Entities involved in Land Banking and its effect on the real estate sector.

Land banking consists of aggregating the plots or land blocks for future sales or construction at current or below-market rates. A land aggregator aggregates land-based on social infrastructure and demographic factors by monitoring the geographical and topological locations that are ready for investment.

The land usually originates in an unprepared format to the aggregator, whereby the land is made available for sale or development after preparing the title documents, property boundaries, zone regulations, conversions, permits, approvals and sanctions for the land. Land aggregators buy land, wait for the value of the land to be appreciated and then sell it for substantial profits to the developers, investors and other interested parties.

Entities that shows interest in land banking:

1) Individuals: Property ownership, including land, provides a sense of security. People can use the land as a wealth creation model, or for their children’s education, or to create a family legacy, or for their retirement plans.

2) Government Bodies: Government agencies use land banking to facilitate long-term community planning or to foster future economic development. Municipalities purchase and retain ownership of land to be used in the development of new roads, metro stations, hospitals, schools and parks also for economic or residential development.

3) Businesses: As a guide to the planned land acquisition, a master plan for a city outlines the infrastructure for a region. For long-term business profits, aggregators may buy and hold undeveloped or pre-developed land parcels that are expected to increase in market value.

4) Universities and Non-Profit Organizations: Universities and non-profit entities usually buy land in the public interest for future growth or for some expansion.

Different types of Land Banking Model:

1) Buying and Selling Model: A land aggregator in this model will purchase the land from the primary owner and as the land appreciates he will sell it to a third party.

2) Joint Development Model: This is a popular model embraced by most landowners, whereby landowner and developer pool their resources and efforts. In this model, landowner contributes their land and the developer is responsible for development.

3) Land Leasing Model: This model is usually taken for a long lease of a property, in which landowners offer the land without any development. Land mobilization by leasing is less costly than the buying and selling model. The land aggregator acts as a broker between landowners and the third party, processing lease agreements, ensuring the operation and land mobilization.