Uttar Pradesh Leads In Value Capture Financing For Urban Infra Projects

Uttar Pradesh has emerged as a front runner in Value Capture Financing (VCF) model for urban infrastructure projects in the country, Urban Development Minister Venkaiah Naidu said on Tuesday.

“As many as 61 cities in Uttar Pradesh are using Value Capturing Financing Tools,” said Naidu on the sidelines of an event to announce his ministry’s achievements in the three years of Modi government.

The finance ministry had notified VCF guidelines in March 2017 to make them mandatory for all ministries from April. As per the guidelines, each project proposal should be presented before the Public Investment Board and the Delegated Investment Board will decide which VCF tool is most feasible for the project.

In the Value Capture Financing model, the government makes large investments in developing public infrastructure which leads to a spike in land prices to focus on land value creation via infrastructure development.

As many as 163 cities across 17 states and union territories had decided to opt for value capture financing. “Gujarat and Maharashtra are behind Uttar Pradesh in implementing VCF model,” Naidu told BloombergQuint at the sidelines of the event.

The different instruments of VCF include: 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.