#51: Losing the plot
How 13 states liberalised building rules, but not always buildability
In 2024, India leased a record 79 million square feet of office space and signed roughly 42,000 branded hotel keys. Demand for commercial real estate is rising across India, and states have begun changing the rules that govern commercial development. Over the last two years, at least 13 states have liberalised their building codes. They have raised floor area ratios, eased setbacks, and removed ground coverage caps to encourage commercial development. On paper, India is finally letting developers build more.
But the success of building reform cannot be measured only by what the law permits on paper. For developers, the test is simple: can each additional floor earn more than it costs to build? This is the difference between permission to build more and the ability to build more.
This article evaluates building reform through the lens of buildability: the ability to turn a plot of land into usable, cost-effective space. We ask three questions. First, how much space can actually be built? Second, can that space be built in a sensible form? Third, how much of it can be built without paying an additional regulatory charge? We apply this framework to a sample hotel on a 5,000 sqm plot in municipal areas across eight Indian states. For each state, we estimate the number of rooms that can now be built, the number of floors needed to deliver those rooms, and the share of rooms that can be built without paying a premium to the government. We then compare these outcomes with Singapore, which serves as an international benchmark. The exercise separates permission to build more from the practical ability to build more at a reasonable cost. It helps us gauge if reforms will translate into actual investment in commercial development.
What have states reformed?
Over the past two years, Indian states have progressively liberalised eight building standards affecting industrial, commercial, and residential development. The Government of India’s Special Assistance to States for Capital Investment scheme and deregulation initiative have together encouraged states to amend building codes that had remained unchanged for over a decade. Since 2024, at least 13 states have amended their codes in the most concentrated wave of building reform India has witnessed.
The eight standards are floor area ratio (FAR), ground coverage, setbacks, height limits, parking requirements, open-space norms, road-width linkages, and high-rise thresholds. Research shows these eight standards act as binding constraints on the production of usable floor space (Byahut et al., 2020; Gray & Millsap, 2023; Gyourko & McCulloch, 2023; Ikeda & Washington, 2015). A higher floor area ratio (FAR) allows more built space. Ground coverage and setbacks determine the building’s footprint. Height limits, road-width linkages, parking requirements, open-space norms, and high-rise thresholds determine whether the permitted space can actually be used. When set restrictively, these standards together impede the cost-effective utilisation of land.
Because these standards interact, the effect of reform is easiest to see through a common example. Figure 1 applies each state’s amended rules to a sample hotel on a 5,000 sqm plot in a municipal area. The figure shows how different reform packages changed the hotel building’s footprint and the potential floor area that can be created.
The same plot produces different buildings under different state reform packages. Haryana and Uttar Pradesh liberalised vertical development most sharply, producing the largest gains in effective floor area. Odisha followed a different route of footprint liberalisation. By removing ground coverage limits, it allowed the sample hotel’s floor plate to expand, even though the gain in effective floor area remained modest. Andhra Pradesh focused on solving binding constraints like height thresholds so builders could maximise the use of its historical unlimited FAR position. Punjab also removed FAR limits for buildings on wide roads, but the reform mainly introduced premium floor area without changing effective floor area or footprint. Telangana, Tamil Nadu, and Delhi showed no change as their reforms either did not apply to the tested plot or did not ease the binding constraint.
The next sections assess the outcomes that each state’s reform packages are likely to produce on individual commercial-use buildings.
How far have reforms improved outcomes?
Building reforms improve outcomes when they allow a developer to build more space in a sensible form and at a reasonable regulatory cost. For a hotel, this means more rooms, delivered on as few floors as possible, with as many rooms available as of right.
To test whether reforms have improved buildability, we apply the same scenario across all states: a hotel on a 5,000 sqm plot abutting a 24 m-wide road in a municipal area. We compare each state’s outcome with Singapore, which we use as an international benchmark because it is a globally competitive tourism destination and supports a high concentration of hotels (Singapore Tourism Board, 2025; World Economic Forum, 2024).
The hotel example allows us to compare states on three outcomes. First, how many rooms can be built in theory? Second, how slender must the building be to deliver those rooms? Third, how many rooms can be built without paying a premium to the government? The following sections test each outcome in turn: rooms, form, and as-of-right capacity.
How many hotel rooms can be built?
The first test of reform is whether the same plot can support more hotel rooms. To compare states, we convert effective floor area into room count. We assume that 60% of the gross floor area is available for hotel rooms, with each room sized at 25 sqm in line with a typical 5-star hotel (Ministry of Tourism, 2018; Urban Redevelopment Authority, 2019).1 Using the same assumptions, Singapore permits 1,266 rooms on the same plot. This gives us an outer benchmark, while the Indian comparison below shows how far state reforms have moved the baseline.
