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In many cities, land has effectively become a ‘dead capital’, the Economic Survey 2025-26 has revealed.
In economic jargon, dead capital is used for assets that no longer function as productive capital.
“These resources have been unable to contribute to economic activity due to a combination of restrictive land-use regulations, title insecurity, and fragmented markets, as well as speculative incentives that lead to low land recycling,” the report tabled in Parliament on January 29, said.
The report observed that restrictive land-use regulations in the form of Development Control Regulations (DCR), such as low floor space index (FSI) or floor-area ratio (FAR), place a cap on the amount of built-up area per unit of land, constraining vertical development and forcing spatial expansion outward rather than upward.
This distortion raises land values and creates artificial scarcity in core urban areas, it said.
The Survey said compared to global cities like New York and Hong Kong, India’s cities have relatively lower FSI, with exceptions for denser areas such as central business districts resulting in settlements to expand horizontally, driving up average land cost and increasing infrastructure delivery costs per unit of housing or commercial space.
But the approach limits housing supply and raises prices relative to incomes.
Underscoring the need for a holistic rethink in the existing approach, it cited that the Chennai Metropolitan Development Authority (CMDA), in drafting its third master plan, is reportedly considering a higher FSI in key zones, mixed-use development, and phased upgrades to support compact and vertical growth across the city.
The document recommends urban bodies and state governments to use urban and housing ministries’ resources to prepare transit-oriented development plans and optimising city densities.
The report identified that unclear land titles, compounded by fragmentation and opaque records are other reasons why land remains unproductive.
“Secure, transferable property rights are essential for land to function as capital. They allow land to be used as collateral, traded in formal markets, and redeveloped efficiently. Land tenure and security encompass securing and transferring rights related to land and natural resources. This includes titling, resolving land disputes, land acquisition, and managing informal settlements,” it said.
According to the Survey, while increasing FSI and FAR may open economic value in terms of additional built-up area per unit of land, the eventual rise in density will lead to unproductive outcomes if the augmenting infrastructure is not created.
“The focus on “de-congestion” can mislead planners into spreading cities outward rather than building infrastructure to support compact growth, even though successful global cities are dense by design and pair density with robust services,” it said.
Amenities such as mass transit, water, and sanitation, among others, must be key factors in the decision-making process, the report noted. In the absence of adequate amenities, a rise in density will result in traffic gridlocks, water shortages and overwhelmed sanitation systems, it warned.