Land pooling

Land pooling or land readjustment is the practice of pooling fragmented land parcels for joint development, with owners transferring a portion of their land for public use to capture value increments and cover development costs
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Instrument Category

  • Government Funding

Other ınstruments ın the same Category

Loan loss reserve (LLR)
National government transfers
Tax incentives for smart city development
Asset recycling

Relevant case study

Land Pooling Scheme for Development of New Capital City in Andhra Pradesh, India

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Description

Land pooling or land readjustment is the practice of pooling fragmented land parcels for joint development, with owners transferring a portion of their land for public use to capture value increments and cover development costs. It is often accompanied by zoning changes or relaxed density regulations so that newly developed land becomes more valuable. Landowners provide a share of their plots for public infrastructure and services, such as public roads, utilities, and parks. In turn, they are returned a smaller plot of land that is nonetheless more valuable due to the improvements made. Land pooling can be initiated by local governments or private landowners.

Enabling Conditions and Key Considerations

  • Clear legal framework for land pooling. The importance of special legislation for land pooling that not only sets out the rules but also serves as a mechanism for cooperation between government and landowners is critical. The framework should set out the circumstances under which land pooling can be carried out, the powers vested in local authorities to make decisions on land pooling, the rights and obligations of owners participating in land pooling schemes, and the treatment of groups who oppose land pooling schemes.
  • Established mechanisms to capture the value from land pooling. Clear guidelines or mechanisms that govern how gains created from land pooling are calculated and redistributed are critical to minimize disputes between landowners and developers (including public agencies). In particular, the way that land value increments due to urbanization or development are captured would need to be set out clearly.
  • Clear dispute or grievance redress mechanisms. Functional and credible grievance redress mechanisms that define clear ways for landowners to raise complaints and objections to projects must be created. For instance, in Japan, this is through the procedures under a stand-alone law, the Administrative Complaint Investigation Law, which includes complaint and appeal procedures. In Germany, landowners can raise their concerns or complaints to the project authority and, if not satisfied with the decision of the authority, can approach the special court of law for grievance redressal.
  • Rigorous land zoning rules are critical to avoid inappropriate land use. Land zoning rules must be clearly established and enforced in a robust manner to avoid private developers pooling land for developments that will have a negative impact on their surroundings.

Potential Challenges

  • Lack of experience of government officials. Government officials may have limited experience in drafting robust land pooling laws and implementing such schemes. Successful implementation of land pooling schemes requires a thorough understanding of land use regulations, investment policies, enabling legal frameworks, fiscal and governance structures, as well as local circumstances and rooted traditions regarding land rights.
  • Does not cover the cost of infrastructure. The land pooling approach covers the land costs but not the costs of constructing the infrastructure. Before implementation, it is critical to secure sufficient financial resources for administrative, implementation, and construction costs, and alternative sources of financing might be needed.
  • Difficulties in securing landowner buy-in can delay development. Landowners might not be convinced of the benefits of the development and can oppose the land pooling exercise, leading to long-drawn disputes that can consume resources and stall infrastructure development.

Potential Benefits

  • Could be a relatively inexpensive way to acquire land. If implemented well, land pooling enables prime land to be acquired for development in a relatively inexpensive way without the government having to negotiate for land acquisition which can be costly and drawn out if existing owners do not agree on the price or are not keen to move.
  • Displacement of existing communities can be limited. Land pooling can allow improvement to land plots without completely displacing existing communities as the land would be returned to current landowners.
  • Costs and benefits are shared between stakeholders. The cost and benefits of the development are shared between the government, public, and landowners as the government is not required to purchase the land.

Sources/Additional Information

Case Study

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