Transferable Development Rights, or TDR in real estate, is a tool used to manage urban development. It allows landowners to transfer the development rights of their land to another location, typically in exchange for compensation or other benefits. TDR in real estate is often used to protect sensitive environmental areas, such as wetlands and forests, or to preserve historic buildings and neighbourhoods.

Transferable Development Rights can also be used to promote smart growth by encouraging development in areas that are already well-served by infrastructure and public transportation. For example, a city might offer TDR credits to developers who build in a designated downtown area, to encourage density and reduce urban sprawl.

What is TDR in Real Estate?

Transfer of Development Rights or TDR in real estate is a land use management tool that allows landowners to transfer their development rights from one property to another, typically in a different location.

TDR in real estate is a tool that can be used to manage urban development. TDR in construction is a way to allow landowners to sell their development rights to developers, who can then use those rights to build at a higher density in other areas.

TDR in construction is a way for developers to build more than the permissible FSI on a property by purchasing the development rights from another property. This can be done when a property is located in an area where development is restricted, such as a historic district or near a park. By purchasing the development rights from another property, the developer can transfer them to their own property and build a larger building.

TDR in real estate can be used to achieve a variety of goals, such as:

• Protecting sensitive environmental areas: TDR in construction can be used to protect wetlands, forests, and other sensitive areas from development by allowing landowners to sell their development rights to developers who can use them to build in other areas.


• Preserving historic buildings and neighbourhoods: TDR can be used to preserve historic buildings and neighbourhoods by allowing landowners to sell their development rights to developers who can use them to build in other areas.


• Promoting smart growth: TDR in real estate can be used to promote smart growth by encouraging development in areas that are already well-served by infrastructure and public transportation.


• Increased public amenities: TDR can be used to fund the development of public amenities, such as parks, schools, and libraries.

How Does TDR Work in Real Estate?

TDR in real estate works by creating a market for development rights. Landowners willing to sell their development rights can do so to developers willing to pay for them.

TDR programs typically work by creating a system of credits. Landowners in designated sending areas, which are typically areas where development is restricted, can sell their development rights to developers in designated receiving areas, where development is encouraged. Developers can then use these credits to build at a higher density than permitted.

The price of TDR credits is typically determined by the market value of the land in the area where it can be used. TDR programs are typically voluntary, but some governments may require landowners to participate in certain cases.

TDR programs are typically implemented by local governments, which establish rules and regulations for how TDR in real estate can be used and transferred. In general, TDR programs work as follows:

• A landowner in a designated area (such as a rural area or an environmentally sensitive area) agrees to surrender their development rights.


• The local government issues the landowner TDR certificates, representing the amount of development they have surrendered.


• The landowner can then sell or donate their TDR certificates to another landowner in a designated receiving area.


• The landowner in the receiving area can then use the TDR certificates to develop their property beyond what would otherwise be allowed.

Transferable Development Rights programs can be beneficial for both landowners and communities. For landowners, TDR programs can provide a way to compensate them for giving up their development rights, and it can also give them a way to participate in the development process even if their land is not located in a prime development area. For communities, TDR programs can help preserve open space, protect environmentally sensitive areas, and promote development in designated areas.

Here is an example of how TDR in real estate might work:

A city government wants to preserve a large forest that lies within its boundaries. The forest is home to various endangered species and a popular recreation area for residents.

The city government establishes a TDR program that allows landowners in the forest to surrender their development rights in exchange for TDR certificates.

The city government then purchases the TDR certificates from the landowners and uses them to develop a new park nearby.

The new park is located in a more developed area where land is more expensive, but the city government is able to use the TDR certificates to offset the cost of the land.

As a result of the TDR program, the city government is able to preserve the forest and develop a new park in a more developed area without having to spend a lot of money on land.

TDR Certificate

A TDR certificate is a document that specifies the number of development rights that a landowner has for sale. Local governments issue TDR certificates.

To obtain a TDR certificate, landowners must apply to the local government. The application process will vary from city to city.

