Both public and private parties can monetize land to pay for infrastructure, such as by selling parts of existing land banks or vacant/underused land to raise funds to invest in infrastructure. This is typically an option in urban areas. It has not always been preferred because it does not result in a sustainable source of finance-there is a limit to what can be sold-but it has been effective with a number of different approaches.
This option has been used extensively in China with the sale or leasing of land parcels on the periphery of cities to fund infrastructure within the city. For example, in Changsha, the capital of Hunan Province, China, approximately 50 percent of the RMB 6 billion funding for an outer ring road came from the sale of leasing rights to land strips on either side of the highway with access and development approval. In its original state, this land had little value.5
In another example, in India a project was launched in the late 1980s to develop the Bangalore-Mysore infrastructure corridor.6 The project involves constructing a 111 kilometer tolled expressway between the two cities and developing five townships with a population of approximately 100,000 each along the road corridor. Theoretically, the project can leverage the increase in land values from the new road and from the township development to finance the infrastructure. While possibly pioneering in its thinking, the project is still incomplete and has been mired in controversy, much of it around land assembly.7 Nevertheless, it may provide valuable lessons for other countries wanting to explore other financing approaches.