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Updated: March 9, 2013 02:14 IST

Why the World Bank is wrong

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“Everything should be made as simple as possible, but no simpler” — Albert Einstein

The World Bank has been pressing for the removal of restrictions on Floor Space Index (or at least their considerable relaxation) in the inner parts of Mumbai and Bangalore. The thinking that leads to this recommendation is based on a mathematical model. This particular model, unfortunately, is oversimplified and neglects important relevant parameters. If you take these into account, the recommendation could be, quite possibly, more damaging than helpful.


Called the monocentric-city model, this assumes the city is inhabited by a number of identical residents, each earning the same income, and who all work in the central business district (CBD). The inhabitants commute from their residences to the CBD on a dense radial road network, paying a certain amount per round-trip mile (including the cost of travel time). An implicit assumption is that commuting is by car, not by public transport that might lead to some preferred travel routes, and not by walking which incurs no explicit travel cost. Further, each resident is assumed to be a renter, paying a certain amount per square foot of housing, and occupying a certain amount of square feet of housing. The price naturally falls with distance from the CBD, and the housing area occupied increases.

The mathematical formulation then moves through various complexities to the consideration of FSI, and what happens when FSI is restricted (as it is in most cities). The FSI restriction tends to limit population density in the central part of the city; and so causes the city to spread out.

Studying the condition of the new resident as the city grows, the model suggests that if FSI restrictions in the inner city are removed, this accommodates more people closer to the centre and so their commuting times are reduced. This is claimed to result in a welfare gain for them, which is measured in terms of their reduced commuting costs. So the claim is that lifting FSI restrictions brings about an overall welfare gain.

The first indication that something is flawed in the argument comes from consideration of where the limit lies if we allow unlimited densification. Every increment in density will result in still more saving for commuters. As the model stands, there is no limit to the saving possible, until commuting cost is reduced to zero. We are obviously missing something. There has to be a constraining parameter that would put a cap, sooner or later, on how small the city can get while being both efficient and attractive.

This constraint is congestion and its consequences. The first untenable hidden assumption in the model is that travel speed is constant, and travel time is proportionate to distance and nothing else. In reality, if we retain the model’s assumption that all travel is by car, as densities rise and streets become more crowded there is bound to be a reduction in travel speeds. It is common knowledge in transportation engineering that as demand increases, road speed reduces and the hourly throughput of vehicles falls. So FSI permitted in a locality needs to be judiciously related to transport demand and transport capacity.

The second hidden assumption is that existing residents are not adversely affected by densification. The fact is that they will now have to share their open spaces and other amenities with new residents, and surely this results in some loss of welfare for the older residents.

A third use

In essence, the model assumes that there are only two uses for land in the city: either for transport by car or for residences. In practice, of course, there is a third use, and that is for open spaces, schools and playgrounds, and land needed for other public amenities. These could be considered a fixed proportion of the total and therefore irrelevant to the argument of the model. However, since localities once built up are hard to change, with densification the availability of amenity space per capita will necessarily diminish, resulting in a loss of welfare for existing residents.

This is not to deny that a more compact city would be more efficient in terms of transport costs, provided it was designed ab initio keeping in mind the necessary high transport capacities and providing adequate physical and social infrastructure towards the city centre.

We should also recognise that FSI can be used in two ways: either it can increase the consumption of floor space by individuals without affecting the total population count in a locality; or it can be used to accommodate more individuals within the same locality, thus raising densities.

There can surely be no harm at all in raising FAR if all it does is give each individual more floor space without encroaching on his neighbour’s light and air.

We should also note a number of other limitations of the monocentric-city model:

• Much employment, certainly more than half, is endogenous, such as laundries and restaurants and branches of banks, serving a local clientele, and therefore is distributed throughout the city. This proportionately dilutes any argument based on the monocentricity of employment.

• Such exogenous employment as there is is often concentrated according to specialisation and distributed over multiple centres, not just one CBD. This may or may not invalidate the findings for a monocentric city. But what it certainly does is add trips from one workplace to another, and therefore dilutes the proportion of commuting trips to all trips.

• Transit lines, even regular bus routes, alter the preferred directions of city growth. The dense radial pattern is no longer meaningful.

• People attach a value to living at comfortable densities, neither too high nor too low, and this value is ignored in the model. Individual preferences do vary even within the same income group. Those with families may prefer living at lower densities (this is quite separate from having a larger house or plot).

• Some localities are preferred to others, on grounds that have nothing to do with distance from the city centre. And there is considerable variation in this choice from one individual to another.

A recent study, by Shlomo Angel and others, of a global sample of 120 cities notes that urban densities have been declining in cities around the world. Between 1990 and 2000, mean built-up area densities declined in 75 of 88 cities in the developing world, and all 32 cities in the developed world. The rate of density decline averaged just over 2 per cent per annum.

If, as the World Bank suggests, increasing FSI, with the objective of increasing densification, delivers an overall welfare gain, how come, world-wide, there is a relentless drift the other way?

