Evaluation Study (Country-wide) on Land Value Capture (LVC) Mechanisms

Introduction

With population and economic growth increasing land scarcity/values manifold, the significance of land-based financing tools for infrastructure needs no emphasis. Land is not just an economic asset of an individual who owns it, but one which has enormous potential to promote a more socio-economically equitable and sustainable society. Land Value Capture (LVC) mechanisms enable governments to recover part of the land value increases that result from public investment through one-time charges, fees, taxes or even in-kind contributions from landowners/developers and channel them into infrastructure finance. LVCs try to also capture a portion of the land value gain caused by urban regulations (change of uses, authorized densities, etc) to finance the investments. Land-Based Financing Tool (LBFTs) is a broader term envisaging multiple tools based on lands potential as a value generating resource and not specifically capturing a portion of the actual accretion in value owing to a specific governmental intervention.

Objectives and Key Requirements of the Study

The present Study, commissioned by the NITI Aayog, seeks to assess the state-wide practices and level of preparedness in introduction/scaling up of LVCs in India. To achieve the objectives of the Study, each of the State Government/UTs are required to fill up a Questionnaire that covers the enabling framework, reforms that has taken place in various states/projects, operational modalities and revenue generated by various LBFTs that are being implemented in the country.

Table 1-Structure of the Questionnaire on LBFTs/LVCs (To be Filled by States/UTs)

I	Introduction
Enabling Framework
1.1	Modernization of Land Records
1.2	Fixation of Guidance Value
1.3	Technology in Land Management
Common Land-based Instruments
1.4	Land Banking
1.5	Property Taxation
1.6	Stamp Duty
1.7	Status of Implementation of LBFTs
II	LBFTs in Practice
2.1	Change of Land Use
2.2	Land pooling/Town Planning
2.3	Land Value Increment Tax (termed as Betterment Levy in other countries)
2.4	Betterment levy (Town Planning Schemes)
2.5	Land Lease
2.6	Premium FSI/Additional FSI/Transfer of Development Rights
2.7	Development Charges
III	Conclusion
3.1	Other Instruments in Use (Capturing Essence of LVCs)
3.2	Hindrances in Introductio/Scaling Up of LBFTs

Structure of the Schedule (Questionnaire)

The Schedule is divided into three sections; Section I comprising the Introductory Section; Section II comprising the key LBFTs in practice and Section III which is an open-ended section covering the details of other instruments that may be implemented in the states/UTs that essentially capture the essence of LVCs.

Section I-Introduction: The introductory section is divided into two parts; first part covering the enabling framework for introduction of the LVCs and the second part a basic understanding of few common land-based instruments. A credible and updated land records and valuation system lie at the very root of the enabling framework. The introductory section will cover this along with basic information pertaining to common land-based instruments of property taxation, stamp duty and status of accumulated lands for infrastructure investment. The section will also cover the status of implementation of various LBFTs. States that are implementing specific LVCs shall fill up relevant sections as applicable under section 2.

Section II-Understanding LBFTs in Practice: Section 2 includes those LBFTs that are presently being implemented in some states. While Sections 2.1 to 2.5 are instruments that are/can be implemented in both rural and urban areas, sections 2.6 (Premium FSI) and 2.7 (Area/Value based Development Charges imposed on developers) are predominantly urban phenomenon. Each of the sections include questions covering the legal framework, operational modalities, reforms undertaken and financial performance of these tools in each States/UT. For conceptual clarity, a brief description of the tool and examples of the law/practice is given at the outset of each section.

Section III-Conclusion: The concluding section includes two parts, the hindrances/bottlenecks in each state for introduction/scaling up of the LVCs covering the first part and an open ended second part covering any state-specific instrument that captures the essence of LVCs but not covered in Section II. The essence of LVCs a reflected in the tools that are presently being implemented in different states is given below:

• Landowners pay a one-time fee in return for the positive externality of land value accretion from a road/infrastructure project
• Landowners who will benefit from a change in land-use/rezoning can partially contribute from the positive externality.
• Landowners collectively pool their land and contribute a portion of their property to the government, in return for a smaller but higher valued plot.
• Land owners who benefit from keeping land vacant and hence not in the property tax net may contribute a minor component of this share as a recurring tax.
• Property owners pay a fee to expand their building's footprint beyond what is normally allowed

The duly filled up forms by all the departments may be uploaded on the website by 15th October positively