Value capture financing
Also called: Land value capture · Topic: Infrastructure: Transport, Communications and Energy · NCERT: Beyond NCERT
Meaning
Value capture financing (VCF), also called land value capture, pays for infrastructure by taking a share of the rise in land and property values that the infrastructure creates. A new metro line or road makes nearby land more valuable. VCF lets the government collect part of that gain instead of leaving it all with landowners. Its tools include:
- betterment levies (a one-time charge on land that has gained value);
- land value tax;
- premium charges for permission to build extra floors (premium FAR/TDR);
- impact fees on new developments.
Example
Under the MoHUA VCF framework (2017), a city building a metro can charge builders a premium to construct taller buildings near stations. This is linked with transit-oriented development, meaning dense housing and offices within about 500–800 m of stations. The money raised helps pay for the metro.
Don't confuse with
- User charges: user charges come from people who use the asset, while value capture comes from people whose land gains value because of it, even if they never use the asset.
Related concepts
- Greenfield project
- Brownfield project
- Take-out financing
- Infrastructure debt fund
- Asset recycling
- User charges