VALUE CAPTURE FINANCING (VCF) TO BE THE NEXT BIG THING
Starting next fiscal, the government looks all set to implement the VCF for all infrastructure projects and would be formally launched by the Honourable Prime Minister, Mr. Narendra Modi. The tool is quite popular across the world over and is based on the simple logic of the government making huge investments in public infrastructure, leading to rapid economic development in those areas, including higher land prices. The tool would mean tapping into this increment through additional taxes and then using finances to fund future infrastructure projects in the same area.
The implementation would require all the infrastructure ministries to first identify the area of influence which would not only, including the actual project area but also covering the catchment area of the project. Thereafter, a value impact assessment would be made as to how much financial progress the project would make in the next decade or two and would be included in the Detailed Project Report. The total workaround would involve three parties, the central government, the state government and an urban local body if present. The funds hence collected would be put in a separate escrow account and would be distributed in proportionate ratio as per the tool.
Commenting on these speculations, Avneesh Sood, Director, Eros Group believes, “VCF is a thing of reality now as the government is trying it’s best to bring the operations and standards of Indian real estate at par with those of foreign countries. This move will not only allow government to plan infra projects freely but also generate revenue from it’s catchment areas which in turn will allow it to develop these regions further. Also, with the VCF tool being implemented, property prices are sure to go up, especially in the areas which are proposed under the Smart Cities and AMRUT missions. These regions will benefit from the world class infrastructure and hence, it is the most opportune moment to invest in the India’s real estate market as it is destined to give value for money and apt appreciation at the same time.”
