The Delhi government would soon have to legislate to make special exemptions to Delhi’s Master Plan to override the Supreme Court’s (SC) order banning commercial activities in residential areas. Policy-makers and planner sitting in ivory towers would have liked to dismiss the move as being forced upon by violators who are politically connected. But such thinking would be erroneous. Both the SC and planners need to worry about their fundamental assumptions.

Can master plans be so ambitiously luxurious as to be non-affordable? If the Master Plan were to be truly adhered to (given the low floor space indices (FSI), restrictive building bylaws and land use exclusions that pretend that citizens are already richer than Americans in California), the cost per unit of built-up areas in central places would be high enough to exclude all but businesses with global markets, the very rich and those having monopoly over central places—government departments, political party offices etc., while the poor get pushed to illegal spaces. Without the violations, Delhi would have actually have died as an economic organism and become like Chandigarh—uselessly splendorous and a playground for spending rents earned elsewhere.

Commercial establishments in residential areas violate the rules and the Master Plan. A violation unpunished would necessarily result in a flood of violations. This externality is what results in the kind of rampant violations in Delhi. When that is the situation, the law (rather than the violator) is the problem.

First, planners need to rethink the appropriateness of keeping residential areas free of all commercial activities. Clearly, there are commercial activities like shopping, restaurants, retail banking, retailing, etc. which, with safeguards, are eminently combined with housing without creating any negative externality. The core safeguards would depend upon the nature of the activity, but in all cases the most important one is to ensure that commercial use of land does not impose parking and noise externality on the residents. This is most easily ensured by functional rather than purely area-based building bylaws. Obviously, when the route to such mixed land use is through violations rather than upfront planning and compensations, injustice is done to those who do not violate.

Similarly, violations of FSI in single use or mixed locations penalise those who do not. Therefore, the second aspect is to ensure that fairness is restored and non-violators do not lose. But making violators lose heavily does not ensure the latter, as the SC seems to think. Hence, the utter stupidity of demolitions as a way to restore fairness. Demolitions of illegal occupations of public spaces, especially on roads, are justified. But such cases are few. Restoring fairness without social loss is the key.

There is a way to grow out of the current imbroglio. All violators could be identified and issued a token that gives then both a right and imposes upon them an obligation. A right to build so much more and to use so much built up area for commercial use—this is their reward for violation (TDRVs); and an obligation that they can operationalise this right only if they buy up ‘transfer of development like rights’. The latter right could be called ‘Rights of Non Violators’ or TDRNVs. The market price for such TDRNVs would depend upon the value of commercial activities. Tradability of both TDRVs and TDRNVs would be necessary to smoothly realise scale and scope economies. It would also allow more efficient high-rises and built up areas, while keeping the overall FSI closer to what is intended.

All this means that the planner’s job undergoes a change from the command and control mode to recognising the value of para-market instruments. The situation in Delhi can be converted into a great opportunity for the government and people as it has the potential to unlock values in hundreds of thousands of crores in the mega city.