Once a landowner has obtained a TDR certificate, they can sell it to a developer. The developer can then use the TDR certificate to build at a higher density in another area.

Purpose of Transferable Development Rights

Local governments typically implement TDR programs, and they can be used for a variety of purposes, including:

Preserve open space and environmental features: TDR in real estate can be used to protect environmentally sensitive areas, such as wetlands, forests, and farmland, from development. This can help to improve air and water quality, reduce flooding, and conserve wildlife habitat.

Protect historic and cultural resources: TDR programs can also be used to preserve historic buildings and cultural landmarks. This can help to maintain a community's sense of place and identity and attract tourists and businesses.

Promote mixed-use development: TDR in construction can be used to encourage developers to build mixed-use projects that include housing, retail, and office space in the same place. This can help to create more liveable and walkable communities.

Support economic development: TDR programs can be used to direct development to areas where it is most needed, such as downtowns and other commercial centres. This can help to create jobs and boost the local economy.

Compensate landowners: TDR programs can be used to compensate landowners who are restricted from developing their land due to zoning or environmental regulations. This can help to make these regulations more fair and equitable.

Promoting affordable housing: TDR in real estate can be used to incentivise developers to build affordable housing units in areas where they are needed. This can help to make housing more affordable for low- and middle-income families.

Reduce traffic congestion: TDR programs can be used to encourage development in areas that are well-served by public transportation. This can help to reduce traffic congestion and improve air quality.

Urban renewal: TDR in construction can be used to support redevelopment efforts in blighted or underserved neighbourhoods. This can help improve residents' quality of life and attract new investment.

Benefits of Transferable Development Rights (TDR in Real Estate)

Benefits for landowners:

• Financial compensation: Landowners can sell their development rights for a profit. This can be a significant source of income for landowners, especially in areas with high land values.


• Flexibility: Landowners can choose to develop their land themselves, sell their Transferable Development Rights, or do a combination of both. Landowners can also choose to sell all or part of their development rights or TDR certificates. This gives landowners the flexibility to retain some of their land for development or other purposes.


• Conservation: Landowners can use TDR in real estate to protect their land from development or to promote sustainable development practices, even if it is zoned for development. For example, a landowner could sell their TDR certificates to a developer who is building a mixed-use development with green spaces and affordable housing.


• Preservation: Landowners can use TDR to preserve historic buildings and neighbourhoods. This can be beneficial for landowners who want to protect the cultural heritage of their community.


• Smart growth: Landowners can use the Transferable Development Rights to promote smart growth by encouraging development in areas already well-served by infrastructure and public transportation. This can benefit landowners who want to live in a more walkable and liveable community.

Here are some specific examples of how TDR in real estate can benefit landowners:

• A farmer in a growing suburban area may be able to sell their development rights to a developer who wants to build a new housing development. The farmer can use the proceeds from the sale to buy more land in a rural area or to invest in their existing farm.


• A family who owns a historic house in a downtown area may be able to sell their development rights to a developer who wants to build a new office building. The family can use the proceeds from the sale to renovate their house or move to a larger home.


• A community group may be able to purchase TDR credits from landowners in a wetland area. The community group can then use the TDR credits to preserve the wetland from development.

Benefits for developers:

• Increased development capacity: Developers can use TDR in construction to increase the allowable development density on their properties more than the FSI would normally allow. This can enable them to build more or larger units, increasing the value of their projects.


• Reduced costs: Developers can use TDR in real estate to reduce the cost of land acquisition. This is because TDR credits are typically cheaper than land in areas where development is allowed.


• Greater Flexibility: Developers can use Transferable Development Rights to build in areas already well-served by infrastructure and public transportation. This can make projects more attractive to buyers and tenants. TDRs can also be used to develop land in regions that would otherwise be restricted. This can give developers more flexibility in where they build and what types of projects they develop.


• Sustainability: Developers can use TDR in construction to promote sustainability by building in already developed areas. This can help to reduce urban sprawl and protect the environment.

