TP Scheme in India

Institutionalized for more than 100 years, the TP Scheme has been successful but not

widely used in India yet. It has been predominant only in the states of Gujarat and

Maharashtra, while a few other states are endeavoring to catch up with them. However,

more than half of the Indian states have yet to initiate any practice for land pooling. In

the last few years, the scheme has gained traction mostly because of the shortfalls of

the LARR 2013, which had a compensation bias toward rural over urban land acquisition.

This made acquiring lands from farmers an expensive proposition for the authorities,

forcing them to look for alternative frameworks, such as land pooling. The states of India

that are endeavoring to use the TP Scheme for urban land expansion include Karnataka,

ADBI Working Paper 1037 V. Jain

Andhra Pradesh, Madhya Pradesh, Chhattisgarh, and Odisha.

Recently, Tamil Nadu

state government passed a bill to amend the Tamil Nadu Town and Country Planning

Act 1971 so that it can use the TP Scheme for its land management.

Among all the states, Gujarat has most prominently used the TP Scheme for almost a

century. It has developed the largest city of the state, Ahmedabad (approximately 95%

excluding the downtown area), using this land readjustment mechanism, and it is

continuing to implement the TP Scheme for developing the outskirts or peri-urban areas

of the city. As of 2010, Gujarat was implementing 1126 cases of the TP Scheme, and

600 more were in the pipeline (Sharma 2015). With long-term application, the scheme

has evolved through continuous improvements in the content of the proposals and the

implementation strategies and procedures. The state of Maharashtra was a pioneer in

India in the use of land readjustment for urban development and has gained some

success in implementing the TP Scheme but not to the same extent as Gujarat. Owing

to reasons such as procedural delays and greater emphasis on development plans,

Maharashtra discontinued the use of the scheme in 1985 (Vaishampayan 2013).

Another push for the TP Scheme comes from the Government of India’s AMRUT policy,

which directs the use of the TP Scheme for systematically developing greenfield sites

located on the outskirts of the city, promoting planned urban expansion. In accordance

with the directive, the ministry will monitor the physical and financial process of

implementing the TP Scheme and train the city and state officials in carrying out the

processes. While land and its development are a state subject, the central government

is intervening for the first time to give a boost to this scheme and train the planners and

practitioners in multiple states of India to scale up the TP Scheme.

2.3 TP Scheme Procedure

The process of planning and executing the TP scheme is comprehensive and long,

involving many steps; for instance, it has 50 steps for Gujarat (Parekh 2018). It typically

takes up to 4 years (Practicing Urban Planner 2018, Parekh 2018) to implement the

scheme, and completion should ideally take place within the stipulated time, as the act

of the state determines. It is a three-stage process for drafting plans and seeking

approval—draft, preliminary, and final. The illustration below shows the broad procedure

that Gujarat follows.

Role of the TPO: The appointment of a quasi-judicial officer, the Town Planning Officer

(TPO), follows the approval of the draft TP Scheme. The TPO’s task is to deal with each

landowner on the following:

• the physical planning proposal—the shape and location of the final plot; and

• the financial proposal—the compensation and betterment issues.

In 2011, the Government of India approved the name change of the State of Orissa to Odisha. This

document reflects this change. However, when reference is made to policies that predate the name

change, the formal name Orissa is retained.

ADBI Working Paper 1037 V. Jain

Figure 2: Broad Procedure of the Town Planning Scheme, as the State of Gujarat,

India, has adopted (Balodia 2018) (Darshini Mahadevia 2018)

Source: Author’s understanding from the Gujarat Town Planning and Urban Development Act (GTUPDA), 1976, interviews

with staff from the Town Planning and Valuation Department, Government of Gujarat, and book references.

Eventually, the TPO demarcates the final plot on the ground and hands it over to the

owner. The TPO divides the sanctioned draft TP Scheme into two parts to enable better

functioning: a preliminary TP Scheme to deal with the physical planning proposal and a

final TP Scheme to deal with the financial proposal. The TPO hears the grievances and

objections of each landowner on the physical and fiscal plans and revises the preliminary

and the final scheme, respectively. For the finalization of the preliminary scheme, the

TPO can seek inputs from the state government, local authority, and development

authority.

