How building laws lock India’s factory land

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₹2.67 lakh in a micro-factory to ₹3.16 crore in a mega factory. These regulations may be driving an irrational location of factories. Factories should ideally go where land prices are lower.

However, restrictive regulations in cheaper areas may drive factories to more expensive locations. For example, the land price in DLF Industrial Area, Faridabad, Haryana, is about ₹14,352 per sq. m, and in Ganesh Nagar, Ludhiana East, Punjab, is ₹13,200 per sq.

m. But, Faridabad is less restrictive than Ludhiana. Therefore, a medium factory will lose ₹57.4 lakh in Faridabad and ₹1.07 crore in Ludhiana.

As a result, Faridabad becomes a more attractive investment location than Ludhiana even as land prices are slightly higher in Faridabad. Money wasted is apparent, but the unseen cost is jobs not created. Even if the land loss on account of regulations was halved, states could generate between 30-74 jobs in a medium-sized factory.

These losses at the factory level can compound to millions of job opportunities lost. For instance, large factories in Maharashtra could have space for 563,000 more industrial jobs had the state reduced the land lost by half. This is 38% of the factory workers currently employed in Maharashtra generating more than ₹500 crore per month in additional wages.

These land loss estimates are conservative as they are based on only four standards. Other standards like open space reserve, rainwater harvesting systems, means of access, height restrictions, etc., additionally restrict the growth of buildings. In addition, a factory has to dedicate large parts of the floor space to facilities under labour laws.