Pre-reform, an Indian state could, on average, deliver 432 rooms on a 5,000 sqm plot. Most states reached 540–580 rooms, while Delhi, Punjab, Uttar Pradesh, and Haryana stopped below 400. Pre reform, Indian states kept room counts low through restrictive FAR ceilings. FAR is the ratio of total built floor area to plot area. Four of the eight states capped FAR at 3.5 or below. Andhra Pradesh and Telangana are the only states with liberal FAR. But even with unlimited FAR, their rules kept room counts below what the plot could otherwise support because of height limits, setbacks, and related standards.
Figure 2 shows that reforms have increased hotel capacity on the same plot.
Post reform, the average room count increased to 568, a 32% increase. Haryana and Uttar Pradesh became the first states in the sample to cross the 700-room mark. Haryana recorded a five-fold increase in the number of rooms that can be built, and Uttar Pradesh recorded a ~2.5-fold increase. Singapore still permits ~60% more rooms per plot than India’s frontier state. The largest gains have come from easing limits on vertical development. Haryana’s reform was the most striking: it removed FAR limits entirely, joining Andhra Pradesh and Telangana in permitting unlimited FAR. Uttar Pradesh allowed a 3.5-times increase in FAR for hotels. Andhra Pradesh’s gains came from easing height limits, which allowed the hotel to realise more of its unlimited FAR.
The first win of the reform wave is more rooms on the same plot. Some states now permit hotels larger than Aurika Mumbai, India’s largest hotel, with 669 rooms. This is a major shift from the pre-reform baseline. Even though states remain behind Singapore’s offering on room count, they have still come a long distance.
Room count, however, is only the first test. The next question is whether these additional rooms can be delivered in a practical built form.
Can more rooms be delivered in a sensible built form?
The first test showed that reforms have increased the number of hotel rooms that can be built on the same plot. The second test asks whether those rooms can be delivered in a practical built form. More rooms are useful only if they do not force the building into an unusually tall and narrow shape.
Pre reform, most states allowed too few rooms for built form to become the main constraint. A hotel that could build only 300 or 400 rooms did not usually need to become very tall. Post-reform, some states allow hotels to approach the 800-room target. Once room capacity rises, the next question is whether these rooms can be delivered through a wider floor plate or only by adding many more floors.
To compare states on built form, we look at how many rooms each state permits and how slender the hotel must become to deliver those rooms. We use 800 rooms as the target because it is the upper end of what Indian states currently permit on the 5,000 sqm plot.2 We capture the built-form side of the comparison through the slenderness ratio, i.e. a building’s height divided by the width of its base. The best-performing states would combine a higher room count with a lower slenderness ratio.
Figure 3 plots these two outcomes together.3 States farther to the right permit more rooms. States lower on the chart deliver those rooms in a less slender built form. The best outcomes appear in the bottom-right quadrant: more rooms, without forcing the hotel into a tower.
Post reform, the largest room-count gains seem to have come with a built-form penalty. Haryana and Uttar Pradesh deliver between 700 and 800 rooms, but at high slenderness ratios, as hotels require 14 to 20 floors to achieve this. In other words, they approach Singapore’s room count only by building hotels that are roughly twice as tall. Odisha and Andhra Pradesh face the opposite problem. They keep the hotel closer to a shorter, wider form, but remain below the 800-room target because other standards still cap total capacity. Tamil Nadu and Telangana deliver moderate room counts at relatively poor built forms. Delhi and Punjab continue to only permit small hotels. No Indian state lands in the bottom-right quadrant alongside Singapore.
The second test produces a more mixed result. The matrix shows the pattern clearly: no Indian state combines high room count with low slenderness. Indian states have begun to unlock more hotel capacity, but they have not yet combined higher room counts with efficient built form. Built form is one cost of using additional floor area.
The next section asks whether developers must also pay a premium to build the rooms that states now permit.
How many rooms can be built without paying a premium?
The third test of reform is whether the rooms permitted by law can be built as of right. Indian states typically divide floor area into two categories: base FAR, which can be used without an additional payment, and premium FAR, which requires a payment to the authorities. A state may allow more rooms on paper, if many of those rooms fall under premium FAR, the developer must pay before using the additional capacity.
Pre reform, entitlement was less of a constraint because most states permitted fewer rooms and made most of those rooms available as of right. Five of the eight states permitted the entire room count to be constructed without paying a premium. Only three states charged a premium: Odisha for 58% of the rooms, and Tamil Nadu and Uttar Pradesh for about 30% of the rooms.