ADBI Working Paper 1037 V. Jain

2.4 Legal and Institutional Framework

As a colony under British rule, India adopted many development concepts and laws from

the United Kingdom (UK), including the reorganization of land through the TP Scheme.

The Bombay Town Planning Act, 1915, was one such piece of legislation, which it later

amended with the New Bombay Town Planning Act, 1954. This act was instrumental in

conceptualizing the town planning development and TP Scheme in India, and the present

states of Maharashtra and Gujarat have applied it. This law empowered the local

authorities to control the use of land and development through

the instruments of zoning and building regulations, acquire land for public purposes, and

recover betterment contributions with respect to land parcels benefiting from

improvements. The downside of the Bombay Town Planning Act, regarding the TP

Scheme, included the following: A) the process of preparing the TP Scheme took a very

long time, as the physical planning proposals and the financial proposals were linked

and the authorities had to pursue them simultaneously, and objections arising

in any could delay or halt the entire implementation process; and B) the area of

jurisdiction of the TP Scheme was limited to the city. With the increasing pace of

urbanization and migration, pressure for development just outside the city limits began

to arise. The periphery or the fringe began to experience unplanned development and

could not remain unattended.

While the land-pooling mechanism had a historical background and presence, the

enactment of the laws and policies underwent a hiatus during the period just before and

after independence.

This resulted in chaotic and haphazard growth of cities and towns

and confusion over the sanctity and applicability of town planning laws and schemes in

free India. Inspired by the erstwhile comprehensive planning system envisaged under

the Town and Country Planning Act, 1947, of the UK, the Central Town and Country

Planning Organization (TCPO) drafted the Model Town and Regional Planning and

Development Law in 1962, revising it later in 1985, which formed the basis for various

states to endorse town and country planning acts, with modifications to suit the local

conditions. For instance, the State of Gujarat enacted the Gujarat Town Planning and

Urban Development Act (GTPUDA) in 1976, and it became effective in 1978. It made

amendments to this act several times—in 1995, 1999,

and 2001—to keep up with the changing socio-economic context. It is a far more

comprehensive legislative act and responded to the local challenges of growth. The

drawbacks of the Bombay Town Planning Act were overcome by a) unlinking the physical

planning proposals and financial proposals in the TP Scheme and b) allowing the

delineation of a large planning area, including the periphery of the local authority area.

The process of preparing a TP Scheme takes place in three stages—the draft,

preliminary, and final TP Scheme—to expedite the implementation and to seek

landowners’ satisfaction through consultations at each stage. This revised law mandated

the state government’s constitution of the State Regional and Town Planning Board to

advise on the delineation of the region for the planned development. In

this way, in a regional context, the government could designate more areas for

development under the TP Scheme.

India gained independence on 15 August 1947.

ADBI Working Paper 1037 V. Jain

BOX 1: Case Examples of the TP Scheme in Gujarat

The table below tabulates and compares three cases of the TP scheme in Gujarat, with

varying features, to help understand the nuances of the TP scheme better. The case studies

are from (Mathur 2012).

Case 1

Case 2

Case 3

Area of the TP

Scheme (Ha)

209

181

300

Time of Scheme

Notification

May 1978

December 2001

April 2001

Status of

Implementation

Completed in 2005

Sanctioned Draft

TP Scheme as of

2012

Draft TP Scheme as of May

2009

Key Features of

the TP Scheme

• Conversion of

agricultural land

into urban areas

• Implemented

before the 1999

amendment to the

GTPUDA

• Conversion of

agricultural land

into urban areas

• Implemented after

the 1999

amendment to the

GTPUDA

• While much urban

development existed, it

was still in the “rural”

category

• The final plot did not differ

much from the original plot

in terms of location,

shape, and size

• Implemented after the

1999 amendment to the

GTPUDA

% of Average Land

Deduction

25%

36%

15%

While cases 1 and 2 are typical of the TP Scheme in the conversion of agricultural land into

urban areas, case 3 focuses more on improving the project area through betterment charges

and streamlining the infrastructure and services in accordance with the development plan.

Typically, the betterment charge equals one-half of the difference between the FP and the

OP values. The ratio of the FP to the OP varies between 2 and 3 for the TP Scheme case

studies. For example, the ratio is 2.6 for case 2, with an average OP value of $10/m

and an

average FP value of $26/m

The sale of the reserved land parcels covers the scheme costs that the state cannot recoup

from the betterment charges. However, as the landowners must pay only half of the land

value increase as betterment charges, they have less incentive to cede land and more

incentive to pay higher betterment charges.

