Innovative resource mobilisation policy on cards: UD Ministry

To meet the growing demand of funds for the ongoing urban infrastructure expansion, the Urban Development Ministry has decided to come up with a policy framework for an innovative resource mobilisation through Value Capture Financing (VCF).

The move seeks to enable the states and city governments raise resources by tapping a share of increase in value of land and other properties like buildings resulting from public investments and policy initiatives. The Ministry will soon have inter-ministerial consultations on VCF based on the feedback from the states, an official release said.

Urban Development Secretary Rajiv Gauba held final round of consultations with states in this regard last week.

The Ministry has identified ten ways of VCF out of which only a couple are being currently used for project financing by some states, the release said. The different instruments of VCF are; land value tax, fee for changing land use, betterment levy, development charges, transfer of development rights, premium on relaxation of floor space index and floor area ratio, vacant land tax, tax increment financing, zoning relaxation for land acquisition and land pooling system. 

While “betterment levy” and “development charges” are being at present used to some extent in the states, the other instruments also have substantial scope for resource mobilisation, the release said.

The Urban Development Ministry is working to develop a comprehensive VCF framework so that it can be used efficiently and optimally across the country as a method of financing infrastructure and enhancing the finances of urban local bodies, it added.