Selling government lands

MR has an interesting graphic about land ownership in the US, which indicates a clear east-west divide. Surprisingly, the federal government owns more than half the high priced land in the west, and Alex Tabarrok proposes selling some of these lands to raise money.



Governments own large extents of land in most countries and these land bits are one of the largest sources of locked up income for governments. China is one of the best examples of how government ownership of land has been leveraged to raise massive investment resources. It has been estimated that proceeeds from such sales and partnerships in urban lands, has provided the largest source of government revenue for investments in infrastructure in the country.

In recent years, state governments in India have been selling large extents of lands to raise money. But unfortunately instead of leveraging this income for capital expenditure, governments have been using it to bridge their budgetary deficits. Further, most of these lands are disposed off through direct auction sales (instead of selling it for PPP developments or after developing layouts), which prevents the full capture of value in the chain.

There is a strong economic case that can be made in favour of facilitating the development of government lands, especially in urban areas. Apart from providing huge incomes, the development of such lands exerts significant multiplier effect on the local economy. Typically, governments have large tracts of highly priced real estate, which if released into the market can have the effect of generating a downward pressure on land prices. Lower land prices and rental values will make housing and commercial space more affordable, thereby sustaining the urban growth engine. In any case, government lands in urban centers are always vulnerable to being encroached or grabbed if left unattended for long!