After the 1999 amendment to the GTPUDA, the net benefit to the property owner increases

with the decrease in land deduction while the betterment charges increase; this was also the

scenario for case 3.

The public agency can acquire land and begin developing roads and other priority projects

after the sanctioned draft TP Scheme stage. Therefore, while road construction in case 1

(a pre-1999 amendment TP Scheme case) started 15 years after the notification date, the

construction began within 4 years in case 2, and 80% of the construction of roads took place

in the next 6 years. Once the state government had approved the draft TP Scheme in Case

3, it expected a similar pace of infrastructure development.

However, clearly all three cases took many more than 4 years either to achieve completion

or to arrive at an advanced stage in the process.

ADBI Working Paper 1037 V. Jain

2.5 Lessons from the Success of the TP Scheme

Some of the lessons from the success stories of the TP Scheme are based on continual

legal evolvement, favorable institutional and financial conditions, and procedural

advancements:

Institutional:

• Due to their self-financing nature and the high level of landowner satisfaction, the

TP Scheme enjoys a high degree of political acceptability in Gujarat

(Mathur 2012).

• Under the TP Scheme, the state appoints a quasi-judicial official, the Town

Planning Officer (TPO), who interacts with landowners and prepares physical and

financial plans. A trained urban planner with no influence from local authorities

holds this position, which helps to ensure fair and independent decisions.

• The TPO conducts three rounds of grievance hearings and addresses

landowners’ concerns at various stages of the TP Scheme.

Legal:

• The GTPUDA underwent various amendments that helped in evolving the TP

Scheme with the changing times.

• The 1999 amendments to the GTPUDA have allowed the timely provision of

infrastructure, such as roads, for which construction can now begin soon after the

state government’s approval of a draft TP Scheme, unlike previously, when

construction had to wait for the sanction. Roads make the land accessible,

significantly increasing the property values.

• The TP Scheme delinks land ownership and disputes over it from scheme

preparation and approval. The TP Scheme process does not settle land

ownership disputes; rather, it transfers these disputes to the newly reconstituted

plot.

Financial:

• Mostly, the scheme is self-financed through the betterment charges and the

revenues from the sale of reserved land, but state-level subsidies are also

available when needed.

• The land sale revenues also help the local governments to hedge against future

increases in construction costs and fund other region- and city-level

infrastructure.

• The TP Scheme in Gujarat adopts the mechanism of revolving funds whereby

land sale proceeds from previous TP Scheme cases fund infrastructure and

services in subsequent ones. This mechanism allows the local governments

to capture significant land value gain and to employ that gain for urban

development.

ADBI Working Paper 1037 V. Jain

2.6 Challenges Limiting the Scaling Up of the TP Scheme

The urban planning domain has institutionalized the TP Scheme for many decades now,

but it still does not have the traction that it deserves. The conceptual, legal, institutional,

procedural, and financial frameworks of the scheme highlight the following reasons:

Conceptual

The scheme is conceptually sound and borrows the best framework worldwide, but there

is scope for improvement. While the scheme advocates public participation and the

utmost transparency, the overall scheme-related decision-making processes do not

represent landowners; the scheme only encourages their consultation regarding their

individual plots. Leaseholders and tenants have no voice in planning and implementing

the TP Scheme (Darshini Mahadevia 2018).

It is observed that the TP Scheme is typically more challenging in small to medium-sized

towns. In these suburban areas, the potential for urbanization in the short term is limited,

impeding the expected land value increase (Darshini Mahadevia 2018) and thereby

reducing the overall financial benefits of the scheme. Therefore, urban planners need to

make reasonable and practical assessments of where to use the TP Scheme for land

management.

Legal

Land is not a central-level subject in India and is solely under the jurisdiction of the state

government, meaning that the state makes all the decisions pertaining to land matters.

Executing the TP Scheme requires the enactment of a state-level town and country

planning act to support the scheme. Unfortunately, not many states have endorsed this

act, limiting the use of the TP Scheme to only a few states. In addition, the central

government could play an active role in pushing the states to enact the law and use the

scheme more commonly.

