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New Delhi: In view of the growing demand for resources to finance on going urban infrastructure expansion, the Ministry of Urban Development will soon come out with a policy framework for an innovative resource mobilization through Value Capture Financing (VCF). This seeks to enable 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 in the identified area of influence.

The Ministry will soon have inter-ministerial consultations on Value Capture Financing based on the feedback from the states.  Rajiv Gauba, Secretary (Urban Development), held final round of consultations with states in this regard last week. The ministry is keen about integrating VCF into project feasibility assessment for systematic and largescale adoption of capturing a part of potential increase in the value of land and other properties resulting from the proposed investment, according to a PIB release.

The proposed VCF policy framework that works as a guide to state and city governments will assist in assessing the scope of resource mobilization, identifying the area of influence of proposed projects and optimizing resource mobilization. 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.

Traditional resource mobilization through direct sale of land, the most fundamental asset owned and managed by states and Urban Local Bodies is an inefficient form of resource mobilization and the Ministry is keen about land monetization more effectively though value capture. This innovative mechanism could also be used by central Ministries investing heavily in building national highways, railway projects, power generation and port infrastructure development.

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