A Model for the Economic Feasibility Assessment of Urban Road Development in Agglomeration Areas based on Land Value Changes

Abstract

This study develops a model to evaluate the economic feasibility of urban road network development by incorporating land value changes as a key component of the evaluation process. The model addresses the limitations of conventional approaches that focus solely on transportation efficiency by integrating transportation benefits, such as Vehicle Operating Cost (VOC) savings and Value of Time (VoT), with long-term fiscal benefits derived from increases in Taxable Value of Objects (TVO) and Land and Building Tax (LBT). The methodology includes Cost-Benefit Analysis (CBA), traffic simulation using PTV Visum, and a log-linear regression model to quantify the impact of improved accessibility on land value. The model is applied and validated through a case study of the Mamminasata bypass road project in South Sulawesi, Indonesia. The project shows a Benefit-Cost Ratio (BCR) of 2.86, a Net Present Value (NPV) of 7,329.47 million IDR, and an Internal Rate of Return (IRR) of 12.05%, with full payback of the investment within 12 years. This model provides a more integrated, sustainable, and forward-looking approach to assessing the economic viability of road infrastructure development by linking transport efficiency with land value dynamics.