Govt Explores Land Value Capture for Infrastructure Boost
ROADS & HIGHWAYS

Govt Explores Land Value Capture for Infrastructure Boost

In a bid to fortify funding for critical infrastructure projects, the Indian government is actively delving into innovative policy mechanisms to harness the escalating land values adjacent to road developments. The Ministry of Road Transport and Highways (MoRTH) has embarked on an exploration of global best practices to identify effective methods for financing its ambitious expressway projects, with a final decision expected post the new government's assumption of office.

The proposed strategy, under scrutiny by MoRTH, aims to leverage the surge in land values along forthcoming expressways to finance future infrastructure endeavors. A government official elucidated that this move aligns with the ministry's long-term vision of sustainable development.

At the forefront of these deliberations is the consideration of a 'betterment' levy, wherein property owners benefitting from government infrastructure developments, particularly those in proximity to expressways, would be subjected to a one-time charge. This levy would be contingent upon the distance from the expressway.

The concept of land value capture, a globally recognized tool for generating revenue for public services, has found a foothold in various countries. Nations like Colombia and Brazil are experimenting with similar levies, while the US and Canada have implemented impact fees for select projects. Furthermore, Latin American countries are exploring additional development rights, while Japan and Germany are contemplating land pooling or readjustment strategies.

Jagannarayan Padmanabhan, senior director and global head of consulting at CRISIL Market Intelligence and Analytics, emphasized the efficacy of 'land value capture' in capturing the appreciation in land value spurred by government infrastructure spending. However, he cautioned that challenges persist in demarcating zones and establishing uniform charges due to the fluctuating land values.

The Indian government's objective is to tap into the escalated land values surrounding highway projects, thus benefiting real estate developers, while concurrently bolstering funding for public infrastructure. This initiative is crucial as India aims to secure over Rs 20 lakh crore by 2030 to revamp its road infrastructure.

Alongside the strategy of land value capture, the government is exploring asset monetization avenues such as toll-operate-transfer and infrastructure investment trust modes to garner funds for its ambitious projects. The Ministry, through the National Highways Authority of India, is currently engaged in advancing 27 greenfield expressway projects spanning 10,000 km, with an estimated cost of Rs 4.5 lakh crore, slated for completion by 2030. This concerted effort underscores the government's commitment to bolstering the nation's infrastructure landscape through innovative financing mechanisms.

In a bid to fortify funding for critical infrastructure projects, the Indian government is actively delving into innovative policy mechanisms to harness the escalating land values adjacent to road developments. The Ministry of Road Transport and Highways (MoRTH) has embarked on an exploration of global best practices to identify effective methods for financing its ambitious expressway projects, with a final decision expected post the new government's assumption of office. The proposed strategy, under scrutiny by MoRTH, aims to leverage the surge in land values along forthcoming expressways to finance future infrastructure endeavors. A government official elucidated that this move aligns with the ministry's long-term vision of sustainable development. At the forefront of these deliberations is the consideration of a 'betterment' levy, wherein property owners benefitting from government infrastructure developments, particularly those in proximity to expressways, would be subjected to a one-time charge. This levy would be contingent upon the distance from the expressway. The concept of land value capture, a globally recognized tool for generating revenue for public services, has found a foothold in various countries. Nations like Colombia and Brazil are experimenting with similar levies, while the US and Canada have implemented impact fees for select projects. Furthermore, Latin American countries are exploring additional development rights, while Japan and Germany are contemplating land pooling or readjustment strategies. Jagannarayan Padmanabhan, senior director and global head of consulting at CRISIL Market Intelligence and Analytics, emphasized the efficacy of 'land value capture' in capturing the appreciation in land value spurred by government infrastructure spending. However, he cautioned that challenges persist in demarcating zones and establishing uniform charges due to the fluctuating land values. The Indian government's objective is to tap into the escalated land values surrounding highway projects, thus benefiting real estate developers, while concurrently bolstering funding for public infrastructure. This initiative is crucial as India aims to secure over Rs 20 lakh crore by 2030 to revamp its road infrastructure. Alongside the strategy of land value capture, the government is exploring asset monetization avenues such as toll-operate-transfer and infrastructure investment trust modes to garner funds for its ambitious projects. The Ministry, through the National Highways Authority of India, is currently engaged in advancing 27 greenfield expressway projects spanning 10,000 km, with an estimated cost of Rs 4.5 lakh crore, slated for completion by 2030. This concerted effort underscores the government's commitment to bolstering the nation's infrastructure landscape through innovative financing mechanisms.

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