Enhancing the Efficiency of TDR Markets for Financing Large-scale Infrastructure Projects

Abstract

India will require an investment of Rs. 50 trillion in the infrastructure sector by 2022 to cope with the rapid pace of urbanization (IBEF, 2022). Given the increasing demand for infrastructure projects and the limited supply of financing mechanisms, there is a growing need to develop a sustainable self-financing mechanism for financing large-scale infrastructure projects. Most urban development and infrastructure projects get stuck in long-drawn issues related to land acquisition, compensation payment, and land disposal to the respective land development agencies. As a result, the implementation of projects is significantly delayed, a significant hurdle faced by developers. To mitigate these issues, development authorities and municipalities are shifting towards innovative land development and financing mechanisms to boost urban development and large-scale infrastructure projects. One of the land value capture mechanisms to finance large-scale infrastructure projects is the Transferable Development Right (TDR). The market of TDRs is characterized by a high transaction cost and information asymmetry. This article explores the inefficiencies in the processes of generation, transfer, and utilization of TDRs, and how blockchain technology (BCT) can reduce them.