Institutional

This tool is complex and needs trained planners and officials for efficient and timely

execution. The local development authorities are responsible for implementing the

scheme and usually do have sufficient resources of skilled and accomplished officials

who have the experience and capacity to handle the process. For the success of the

scheme, capacity building of the landowners is also necessary to help them make

informed choices. While it is imperative to advocate the benefits and necessity of the

scheme, except for the TPO, there is no team of technical experts to do so or any other

provision in the system to build the capacity of land rights holders. This impedes the “buy

in” from the landowners and causes temporary delays or complete failure of the scheme.

It is further hindered by the time delays due to a lack of coordination among the

stakeholders and the centralization of the approval processes at the state level. The

success of the scheme requires coordination between the infrastructure-providing

agencies, such as water, transport (roads and others), environment, and municipal and

development authorities, which is not smoothly attainable and delays the planning and

implementation process. In every step of the scheme, including the draft, preliminary,

final, and other steps, state sanction is necessary, which in practice takes a long time to

procure. States should endeavor to reduce the length of time from scheme initiation to

completion.

ADBI Working Paper 1037 V. Jain

Procedural

While the concept of the scheme extends beyond new towns and urban sprawls, that is,

post-disaster areas, urban complex infrastructure provision, and core area revitalization,

it is not common in practice. This could be attributable to the nature of complexity and

the lack of trained officials to undertake such projects. This is the need of the hour in

India, given that small–medium-sized towns are burgeoning, demanding core area

development before peripheral growth, and disasters, especially floods and fires, are

becoming a common phenomenon.

Financial

The financial process of the scheme is such that investments in development are

necessary before the actual realization of payback from betterment charges or the sale

of reserved lands. This becomes an issue for development authorities that are already

experiencing a fund deficit. This challenge also arises from city governments’ inefficiency

in collecting property and other taxes (Darshini Mahadevia 2018). At the same time, there

is no provision for central subsidies and limited state subsidies, leading to a lack of

financing for project development.

3. LAND READJUSTMENT IN JAPAN

The Land Readjustment (LR) Scheme in Japan is a popular urban development method

based on which the country develops a large area of its urbanized land. Its fundamental

objectives include (a) the development and improvement of public facilities and (b) the

enhancement of land usability. With these wide objectives in the background, Japan

applies the LR Scheme to undertake certain functions, such as land replotting to

reorganize and reshape land plots; land contribution to create public spaces and reserve

land to recover the development cost; the development of public facilities; and the

promotion of public and private participation. Japan used this scheme extensively for

reconstructing post-WWII areas and continues to apply it to the following development

areas:

• new town development in peri-urban areas (Figure 4);

• post-disaster reconstruction;

• city center and station area redevelopment;

• improvement of congested and wooden residential areas;

• integrated LR with railway development; and

• small-scale LR for land consolidation in urbanized areas.

Figure 3 presents an example of the typical implementation of the LR Scheme for land

consolidation and urban expansion.

Most LR projects in Japan do not include new building development in their scope, which

the land rights holders and the purchasers of reserve land undertake. However, there

are some cases in which the development objective of LR projects includes building

development (e.g., high-rise building development in underutilized areas and social

housing development in large-scale new town development).

ADBI Working Paper 1037 V. Jain

Figure 3: Conceptual Diagram of the LR Scheme in Japan

Source: Case Study, Land Readjustment in Japan, World Bank Group.

3.1 History of the LR Scheme and Related Laws

The origin of the LR Scheme in Japan dates back more than a century. The modern land

management system and Agricultural Land Consolidation (ALC) were established in the

late nineteenth century. ALC was an agricultural land development tool to reorganize

agricultural land and develop passage and irrigation channels to improve agricultural

productivity. In the early twentieth century, Japan applied ALC to residential area

development in large cities facing rapid population growth. Because ALC required

landowners to pay cash for construction, it was difficult to involve poor landowners in the

target area. To recover part of the project cost, the scheme sold “surplus lands,” which it

could create from private lands under the provision of the ALC law, on the market. The

idea of surplus lands gave way to the “reserve lands” of the LR Law, which the country

established in 1954. Before this, the Urban Planning Law from 1919 contained provisions

for land readjustment and established the legal basis of the LR Scheme. The provisions

of the ALC Law formed the implementation procedures of LR.

