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THEME PAPER
VALUE INCREMENT FINANCING OF URBAN
DEVELOPMENT IN INDIA
MR. ABHISHEK MALHOTRA Urbanisation is one of the most century and India is no
signi cant global trends of the twenty- exception. This revolution is
rst century. India is witnessing a high much stronger than the
rate of urbanisation like other developing agriculture and industrial
countries in Asia and Africa. e ever- revolution observed in the past.
rising population in the cities demands
an increase in infrastructure, affordable It can not only transform the
country physically but can also
housing, mass transit, etc. for the city to
be able to sustain the pressure and relieve positively impact the lives of the
the burden of overcrowding. To provide people. If this process is carried
VIF is a measure that can be
for these facilities, there is a need for the out in a planned and systematic
used to secure a loan,
government to invest heavily in housing manner, it has the power to
leverage an up-front
and infrastructure projects. However, achieve the sustainable
investment, promote a
nance has remained a constraint for all development goals (SDGs)
public-private-partnership urban renewal and development which India is signatory to. The
(PPP) or undertake projects. is paper highlights the speed of India's urbanization has
development on the 'pay-as- importance of value increment nancing
been significant. India's urban
you-go' principle. It creates in this context. VIF is a scal instrument population has increased from
hope for the cash-starved that is self- nancing and is used in 286 million in 2001 to 377 million
local bodies which can rely different countries to generate funds in 2011 and is further expected
on robust development r e q u i r e d f o r i n v e s t m e n t s i n
infrastructure and public utilities; and to to reach 820 million by 2051
strategy and fiscal discipline
pay for other economic development. It is (United Nations 2015). The
to develop or renew cities.
a measure that streamlines the emergence of cities and their
increment in values and taxes due to the importance cannot be neglected.
infrastructure development, escrows it Cities are known to be the
into a special fund and uses it to service engines of growth around the
the project funding. e VIF mechanism globe. Indian cities contributed
can be used along with long-term to more than 65 percent of the
borrowing to get the best results. is
Gross Domestic Product (GDP)
paper discusses the details of VIF and
and were expected to contribute
how it can be incorporated in
75 percent by 2021 (Planning
infrastructure projects along with
Key Words: Value increment financing, State Commission 2008). A positive
different value capture methods and
of finances, land auction, PPP relationship can be observed
long-term borrowing.
Mr. Abhishek Malhotra between GDP per capita and
INTRODUCTION
(Abhi.malhotra2209@gmail.com) is a urbanization in India as shown
Doctoral researcher in Economics at The world is witnessing an in Figure 1.
University of Hyderabad, Telengana. urban revolution in this
20 HUDCO-HSMI Publication