Figure 4 shows how many rooms each state can deliver post-reforms, split between rooms available as of right and rooms that require a premium.
Post reform, several states permit more rooms, but not all of this additional capacity is available as of right. Haryana and Uttar Pradesh come closest to the 800-room target, but grant only 25% and 30% of their rooms as of right. Tamil Nadu and Punjab sit in the middle, granting ~70% of rooms without a premium. Andhra Pradesh, Odisha, and Telangana grant all permitted rooms without a premium, but they do not reach the 800-room target.
The pattern matters because the largest room-count gains come with a premium penalty. Developers in these states may have to pay twice: once through the cost of building a taller hotel, and again through regulatory fees to use the additional room capacity. A premium can weaken the gain from reform if developers respond by building fewer rooms than the law permits, absorbing the cost, or forgoing the project.
The third test shows that states are unlocking gains at a high regulatory cost. Where states have unlocked the most capacity, they have also charged the most to use it. The next reform frontier for states is to make more rooms available as of right and reduce the premium to the extent possible.
So, how far have reforms improved buildability?
Having tested room count, built form, and premium-linked capacity separately, we now ask which states have actually made it easier to build a viable hotel. A useful reform package should allow a hotel to become larger, keep the building form practical, and make the permitted capacity available without a premium. To see which states come closest to this package, we compare the three outcomes together.
To compare these outcomes, Figure 5 uses a spider chart.4 The three axes correspond to the three outcomes tested above: number of rooms, built form, and rooms available as of right. The outer boundary represents the reference case: a hotel that reaches the 800-room target, delivers those rooms in a Singapore-like built form, and makes all 800 rooms available as of right. Each state’s plot shows how close its reform package comes to this reference case, and where constraints remain.
The spider chart shows that Odisha and Andhra Pradesh have improved buildability most clearly. Neither state reaches the full 800-room target, but both come closest to making legal permission usable in practice. They allow a substantial number of rooms, keep the building form relatively practical, and make the permitted capacity available without a premium.
Uttar Pradesh shows more moderate improvement. Uttar Pradesh has made the largest gain in room count, but the additional capacity comes in a taller built form and with a large premium-linked share. Tamil Nadu and Telangana also sit in the middle of the pack. Both delivered moderate room counts in a reasonable built form before reform, but neither saw any change on the tested plot.
Haryana and Punjab remain weak performers. Punjab does not allow enough rooms on the tested plot to create meaningful hotel capacity. Haryana appears liberal because it meets the 800-room target, but the additional rooms are delivered through a highly slender built form, and most of the capacity is available only after paying a premium. Haryana shows why headline liberalisation can mislead. A state can permit more rooms on paper while still leaving developers with a costly and less viable project.
Read together, the three outcomes show that states have not delivered buildability as a package. Many standards come together to shape a building’s form and economics. A reform that improves only one metric of buildability, leaving others binding, can undercut potential gains. Going forward, reforms are better judged by outcomes rather than reforming individual standards against benchmarks.
What should states reform next?
India’s reform wave has improved buildability unevenly. Odisha and Andhra Pradesh show that reforms can make legal permission more usable when they ease binding form constraints and keep capacity available as of right. Uttar Pradesh, Tamil Nadu, and Telangana have moved part of the way. Delhi, Haryana, and Punjab either fail to create enough usable capacity or create capacity in a form that is too costly to use. Building reform works best when standards move together: more rooms, practical built form, and capacity available as of right.
The first task is to increase usable floor area. Building regulations historically restricted commercial development in India. Until a few years ago, commercial buildings could not provide usable floor area greater than 1.5 to 2 times the plot size, while global cities such as Shanghai, Vancouver, and Chicago allowed 8 to 12 times the plot size (Vishwanath et al., 2013). This matters because permissible floor area sets the upper bound of commercial activity on scarce, well-located land. Recent research also shows that easing floor area limits can improve real estate supply and affordability (Clarke Annez et al., 2010; Nagpal & Gandhi, 2026). States should continue raising room capacity where low FAR, height limits, setbacks, or other standards keep commercial plots underused.
The second task is to make that floor area buildable in a practical form. The same amount of floor area can cost very different amounts depending on how it is arranged (Chau et al., 2007). Buildings with larger floor plates cost less per square metre to construct (Picken & Ilozor, 2015). Eriksen and Orlando (2021) show that, for the same floor area, doubling the floor plate reduces average cost per square foot by 26.6%. Taller and narrower buildings require more expensive structural systems, services, and cores (Eriksen & Orlando, 2021; Ilgın, 2022; Ilgın et al., 2020; Jennings, 2018; Watts et al., 2007; Watts & Langdon, 2010). States that increase FAR without easing the standards that shape floor plates risk making projects taller, narrower, and more expensive.
