Page 35 substantial investments for improvement and redevelopment that the market may dictate, but which the current ownership framework make highly risky and ineligible for formal financing.

# **Government Regulations Requiring Consumption of Land**

The discussion above describes government policies and procedures that make it difficult and costly to obtain land for development; this section discusses a set of regulations that force a high consumption of land per unit of floor space provided. What households want is living space—a roof over their head—not necessarily raw land. Having made land expensive, government also limits the ability to economize on land when producing housing space. These regulations all have acceptable goals. Typically, their rationale is based on quality of life considerations, privacy, local environment, preservation of views etc. However, especially in a fast growing economy which has difficulty expanding access to land or wishing to contain urban sprawl and a large low-income population, the effects are the opposite of what is intended. The key to the unintended effects lies in affordability. If, as is the case in Ahmedabad, only 50 percent of the population can afford a new formal home, much of the expansion of the housing stock takes place informally—where these regulations don’t matter.

# **Maximum FSI**

Low uniform maximum FSI even in the city center forces more Greenfield development at the urban periphery—pushing the pressure for developable land into the periphery where the delays in rural urban land conversion make themselves felt. See Figure IV.6 showing that the density profile already flattened between 1991 and 2001<sup>21</sup> .

The practice, common in India, to impose a uniform maximum FSI to an entire city has many negative impacts. This practice forces the consumption of land in less desirable suburban areas and it decreases the area of floor space that can be built in areas where there is a high demand for high quality high density urban development. But not allowing higher maximum FSI in nonresidential areas, it intensifies the competition between households and businesses for welllocated land. While businesses may happily sacrifice a spacious, bucolic environment for an efficient well designed business centre, uniformly low maximum FSI forces them to consume open space they don’t want or need. This drives up the price of open space everywhere, and raises the costs of these amenities to households. In aggregate low maximum FSI increases the land required for housing and commercial development, and drives up its price—thereby driving up the cost of any housing—since they all need land.

Beyond its substantial impacts on housing affordability, the current maximum FSI policy affects the structure of the city in undesirable and possibly unforeseen ways. Figure IV.7 shows for example that some of the lowest densities in the city are in the heart of the central business district (CBD) on the west side of the river. The modern service sector CBD that emerged in the 1980s along Ashram road around Nehru bridge is now anemic because the low FSI doesn’t allow the construction of a modern CBD. Instead, small office and commercial centers are being built in suburban areas along ring roads and radial roads. By failing to distinguish between commercial and residential land, the current 1.8 FSI imposed on Ahmedabad contributes to dispersing commercial activities into distant suburbs. This dispersion of business and commercial activities will have consequences for the modernization of Ahmedabad’s transport system.

21 This analysis can be updated to 2011 once ward level population data are available from the 2011 census.