LAND AS A RESOURCE PRADEEP SINGH KHAROLA MANAGING DIRECTOR, BANGALORE METRO RAIL CORPORATION LIMITED

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1 LAND AS A RESOURCE PRADEEP SINGH KHAROLA MANAGING DIRECTOR, BANGALORE METRO RAIL CORPORATION LIMITED

2 LAND AS A RESOURCE Economise on Land Usage Developer Exactions Value Capture Land Asset Management Printing Money Giving TDR in lieu of Monetary Compensation for land acquisition

3 LAND AS A RESOURCE The land based financing instrument is structured on the principle that the benefits of infrastructure projects are capitalized into land values and therefore it follows that it is logical to ask people whose land values have gone up due to share a small percentage of the costs of development.

4 LAND AS A RESOURCE ECONOMISE LAND USAGE Classic example of land wastage is providing Ground parking. Land in a metropolis costs about Rs 0.5 lakhs per square metre. The space required for parking a car is about 30 square m. The cost of providing parking is many times higher than cost of a car. Most infrastructure projects consume lands lavishly.

5 LAND AS A RESOURCE ECONOMISE LAND USAGE Modern technology and management systems can significantly reduce demand for land for building urban infrastructure. There is a need to shift focus from capital-saving technologies towards landsaving technologies, as land becomes relatively more scarce than capital.

6 LAND AS A RESOURCE- DEVELOPER EXACTIONS This was the traditional method where any new development is charged with levies and cess to fund the urban infrastructure. It has been experienced that these levies are on the lower side. Therefore there is need to enhance these as each new development puts new demands for enhancement of trunk infrastructure.

7 VALUE CAPTURE Value capture builds on the principle that the benefits of urban infrastructure investment are capitalized into land values. Because public investment creates the increase in land values, many land economists have argued that the government should share in the capital gain to help pay for its investment.

8 LAND AS A RESOURCE VALUE CAPTURE Betterment Levies : This is a levy to captures part of the land-value gain attributable to infrastructure investment by imposing a one-time tax or charge on the land-value gain. Though many countries have imposed this levy, in actual practice it has been proved to be difficult to administer. The chief reason for its failure stemming from the difficult to identify with precision, parcel by parcel, the land-value gains resulting from public works projects. For this reason, betterment levies have fallen out of favor as a significant source of revenue. However, local authorities can capture by increase in property tax, higher rates for new building permits, revising guidance value for property registration.

9 LAND AS A RESOURCE LAND ASSET MANAGEMENT Fortunately, all public utilities own substantial prime lands in city areas. These lands usually idle and often encroached These need to be commercially exploited Challenges are mobilisation of funds and after assets are constructed the challenge is to monetise it.

10 PRINTING MONEY GIVING TDR IN LIEU OF MONETARY COMPENSATION FOR LAND ACQUISITION This yet another instrument by which the infrastructure agency issues TDRs in lieu of cash compensation. The land loser is not given cash compensation but a certificate a percentage in excess of the land surrendered for the infrastructure project, which he can utilize himself or trade it in the open market. This is a highly complex system and need to be operated like stock market with the TDRs issued to be in demat form and transferable on line. If operated well this instrument could be a good instrument for generating substantial revenue for infrastructure projects.

11 INDIRECTLY AUGMENTING MAIN REVENUES Most transport organisations are bogged down with fighting to meet peak demands. The concern is less traffic during non peak days/period. We do not market transport services. The problem is more acute for metro systems as these are less flexible as compared with the bus systems.

12 INDIRECTLY AUGMENTING MAIN REVENUES The Challenge is to draw more passengers The BMRCL has spent Rs5 crore to establish the Rangoli centre, which has three art galleries, a mini-auditorium, interactive play area and others. The horticulture department, which was given the task of developing boulevard, has grown over 1,000 saplings of various types, including flowers

13 TRANSPORT DEVELOPMENT FUND A Fund is necessary as there is no quid pro quo between the funds mobilised and their commitment to transport infrastructure Agency providing transport services are not authorised to impose levies described herein. A proportion of the funds mobilised should be statutorily reserved for the transport development fund. Funds to be placed at the disposal of an integrated agency which looks after the transport planning.

14 CERTAIN CAUTIONS: These instrument of unlocking land value have not been fully tested and hence great care must be in the use of these instrument for financing urban infrastructure: 1. Comprehensive planning for the city is required to identify the potential growth areas ; 2. A transparent and accountable mechanism for operating any of the instruments for Cess, FAR, TDR etc. 3. Proceeds form part of the Urban Infrastructure Fund (UIF) and utilized only for capital investment projects/ housing for the poor. 4. Governance and operational mechanisms of (UIF) must be designed to ensure total transparency; and 5. A clear policy to sharing revenues between the civic agency to meet their cost to provide/ungrade services.

15 Thank you