The increasing demand of the land for housing due to different push and pull factors like: rural-urban migration, population growth and natural disaster, expectation of job and urban facilities, most of the cities and the governments are facing many challenges to relocate the urban poor and low income groups in planned and environmentally safe areas (Paudyal, 2006). On the other hand, the people who are living in squatter settlements are deprived from the security of land tenure, land development rights and land use rights (Pugh, 2000). Therefore, they are far from the facilities provided by the government and consequently suffering from the poor environmental conditions such as lack of water, sanitation, health facilities and education (Atterhög, 1995). However, land is one of the single un renewal natural resource and it is related to basic necessity such as food and shelter for living beings (Palmer et al., 2009). Therefore, sustainable land development to meet the basic need for shelter in urban area of developing and under developed counties cannot be achieved without change in the land rights and condition of the land ownership such as change in geometry, area, land use, location (Muller, 2004).

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The government and the private organizations are the main land developing agencies to facilitate developed land plots in the land market through the urban management methods, process and techniques (Larsson, 1997). These methods might be compulsory or voluntary depending upon the legislation of the government (Hebbert, 1994; Turk et al., 2010). One of the non-compulsory or voluntary urban land development method is the Land Readjustment (LR) and LR is based on self-financing project and win –win strategy (Archer, 1986; Muller, 2004). It is used to readjust the irregular boundaries of the land plots with infrastructure and utility facilities (Doebele, 1982; Hong et al., 2007; Lemmen et al., 2012; Muller, 2004). LR projects are introduced by the central government, local governments, municipalities, private organizations and public agency with the participation of land owners and tenants. In 1902, Germany had initiated LR as a method for converting agricultural land to urban land with the enactment of land transfer law called Lex Adickes. Later on from 1954, LR technique has been adopted for disaster recovery in Japan under the Land Readjustment Acts 1954 and about 30% of the urban land were developed using this technique. Besides land use conversion and disaster recovery, LR has been used in Europe, Asia and America as urban renewal, development of new urban cities and prevention of spotted settlements (Atterhög, 1995; Yomralioglu, 1993).
In spite of the popularity and advantages of the LR technique, there exist several problems that relates to the principles of land governance such as security, equity and participation (Turk, 2008). Therefore, the assessment of the governance principles in different aspects of the governance such as policy, process and structure is necessary for efficient and sustainable urban LR. Moreover, it is important to review the LR in the case of squatters to find out whether it is possible to relocate the squatters in developed and environmentally safe area based on participatory approach (UN-HABITAT, 2013a). Principally, LR projects are fully dependent on the consent of users (land owners) to use their land for infrastructure development and for cost recovery of the project. For instance, almost 30 % of Japanese urban land has been developed by LR technique but there was considerable disagreement by the small land owners with argument that the LR technique has favoured large landowners. Therefore, about half of the municipalities have not used it at all (Atterhög, 1995). Similarly, the study on consensus among the land owners and multi-sectorial involvement in LR reveals that LR projects are fully dependent on the participation among the land owners, private sector and with the government (Hong et al., 2007).
In addition to the participation, equity is other significant principle of the land governance for sustainable LR. Inequity in the distribution of the land resources causes different difficulties in building consensus and finally convert into violence, thus equity is measured by the value of the needs (Yomralioglu, 1993). Equity can be described in terms of input equity, process equity and output equity (Doebele, 1982). Input equity means the involvement of users (stakeholder; landowners are the entire users in LR project) in the policy formulation and planning. Process equity such as land contribution ratio and inclusive participation of users should be fair (Karki, 2004a; Turk, 2008). Output equity can be measured in terms of the benefit returned from the LR project through land value and urban facilities (Turk et al., 2010). Unfortunately, in Nepal, the Lands Act 1963 has made the restriction to maintain minimum parcel size to 80 m2. Because of this the land owner who are unable to maintain the minimum parcel size as mentioned in the acts are forced to sell their land to the LR project and consequently they lose the sentimental value attached with their land and social relationship. However, good land governance is always supportive against the forced eviction (Karki, 2004a). Besides the equity, land tenure security is another principle to be assessed in LR. Land tenure security strengthens the relation between people and land (Simbizi et al., 2014).
Insecurity in land tenure discourages the land owners to participate in land readjustment process. During the LR process temporary land owner is the land developer, who can restrict the transaction of the parcel by subdivision and physical changes on the land. On the other hand due to delay of the LR projects, land owners might be prevented from the land use rights. In Nepal, land ownership certificate and restriction free letter from the Land Revenue office are essential to get the financial credit from the bank but when land ownership certificate are submitted to the LR project it creates the problem to get the credit from the bank. Security of land tenure, in the case of the project handled by the private organizations is another challenge to convince the land owners about security of the land tenure and other use rights (Turk, 2007). To face these problems the network among inter-organizational and multi-sectorial stakeholder is necessary for sustainable LR (Mattingly, 1996). According to Sorensen (2005), when the governance actors are participated in a horizontal integration to meet common societal goal then such a network is called governance network. In the governance network the power among the governance actors is shared for sustainable urban development.
On the other hand, for the case of the squatter settlers who are deprived from land tenure, equitable access to land for shelter; participatory LR with the application of good land governance is essential. Relocation of the squatters into land readjusted area can be possible by constructing social houses by the government, private sector and civil society groups through acquisition of the cost recovery land from LR project. PILaR- Participatory and Inclusive Land Readjustment approach could address many challenges of conventional LR through incorporating participation among the government, internal users (land owners), external users(squatter people), civil society groups, academia and private sector to support the squatters providing secure shelter (UN-HABITAT, 2012, 2013a; World-Bank, 2002).
These aforementioned problems are closely related to the land governance. Thus, it is essential to assess the land governance principles such as land tenure security, participation and equity in different aspects of the governance such as policy process and structure for sustainable implementation of LR. It is also important to review the LR for the relocation of squatters into LR area to meet the need of basic shelter.