During the period from the 1920s to the 1950s, the central and local government mainly

implemented the LR scheme and applied it to several cases, such as post-earthquake

reconstruction in the Tokyo region, urban renovation in large cities, industrial city

construction nationwide, and post-war reconstruction after World War II. Through those

experiences, the government improved and refined the LR techniques. The Agrarian

Reform

of 1947 to 1950 led to an increase in the number of landowners, which

increased the necessity to use the LR mechanism (Matsui 2018).

In 1949, the government repealed the ALC Law and established the Land Improvement

Law, focusing on agricultural land development. This resulted in a conflicting situation,

as the LR Scheme followed the repealed ALC Law, even though the Land Improvement

Law also covered the LR mechanism. To resolve the issue, the government established

the LR Law in 1954. It aimed to foster the completion of the post-war LR projects as well

as the implementation of large-scale LR projects for new town development in response

to socio-economic recovery and increased housing demand (Matsui 2018).

Between 1947 and 1949, the state purchased approximately 5,800,000 acres (23,000 km

) of land

(approximately 38% of Japan’s cultivated land) from the landlords under the reform program and resold

it at extremely low prices (after inflation) to the farmers who worked the land. By 1950, 2 million peasants

had acquired land, dismantling a power structure that the landlords had long dominated.

ADBI Working Paper 1037 V. Jain

In the period including rapid economic growth from the 1950s to 1990s, the country

implemented large-scale LR projects in the major metropolitan areas. Through the

experiences of many LR projects, the LR system improved in terms of the approval

process, land replotting techniques, and financing; this contributed to quicker and

smoother implementation. After the collapse of the bubble economy in the early 1990s,

the decreased housing demand contributed to financial issues in private LR projects that

depended on sales of reserve lands. At the same time, the government changed its policy

to promote land readjustment for urban renovation in city centers, areas around transit

stations, and other urban areas. Although the number of ongoing LR projects has

decreased now, LR has played a very important role in urban development in Japan by

supporting various development purposes. The figures below depict some case

examples of LR in Japan (Felipe Francisco De Souza 2018).

Figure 4: Land Readjustment for the Development of Agricultural Areas

(Tokoyama Area 1994–2000, Aichi Prefecture)

Figure 5: Land Readjustment for the Prevention of Unplanned Growth

(Obu Hantsuki Area 1994–2002, Aichi Prefecture)

ADBI Working Paper 1037 V. Jain

Figure 6: Land Readjustment for the Development of New Towns

(Kayata Area 1989–2005, Chiba Prefecture)

Source: (Felipe Francisco De Souza 2018).

3.2 Comparative Features of the LR Scheme in Japan and India

The Japanese LR mechanism has contributed to better-managed urbanization,

achieving various objectives across the whole country. The urban planning system

controls and promotes projects and various subsidies under the governmental urban

management policies. The table below summarizes the characteristics of the

Japanese LR Scheme that are specific to Japan and different from the TP Scheme

in India (Matsui 2018):

However, there are some characteristics that are common to or similar in the Indian

and Japanese LR mechanisms, which the paper identifies below.

• Coordination with urban planning. LR projects need to conform to the overall

master plan of the area.

• Sales of reserve land. Reserve land is the most critical financial resource for LR

projects, and the laws in both countries allow the recovery of the LR project cost

by selling reserve lands. However, in the Indian TP Scheme, land rights holders

also pay betterment charges for the land development, which partly finance the

scheme.

• Subsidy/central government subsidy. In India, state-level subsidies can

provide technical and financial assistance for LR projects. In Japan, various

subsidies, including a central government subsidy, are available for the

development of city planning roads and other purposes on the LR project site.

• Restriction of building activity. Building restriction in the LR project site area is

enforceable during the planning and implementation stages.

• Temporary relocation. Supporting the construction activities during the

implementation stage, landowners temporarily rent other houses and shop

buildings while they are unable to use their own. The LR implementer

compensates for the cost, including the rental fee and moving.

• Adjustment payment. The laws in both countries allow for an adjustment

method through monetary payment to correct for differences between the

calculated replotted area and the measured area after development. The

ADBI Working Paper 1037 V. Jain

implementing authority pays to or collects money from the land rights holders

based on the final replotting plan.

