Workshop in India Explores Options for Financing Transit-Oriented Development in Cities

India’s rural population is on the decline, and people are increasingly moving to cities. The population of Delhi, for example, is expected to grow 30 percent, making the city the second most populous urban area in the world by 2030. This rapid growth has raised significant concerns about the future of quality of life for Delhi’s residents.

However, with a new transit-oriented development (TOD) policy in place, Delhi is beginning to plan for sustainable urban development. By optimizing land use and connecting housing, office and retail to high-quality public transit, TOD aims to create walkable and compact urban environments. TOD as an urban growth strategy is relatively new in India, but the national government is now beginning to recognize as a legitimate and effective tool. Nevertheless, there remain many challenges and barriers to equitable and inclusive TOD. 

Bringing together city experts from a range of sectors, WRI India, in partnership with the Citi Foundation and C40, organized a workshop on February 18, 2016 in New Delhi to explore options for financing TOD in India. Discussion included financing needs, the mechanisms that exist, and feasibility of applying these mechanisms in Delhi as well as Indian cities broadly.

Despite Challenges, a Growing Recognition of TOD in Indian Cities

Although TOD is a new concept to many Indian cities, some are beginning to experiment, as people recognize that TOD can be an effective instrument to leverage funds for public transit, improve the stability of public finances and improve quality of life. For example, the state of Haryana is currently considering a TOD policy based on Delhi’s. This policy could expand the pool of developable land by 5000 acres in the state as a result. Additionally, the city of Naya Raipur in Chhattisgarh is considering modifications to its master plan—including parking regulations and pedestrian infrastructure—in order to reduce the cost of development. One of the world's largest railway networks, Indian Railways, is exploring the possibility of implementing TOD as a strategy in order to improve station areas and redevelop underutilized parcels of urban land. So far the national government of India is considering TOD as a means of attracting foreign investment to cities. 

Workshop participants from the private sector also voiced support for TOD. Real estate representatives pointed out that the revenue generated from TOD projects can be returned to the project site, urban neighborhood, and transit system in order to support specific urban services and amenities.

Despite initial enthusiasm, cities are encountering several challenges to applying TOD in the context of India, as government agencies often lack technical expertise. Common barriers include a lack of integration between land use and transport planning, deficient funding for TOD projects and little appreciation of TOD’s benefits.   

Adapting Financial Mechanisms to the Indian Context

The workshop highlighted the importance of viable financial mechanisms to overcome these barriers. Participants highlighted the Delhi Metro Rail as an example of success, which was subsidized with funds from the central and state government, and partly financed with the support of the Japanese Infrastructure Agency (JICA) as a Public Private Partnership (PPP). As a result of this innovative private and public collaboration, the Delhi Metro has been making operational profits since its inception. 

Discussion also touched on the potential of Tax Increment Financing (TIF) and rail plus property development models to finance TOD. In the United States, TIFs are often uses to project land values increases in order to borrow money upfront. While this type of instrument may not be a primary source of financing, Indian cities could consider it as another option. Lastly, there was general optimism about green financing and bonds among participants.

Building a Dialogue for TOD across India

Going forward, WRI India will continue to facilitate a dialogue around TOD in Indian cities by giving stakeholders the knowledge and tools they need. WRI will work with the Indian Railway Station Development Corporation Limited (IRSDC) on transit-oriented development around rail stations and with the Delhi Metro Rail Corporation (DMRC) on TOD around metro stations. Additionally, our team will develop materials to help build knowledge among stakeholders and engage local and state governments in capacity building to help ensure that TOD continues to grow throughout India.

The partnership between WRI, the Citi Foundation and C40 helps develop locally-customized business models that can accelerate the implementation of sustainable solutions around the world. Learn more here.