(Shirish B. Patel is a civil engineer and urban planner. He was one of three original authors of the idea of New Bombay, and for its first five years was in charge of planning, design and execution for the new city)

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I really do not understand the author's objection to increasing the FSI. Whatever be the model used for analysis, it is evident that increasing FSI does not mean the everyone will build higher and higher. You need to have the funds and the tenants to make it feasible.A higher FSI merely frees up the artificial scarcity created in the inner cities. Obviously such artificial scarcity benefit the speculators and the so called land mafia more than anybody else. The key thing would be to open up the FSI and protect the rights of the neighbours with regard to light, wind and free space. It would also be crucial to ensure that the high rise which are being built do not end up being derelict and an eysore after many years of existence. This could however be managed by imposing city taxes on the built up area so that unoccupied buildings will get demolished by the owners.

from:  Sunil Joseph
Posted on: Mar 9, 2013 at 13:23 IST

Currently Lot of people spend too much time in commutation to and from
work place as planners develop town far and further but better paying
jobs remain in CBD / Certain areas only, hence increasing FSI in CBD and
near by Areas may help many people. This ought to be supplemented by
regulation for Leaving Space for public Utilities, Schools. Spreading
cities too much is reducing Agro Land and this ought to be limited
specially Hugely populated country like India. Comfort of Existing
people should not be given overriding importance.

from:  Atma Gandhi
Posted on: Mar 9, 2013 at 11:52 IST

i have a question. Is FSI controlled by World bank or by indian govt?
and the author showed the result of a survey that show density in major
country in all over the world is getting decreases but he must look at
metro cities of india where density index is getting rise day by day.

from:  sandeep singh
Posted on: Mar 9, 2013 at 11:13 IST

I can barely get through this article, it is so boringly non specific.
all sorts of opinions about light, air, parks, senior citizens and all that but it sounds like personal bias more than factual.

simple point to refute this entire tedious write up.
look at singapore, hong kong, tokyo, shanghai, san francisco, new york or london.

they are all doing extremely well with a much higher FSI.
case closed.

from:  naveen
Posted on: Mar 9, 2013 at 11:01 IST

A brilliant piece of article by Shirish Patel explainig why World Bank model of housing does not suit Indian cities. So called 'downtowns' in US cities are based on the premise that transport is by cars to workplace and such workplaces can be crowded in the Indian context with our population base is larger. But Indian governments whether UPA or NDA prefer to listen to accept the recommendations of World Bank irrespective their suitability in Indian context. Our economists in the Planning Commission and government bodies will also push such proposals with their enlightened self interest to get plum positions in the Bank post-retirement.

from:  MVJRao
Posted on: Mar 9, 2013 at 10:29 IST

Truly agree with the writer that, if FSI increases, then it may lead to
densification, which again increase traffic flow, which create pollution
and may limit the growth of city, perhaps the growth of city will be
stagnant so do it limit the economic growth, which Indian people badly
needed to feed the hungry mouth and to decrease the employment rate that
is prerequisite of welfare of people.

from:  Prasannajeet Mohanty
Posted on: Mar 9, 2013 at 10:12 IST

Joseph Stiglitz's observation, that the World Bank's 'one-cap-fits-
all' formula does not work for all countries is very relevant to the
subject on hand.21 story apartments,with carpark,green
lawns,jogging-walking paths (paved with flooring suitable to the
knee joints of the aged) etc, enclosed within high walls are found
every where in Mumbai city.Surrounded,of course, by the
Zopadpattis(slums).The Real Estate Mafias, must have by now fully
digested the contents of the report to further their riches.Mumba
Devi alone can save the city from its rulers,forget their party

from:  Kandasamy Koomarasamy
Posted on: Mar 9, 2013 at 09:40 IST

Thanks hindu for publishing such a wondeful article.At last some one speaks sense.

There is one point that has been missed, why the world bank is pushing such flawed policy.It's plain and simple. How otherwise would the greedy real estate developers make profit?World bank has been the best friends of the corporate class.The best way would be to either investigate these world bank representatives or maybe even a sting operation to disclose their hidden assets.It's obivious that they will have considireable amount of undisclosed wealth in secret swiss banks or others.If this is done , then it is for sure every other good aspects of city planning will fall in line.

from:  kishalaya bhattacharjee
Posted on: Mar 9, 2013 at 09:34 IST

I am surprised that World Bank had such a simplistic solution. Kudos to
the author for bring out the nuances. I am a novice. My thinking is to
create multiple small towns well connected by hyper highways (primarily
for large scale public transport - whose journey time should be small).
This will reduce pollution too.

from:  Venkat
Posted on: Mar 9, 2013 at 08:25 IST

A very perceptive and hard headed analysis. It is not unreasonable to
suspect that numerous other models and recommendations based on them
would topple if such detailed analysis is applied. All models involve
assumptions which are often drowned under subsequent deductive
complexities. The last question posed in this essay shows that people as
a collective act rationally using common sense and intuition regardless
of what economic models tell. Good article.

from:  Govind Mudholkar
Posted on: Mar 9, 2013 at 02:19 IST
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