Here are some specific examples of how TDR can benefit developers:

• A developer who wants to build a high-rise building in a downtown area may need to purchase TDR credits to build at the desired density.


• A developer who wants to build a new office building in a mixed-use development may be able to purchase TDR credits from landowners in a nearby residential area.


• A developer who wants to build a new shopping centre in a suburban area may be able to purchase TDR credits from landowners in a nearby agricultural area.

Overall, TDR in construction can be a valuable tool for developers who want to build in areas where it is allowed, reduce costs, and promote sustainability.

Personal experiences of people who have lived in both cities

To provide a well-rounded perspective, we spoke to individuals who have lived in both Bangalore and Hyderabad to understand their experiences regarding the cost of living in Bangalore Vs Hyderabad. Many mentioned that Bangalore offers more job opportunities, especially in the IT sector, leading to higher salaries. However, they also highlighted the high cost of living in terms of housing and transportation, which can consume a significant portion of their income.

One of these people said he was paying Rs. 15,000 per month for a 2BHK apartment in a decent area of Hyderabad. On the other side, in Bangalore, he was paying at least Rs. 30,000 for the same apartment. The same person also said that the food prices in Hyderabad are generally lower than in Bangalore. A meal at a mid-range restaurant in Hyderabad costs around Rs. 200, while the same meal in Bangalore would cost around Rs. 300. Other expenses, such as transportation, utilities, groceries, and entertainment, are also generally lower in Hyderabad than in Bangalore.

After talking to these people regarding cost of living in Bangalore Vs Hyderabad, we learned that those who have lived in Hyderabad emphasized the city's affordability and a more relaxed way of life. The cost of living is relatively lower, allowing individuals to save more and have a comfortable lifestyle. Moreover, the respondents appreciated the city's friendly atmosphere and the presence of various cultural events.

Types of Transferable Development Rights (TDR)

There are four main types of TDR in real estate or construction:

1. Road TDR: This type of TDR is generated when land is acquired for the construction of roads. The landowners who surrender their land for this purpose are granted TDR certificates, which they can use to develop their remaining land to a higher FSI.


2. Reserved plots TDR: This type of TDR is generated when land is reserved for public purposes, such as parks, gardens, and schools. The landowners who own these plots are granted TDR certificates, which they can use to develop their other land to a higher FSI.


3. Slum TDR: This type of TDR is generated when slum areas are redeveloped. The slum dwellers who are relocated as part of the redevelopment project are granted TDR certificates, which they can use to develop their new homes to a higher FSI.


4. Heritage TDR: This type of TDR in real estate is generated when heritage buildings are preserved or restored. The owners of these buildings are granted TDR certificates, which they can use to develop their other land to a higher FSI.

Developers can use TDR to increase the density of their projects in areas where the FSI is limited. This can be useful for developing high-rise buildings or mixed-use projects. TDR in real estate can also be used to redevelop underdeveloped or blighted areas.

How to Calculate FSI and TDR?

The Floor Space Index (FSI) measures the maximum floor space that can be built on a piece of land.

To calculate the floor space index (FSI), you divide the total built-up area of a building by the area of the plot on which it is built. The formula is:

FSI = Total built-up area / Plot area

The built-up area includes the area covered by all the floors of the building, including basements, ground floors, upper floors, staircases, lifts, and other common areas. The plot area is the total area of the land on which the building is built, including any open spaces or gardens.

For example, if a building has a total built-up area of 10,000 square feet and is built on a plot of land that is 5,000 square feet, then the FSI of the building is 2. This means the building covers twice as much area as the plot on which it is built.

The FSI is a dimensionless number and is often expressed as a percentage. For example, an FSI of 2 can also be expressed as 200%.

For TDR calculation, you need to multiply the gross area of the plot relinquished by the allowable zone FSI.

The formula for TDR calculation:

TDR in real estate = Gross area of plot relinquished * Allowable zone FSI

For example, if a landowner surrenders a plot of 10,000 square feet in a zone with an FSI of 2, they will receive 20,000 square feet of TDR credits.

