Financing Options for a Transit System Through Real Estate



Financing Options for a Transit System Through Real Estate

Authors

M Singh, School of Planning and Architecture, Bhopal; Rt Sharma, UMT, Delhi, IN

Description

The research attempts to analyze the current scenario in Delhi that is dealing with tremendous real estate changes as triggered by Metro. Furthermore, how this escalation in individuals property can be tapped and used a source of finance for Metro.

Abstract

In a democratic country like India, Metro rail projects that are presently on a sprawl across most of the cities are favorably social sector projects. These are highly capital intensive and being circumscribed it is not possible to increase the fares beyond a point. Therefore, fare box revenue alone lacks on the part of project's financial viability, where there is a requirement of long lending at a reasonable rate in order to be sustainable.

The research attempts to analyze the current scenario in the city of Delhi that is dealing with tremendous real estate changes as triggered by Metro. Furthermore, how this escalation in individuals property can be tapped and used a source of finance for Metro. The whole study is processed with a base assumption that transit system has benefitted the population by escalating the value of surrounding real estate. The outline is emphasized on tracking the chronological changes that have occurred only due to the transit system. Escalations in value of land and built up structures have been surveyed using comparison method for valuation. The criterion for comparison is certainly the presence of property within a 500m buffer of transit corridor that is its influence zone. For the two sites to be compared one site is within the influence zone and the other one beyond it. The used method keeps all other factors affecting the value of a property similar for both the sites. On the other hand it emphasizes the pure influence of metro corridor on property values that provides weight to the statistics considerable enough to make suitable judgments.

The study further accumulates the financial models adopted by the developer and operator, Delhi Metro Rail Corporation Ltd. It also considers several other current practices by public corporations across other states in order to provide transit supportive infrastructure and to capture the same benefits. Further, it has been put to investigation that whether the above-mentioned escalations can be captured to form a model that shall contribute in further financing of the transit project.

Publisher

Association for European Transport