BUILDING ON NOVELTY - New source of funding infrastructure projects


BUILDING ON NOVELTY - New source of funding infrastructure projects


The Centre and state governments are exploring new sources of funding like special charge from real estate developers and landowners in areas where land prices have appreciated due to infrastructure development, in a bid to find more funds for building roads, flyovers, and Metro rail networks across the country.

Karnataka has become the first state to approve this innovative financing scheme, which can come from real estate development in specific areas. Sources said that the Karnataka government recently gave approval, in principle, for six such financing mechanisms, which include the exchange of a part of the acquired and developed land as compensation for the land required for projects.

Another option it approved was on levy of a premium on floor space index (FSI), subject to zonal regulations.The third option is to levy cess at the time of granting approval for development of land or buildings.

The government can also carry out construction and exploit the commercial spaces near important infrastructure projects like expressways or Metro stations.

“It can amend the Karnataka Town and Country Planning Act to enable the development authority to levy `betterment tax' across the state,“ a Karnataka state government official said.

These financing techniques will be part of the “valuecapture policy (VCP) framework“, which the Centre is now pushing. The basic premise of this policy is that the rates of private land and property in a particular area and its surrounding zone usually go up primarily because of infrastructure development with public investment and policy decisions. Once finalized, something like “better ment charge“ or “impact charge“ can be imposed on landowners during the sale of land and when permission for construction is sought.

“Builders and real estate developers will get more FAR, which will help them build more and sell more built-up area. Similarly, it will help the government recover a portion of the expenditure made to build infrastructure,“ said an official involved in the preparation of VCP framework for the entire country.

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