The third task is to make additional capacity available without a high regulatory premium. Premium FAR converts permission to build into priced permission to build. When the fee exceeds what the project can bear, developers may build below the permitted limit or forgo the additional FAR altogether (Kashyap & Berry, 2015). This weakens the effect of liberalisation. A state may appear to permit more rooms on paper, but that gain is smaller if most of the additional capacity requires a large payment to the government.
The next phase of reform should focus on packages, not isolated standards. Raising FAR is useful only when other rules allow the permitted space to be realised in a practical form. Easing setbacks or height limits is useful only when the project can reach a viable scale. Premium FAR is useful only if the price does not discourage developers from using the capacity that the law now permits. States should ask three questions before calling a reform complete: does it allow more rooms, does it allow those rooms in a practical built form, and does it make that capacity available as of right?
India’s commercial real estate demand is rising. States have already shown that building codes can be liberalised. The next challenge is to make those reforms work together. India must build smarter, not just taller.
References
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Chau, K.-W., Wong, S. K., Yau, Y., & Yeung, A. K. C. (2007). Determining Optimal Building Height. Urban Studies, 44(3), 591–607.
Clarke Annez, P., Bertaud, A., Patel, B., & Phatak, V. K. (2010). Working with the Market: A New Approach to Reducing Urban Slums in India. World Bank Policy Research Working Paper No. 5475.
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Gyourko, J., & McCulloch, S. (2023). Minimum lot size restrictions: Impacts on urban form and house price at the border. National Bureau of Economic Research.
Ikeda, S., & Washington, E. (2015). How Land-Use Regulation Undermines Affordable Housing. Mercatus Research.
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List of regulations
Andhra Pradesh (AP)
Delhi (DL)
Master Plan for Delhi 2021
Haryana (HR)
Odisha (OD)
Punjab (PB)
Tamil Nadu (TN)
Telangana (TG)
Uttar Pradesh (UP)
Singapore
Code of Practice for Vehicle Parking Provision in Developments 2019
Guidelines for commercial building development
To convert floor area into rooms, we assume that 60% of gross floor area is available for hotel room floors. Singapore’s Master Plan requires hotels to use at least 60% of total floor area for rooms. Literature also shows that guest-room areas generally account for 50 to 70% of the total floor area.
Indian states permit a maximum of 800 rooms on a 5,000 sqm plot (See Uttar Pradesh in Figure 2). Singapore’s largest hotels host between 600-1,000 rooms on similar plots like YOTEL Singapore Orchard Road (610 rooms, 5,056 sqm), Mercure ICON Singapore (989 rooms, 5,121 sqm), and V Hotel Lavender (888 rooms, 4,273 sqm).
The quadrant markers represent the 75% mark for room count and within 25% of the best slenderness ratio (among states crossing the room-count threshold). It is based on a judgment call of what would qualify as a good-sized hotel and a sensible built form.
Each metric is scored against a reference case. Room count and as-of-right capacity are scored against the 800-room target. Built form is scored against Singapore’s slenderness ratio and adjusted for room count, so a small hotel does not appear efficient merely because it remains short. A score of 1 means the state meets the reference case on that metric. The chart shows where each state performs well and where a constraint remains.
The state government has withdrawn the draft as of 27 April 2026, following a stay issued by the High Court.
North Buona Vista Drive in Singapore was selected for comparison.
Sargun Kaur and Bhuvana Anand are researchers at Prosperiti. The authors thank Anandhakrishnan S and Rohan Ross for painstakingly mining and analysing building regulations, Pranjal Chandra for helping think through the analytical framework, Ananya Sood for supporting data visualisation, and Sarvnipun Kaur for input on measuring a state’s performance.
This is a masterclass in tracking the micro-foundations of state capacity. The distinction you make between liberalizing rules and actually freeing up "buildability" is exactly the kind of structural friction that completely upends aggregate macroeconomic and polling baselines.
From an electoral analytics perspective, when 13 states run mismatched building reforms, it creates intense sub-regional data variance.
On substack.com/@electoralindex, we look at how these spatial bottlenecks restrict private capex concentration. If an entrepreneur must still surrender a massive fraction of land to legacy setbacks, the promised factory floor jobs don't materialize fast enough to match the political narrative. When we execute demographic survey raking across manufacturing corridors, we track a distinct rise in voter volatility in zones where the regulatory execution gap stalls real-world wage growth—proving that invisible land-use math quietly shapes the anti-incumbency floor.