Suppose undeveloped farmland surrounding a town is required for housing.  The current-use price is, say around rupees 60,000 rupees per an acre of land; this is the transfer price, i.e., what another farmer would be prepared to pay for the land for agricultural use.  Planning permission is now given for a housing development on twelve acres of a particular farm.  As a result the price of these twelve acres rises to 1,20,000 rupees per acre of land.  Thus development value for the purposes of DLT would equal current market price minus current-use value, plus 10 percent, i.e. 1,44,00,000 %u2013 (7,20,000 + 72,000) = 1,36,08,000.  DLT payable would be 60 percent on all realized development value above 30,00,000 in any one year, i.e., 60 percent of 1,06,08,000, or 63,64,800.  The farmer is thus left with 80,35,200, and by taking his gain he can obtain almost 134 acres to replace the twelve sold.
 
Thus if no planning permission were required and all the agricultural land surrounding the town were suitable for housing, we can assume that any price above the agricultural price will secure that land for housing.  In other words, the supply (Sa) of land is perfectly elastic at 60,000 rupees per acre.  Any increase in demand for land for housing, could have been supplied without any rise in price.  In other words, because supply is perfectly elastic, the increase in demand would have had no effect on price.