• Special treatment for small land parcels. In the land replotting planning, small

land parcels can receive special treatment, such as exchanging land for money.

Table 1: Comparative Differences between the Japanese LR Scheme

and the Indian TP Scheme

Characteristics

Japanese LR Scheme

Indian TP Scheme

Multiple LR

Implementers

The LR Law allows for three categories of

public implementers—(a) local governments

(prefecture and city), (b) the central

government, and (c) government

corporations—as well as three kinds of private

implementers—(a) individuals (i.e., a

landowner or a group of landowners

containing several persons or entities), (b) LR

cooperatives,

and (c) LR corporations.

Government authorities

solely implement LR projects.

Agreements from

Land Rights Holders

Private implementers must collect land rights

holders’ agreement (100%) in the approval

procedure, but there is no such requirement

for government-led LR projects. However, in

practice, the government also seeks the

approval of the land rights holders.

In India, publicly implemented

LR projects need agreement

from at least two-thirds of the

land rights holders.

Governmental

Technical and

Financial Support for

Private LR Projects

A private LR project can receive technical and

financial support from the local government

and subsidies from the central government.

The private sector is not

engaged in the TP Scheme,

at least not directly.

Tax Exemption for LR

Implementers and

Landowners

LR implementers are entitled to exemption

from and reduction of taxation. The exemption

is applicable to the real estate registration tax

for replotting lands, sale of reserve lands,

corporate tax, and income tax levied on the

LR cooperative and corporations.

Landowners relinquishing their land receive a

reduction in the income tax on the income that

they earn from compensation and land

expropriation.

No such incentive schemes

are available to LR projects in

India yet.

Dispute Resolution

The implementation activities (e.g.,

designation of replotting plan), defined as

administrative disposition, are eligible for

request for examination under the

Administrative Complaint Investigation Law.

Persons and legal entities can submit a

request for examination to the prefecture

Governor or Minister of the Ministry of Land,

Infrastructure, Transport, and Tourism (MLIT),

depending on the type of the implementer.

In India, the TPO resolves

disputes first and then

escalates them to the state

government. Finally, there is

a Board of Appeal at the

state level, which has the

supreme decision-making

power.

Land rights holders organize LR cooperatives within the LR project site. To establish the LR cooperative, the applicant

group (comprising seven or more land rights holders) needs to have the agreement of more than two-thirds of the land

rights holders. After the establishment of the cooperative, all the land rights holders are registered as cooperative

members.

LR corporations are a type of special purpose company that land rights holders and a private company organize. The

government added this provision to the LR Law in 2005. To establish the LR corporation, land rights holders must invest

more than 51% of the capital of the LR corporation.

When the cooperative sells the reserve land, the sale income is tax exempt. Note: This exemption also applies to

individual-implemented and corporation-implemented LR.

ADBI Working Paper 1037 V. Jain

3.3 Success Factors of the LR Scheme in Japan

The long history of successfully concluding thousands of LR schemes highlights a few

interesting lessons from which other countries can learn.

• There is an established institutional responsibility, which, coupled with the

Japanese culture of respect and obedience toward the government, successfully

promotes LR as a tool to overcome historical difficulties of space constraints,

natural disasters, and a lack of resources. This is a soft or intangible element but

important for the success of the LR Scheme.

• Japan practices the LR Scheme under the central-level law, the Land

Readjustment Law, 1954, which defines the contours of the LR Scheme clearly

and articulately. This helps in guiding all the implementers—public or private

agencies—on the procedures, legalities, approval mechanism, and the financial

framework of the LR mechanism.

• The implementation of the LR Scheme in Japan is diversified. It is not limited

to new town development or controlling urban sprawl but is incorporated into

almost all broader aspects of development, including post-war, post-disaster, and

core area revitalization and the development of complex infrastructure. At the

same time, six different types of implementing agencies can implement it, varying

from public to private, expanding the scope and purpose of this scheme.

• In the Japanese LR Scheme, the representation of landowners and

leaseholders is always eminent in the planning and implementation process,

irrespective of who is implementing the scheme—a private or a public agency. If

it is a private-led implementation, then landowners and leaseholders are part of

the cooperative or corporation formed to execute the scheme. If a government

agency is implementing the scheme, then it forms a land readjustment

council with landowners and leaseholders as representatives that the rights

holders elect.

