Urban and Developable Land: What They Are and Key Differences

Unchecked urban growth in recent decades has led to a growing need to understand the different types of land and their classification for proper urban development. In Spain, it is essential to differentiate between urban and developable land, as this distinction not only affects urban planning but also has significant legal and economic implications.

What is urban land?

Urban land, also known as buildable land, is defined as land that has already been urbanized, meaning it has been equipped with basic infrastructure and services such as streets, sewage, potable water, electricity, and other facilities necessary for daily life. Additionally, these plots are designated for a specific use according to current urban planning regulations, which can be residential, commercial, industrial, among others.

Urban land is typically located within city limits or municipality and is generally regulated by the urban planning of a locality, which is essentially a zoning plan that determines its use, buildability, and density, ensuring orderly and sustainable development. Its market value tends to be higher due to the availability of services and constant demand from individuals and businesses looking to establish themselves in these areas.

What is developable land?

In contrast, developable land is land that, although not currently urbanized, has the potential to be transformed into urban land through a planning and development process, intended for future growth of an area. This type of land is subject to a set of conditions and regulations that must be met before its urbanization can begin. Land is typically classified as developable because it possesses certain suitable characteristics, such as its proximity to basic infrastructure or its strategic location in relation to existing urban development.

Developable land is generally divided into two categories: programmed developable land, which has already been included in an urban plan for short- or medium-term development, and unprogrammed developable land, which is land that, although suitable for urbanization, does not have a specific plan indicating when this development will take place.

What are the differences between urban land and developable land?

The differences between urban and developable land are fundamentally legal, economic, and practical in nature:

Development Status

Urban land is already fully developed with all necessary services available. In contrast, developable land needs to be developed and may not have basic utilities.

Use and Regulations

The use of urban land is clearly defined in a zoning plan. Conversely, the use of developable land can be more flexible, although its future use is subject to the approval of specific plans.

Economic Value

Generally, the value of urban land is higher than that of developable land due to its accessibility and existing infrastructure.

Development Time

Urban land is ready for construction, while developable land requires an additional process that can be long and complex.

Advantages and Disadvantages of Urban Land

Advantages

• Service Availability: one of the biggest attractions of urban land is that it is equipped with public services, making daily life immediately accessible.
• Higher Demand: the demand for urban land tends to be high due to its location and the convenience of available infrastructure, which can result in faster property value appreciation.
• Reduced Uncertainty: being regulated and having a specific legal framework, urban land offers a lower level of risk for investors compared to developable land.
• Ease of Financing: banks and financial institutions usually offer better financing conditions for the purchase of urban land, given its legal certainty and development.

Disadvantages 

• High Prices: one of the main drawbacks of urban land is its high cost, which can limit accessibility, especially in large cities.
• Strict Regulations: regulations and norms for urban land can be restrictive, offering less flexibility for innovative developments.
• Increased Competition: due to high demand, urban land can be flooded with competitors, which can make it difficult to acquire a desired property.
• Noise and Congestion: proximity to highly populated areas can result in noise and congestion, which can affect quality of life.

Advantages and Disadvantages of Developable Land

Advantages

• Lower Cost: developable land typically has lower prices compared to urban land, making it an attractive option for investors seeking opportunities.
• Development Potential: the possibility of developable land quickly becoming urban can result in significant property appreciation, making it attractive to investors.
• Flexibility in Use: developable land can have a wider range of permitted uses, providing more options for developers.
• Availability of Large Plots: often, developable land plots are larger than urban ones, allowing for more ambitious projects or sustainable developments.

Disadvantages 

• Legislative and Development Uncertainty: the transformation of developable land into urban land can be subject to complicated and lengthy legal processes, creating uncertainty for investors.
• Lack of infrastructure: developable land may lack essential services, which can delay development plans.
• Risk of regulatory changes: changes in urban planning regulations can impact the viability of developing a developable plot of land.
• Lower immediate appeal: the absence of infrastructure and services can make these plots less attractive to buyers or tenants in the short term.

When does developable land become urban land?

The process by which developable land becomes urban land is called the "urbanization process" and requires compliance with a series of requirements established in the corresponding urban planning legislation, which vary from one autonomous community to another in Spain. Generally, this process involves the approval of an urban development plan, meaning that the developable land must be included in a General Urban Development Plan (PGOU) that determines its short-term development and urbanization. Once the plan is approved, it is necessary to carry out the urbanization of the land, which includes the construction of necessary infrastructure such as streets, water, electricity, and sewage services. Finally, once the land has been urbanized, the corresponding authorizations and licenses that permit its use for urban purposes must be obtained.

Investment opportunities in urban and developable land

Investment opportunities in urban and developable land are an important aspect to consider in the dynamic Spanish real estate market. For investors, it is essential to conduct a thorough analysis of the land's characteristics and its surrounding context.

Urban Land

Investing in urban land can offer a guarantee, especially in high-demand areas. Residential, commercial, or even urban renewal construction projects can be profitable in the short to medium term. Investing in these areas is generally safer due to proven demand.

Developable Land

Developable land offers significant potential for investors willing to take on some risk. The value appreciation that can occur once developable land is reclassified as urban land can be substantial, resulting in high economic returns. It's also possible to diversify into developable land in growing or expanding areas, which could experience a boom in the future.

An informed investment strategy can pave the way for success in both types of land, so it's always recommended to conduct a market study, consult with urban planning experts, and analyze the applicable legislation in the specific region.

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Conclusion 

In conclusion, differentiating between urban and developable land is fundamental to understanding urban development and investment dynamics in the Spanish real estate market. While urban land offers the security of being fully ready for development, developable land presents a valuable alternative for those seeking opportunities with appreciation potential. Each type of land has its own advantages and disadvantages, and the choice will depend on each investor's needs and objectives. With proper understanding and analysis, both urban and developable land can offer significant returns in the context of constant urban growth and demographic change in Spain.