Note: The exact TDR calculation may vary depending on the local laws and regulations. It is always advisable to consult with a qualified real estate professional to get the most accurate calculation.

Markets for Transferable Development Rights (TDR)

The market for TDR in real estate in India is largely unorganized and varies from city to city. There is no central authority that regulates the pricing or trading of TDR. As a result, the market is driven by demand and supply, and prices can fluctuate significantly.

TDR markets are typically established and regulated by local governments. TDR can be traded on the open market or through a government-run exchange.

The price of TDR is typically determined by the market value of the land in the area where it can be used. TDR prices can vary significantly depending on the location and the demand for development rights.

According to a recent study by the National Institute of Urban Affairs (NIUA), the average price of TDR in India has increased by around 10% in the past year. The study also found that the demand for TDR in real estate is expected to continue to grow in the coming years.

The TDR market in Mumbai is the largest, most active, and most organized in India. TDR prices in Mumbai are the highest, costing upwards of Rs. 100,000 per square meter. TDR from Mumbai is highly valued due to the city's high land prices and scarcity of land.

The TDR market in Delhi is smaller and less organized, but it is still significant. TDR prices in Delhi are lower than in Mumbai, costing upwards of Rs. 50,000 per square meter, but they have been rising in recent years. The TDR market in Bengaluru is growing rapidly due to city’s rapid urbanization. TDR prices in Bengaluru are lower than in Mumbai and Delhi, costing upwards of Rs. 30,000 per square meter, but they have been rising in recent years.

The TDR market in Hyderabad is the smallest and least active of the four cities, but it is growing. TDR prices in Hyderabad are the lowest of the four cities, costing upwards of Rs. 20,000 per square meter. The TDR market in Hyderabad is less organized than in the other three cities, but it is still in high demand due to the city's rapid growth.

Criticism of the TDR Concept

The concept of TDR in real estate in India has faced several criticisms, including:

• Unplanned and haphazard development: TDR has been blamed for leading to unplanned and haphazard development in suburban areas, as developers have used it to increase the saleable area in prime locations. This has resulted in congestion, increased pressure on infrastructure, and a decline in the quality of life for residents.


• Increased real estate prices: The cost of TDR in construction is typically loaded onto the project cost, which is then passed on to buyers in the form of higher property prices. This has made it difficult for middle- and low-income earners to afford housing in prime locations.


• Gentrification and displacement of low-income residents: This is because developers are often willing to pay a premium for TDR certificates, which can drive up the cost of land and housing in certain areas.


• Complexity and lack of transparency: The TDR system can be complicated for both buyers and sellers to understand. This has led to cases of fraud and malpractice.

In addition to these general criticisms, there have also been specific concerns raised about the implementation of TDR in real estate in different parts of India. For example, in Mumbai, it has been alleged that developers have used TDR in construction to circumvent environmental regulations and build on ecologically sensitive land.

Final Thoughts

Transferable Development Rights, or TDR in real estate, is an innovative market-based tool that can be used to balance the competing goals of urban development and environmental protection. It is a powerful instrument that can be used to achieve various objectives.

However, TDR is not a panacea. It is important to carefully design and implement TDR programs to achieve their objectives and avoid unintended consequences.

Overall, TDR in real estate is a promising tool for managing urban development in the 21st century. When implemented effectively, Transferable Development Rights can help to create more liveable and sustainable cities for everyone.

FAQs

What is TDR in real estate?

Transferable Development Rights or TDR in real estate is a system that allows landowners to sell or transfer the development rights of their land to another landowner.

How is TDR calculated?

TDR is calculated by multiplying the gross area of the surrendered plot and the allowable zone FSI.

What is TDR full form in construction?

TDR full form in construction is Transferable Development Rights.

What is TDR in land acquisition?

TDR in land acquisition allows landowners to exchange a portion of their relinquished land area for additional built-up space, which they can use personally or sell to someone in need for an agreed-upon fee.