• An administrative measure, the Administrative Complaint Reinvestigation

Act, 1962, guides the LR mechanism in Japan. This act allows the hearing of

the complaints, objections, or dissatisfaction of the landowners over their

contribution ratio or plot placements and so on without halting or freezing the

implementation process of the LR scheme. In this way, one or a few people

cannot risk the execution if the majority of people have reached a consensus to

implement it (Felipe Francisco De Souza 2018).

4. PRELIMINARY LEARNINGS AND CONCLUSION

There is scope for all countries practicing land readjustment tools to learn from each

other. The underlying concept of land readjustment remains the same across borders;

however, some granular differences prevail, especially with regard to the procedures,

approval mechanism, and financing. In Japan, the scale of the use of the land

readjustment mechanism is far higher despite it being a much smaller country than India.

With regular usage of this tool, several project modalities have improved over

the past century, transforming 10,909 projects covering 329,248 hectares (Felipe

Francisco De Souza 2018). There is an understanding that the success of the land

readjustment mechanism is inevitable if the country continues to apply it constantly and

use it as a planning mechanism. By continuous implementation, for small or large

areas, the scheme self-evolves and people’s trust in this mechanism of development

increases, leading them to participate. Drawing lessons from Japan and showcasing

ADBI Working Paper 1037 V. Jain

successful case studies of Gujarat and Maharashtra, other states in India should adopt

the TP Scheme too. The way forward for India could be to scale up the use of this tool

by gathering resources and drafting an efficient financial framework for executing TP

Scheme projects, learning from success stories, and eliminating the fear of failure.

The preliminary learnings that India’s TP Scheme could draw from the Japanese LR

Scheme are as follows:

• Private Sector Engagement for Financial and Technical Support

India has the precedence of engaging the private sector in infrastructure development

through public–private partnership (PPP) models, which land management could

replicate. Along similar lines to the system in Japan, it would be possible to engage

private developers to invest in the TP Scheme, given that local development authorities

lack the financial capacity to fund the upfront cost of infrastructure development and to

mobilize resources. To incentivize private sector participation, the state could offer tax

exemption on the sale of reserved land, a prominent feature of the Japanese LR Scheme.

• Capacity Building and Transparency in the Process

Development authorities that are intending to use the scheme need to convince the

landowners of the fairness of the process and benefits accrued. By constituting land

readjustment councils, comprising elected representatives from the landowners and

leaseholders, the Japanese LR Scheme increases the transparency, participation, and

trust of the rights holders in decision making and the overall implementation process.

This council also discusses the potential benefits with each land rights holder individually

and resolves any issues in the case of disagreement.

In India, the TPO is the sole authority for decision making, and a committee that the TPO

leads could act as a substitute but with fair representation from landowners and perhaps

LR experts too. This committee could also be responsible for advocacy to the landowners

on their rights, the benefits, and the clarity of the process, supporting capacity building,

which can perhaps help them to be less susceptible to private developers’ land

amassing, which may entail duping farmers, especially small farmers.

The country should develop a central-level guideline on implementing the TP Scheme

for building the capacities of states with little or no experience of planning and executing

the TP Scheme. However, the states in India are very different, and there is no one

solution that fits all, so it should still be necessary for them to formulate their own town

and country planning legislation and TP Scheme procedures. Adapting from Japan, there

must also be a provision for seeking technical support in designing and implementing the

TP Scheme from the state-level or central-level authorities.

• TP Schemes for Build Back Better

Japan has successfully applied the LR scheme to post-disaster reconstruction. This is

an efficient mechanism for rehabilitating disaster-affected lands that need better

reorganization of plots and an efficient infrastructure for future resiliency—Build Back

Better. It is also applicable as a preferable mechanism for disaster-hit areas in India,

promoting resilient and safe development. Landowners are vulnerable at the time of

disasters, and this mechanism can help them to feel more secure and less exposed to

eviction or loss of livelihood. Gujarat applied the TP Scheme to Bhuj following an

earthquake in 2001, which was a success and can offer some lessons to other states.

Similarly, Japan’s post-earthquake recovery after 1995 (Hanshin-Awaji) and 2011

(Tohoku) are worth studying to gain a better understanding of the applicability of land

readjustment to post-disaster reconstruction.

ADBI Working Paper 1037 V. Jain

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