National TOD Policy states that “In TOD influence zones, land value capture can be done through enhanced or additional land value tax or one time betterment levy, development charges or impact fee, transfer of development right (TDRs), or other such mechanisms which have been adopted in various states across the country and abroad”. It also states that Land Value Capture can be used as a mechanism to finance the required upgradation of infrastructure and amenities within the influence zone and expansion of the public transport system.
TOD policy should be notified as part of the Master Plan/Development plan of the city. To ensure that the infrastructure created in the influence zone is provided in a planned manner, the Urban Local Bodies (ULBs) and the concerned authorities/agencies should prepare a comprehensive plan integrating all the utilities, physical infrastructure and essential facilities such as roads, sewers, drainage, electric lines, green spaces, police post, fire post, electric sub-stations, etc.
The National TOD Policy also states that a TOD fund should be created for funding the infrastructure upgradation/ maintenance, enhancement of viability of transit systems, and should be in the form of an escrow account, from which financing is provided to various agencies for the identified activities and the balance can be used by the ULBs for other development purposes such as public transport expansion.
The VCF Policy Framework issued by the Ministry of Housing & Urban Affairs, aims to encourage and enable Central Government, States/ULBs to use appropriate VCF methods for generating resources for new and existing infrastructure projects in urban areas.
The Ministry of Housing and Urban Affairs provides guidance to State Governments and Union Territories to leverage their assets, and in particular make use of underutilized resources such as land to finance infrastructure.
At the time of initiation of the project, the rules and regulations governing Value Capture in the State need to be studied and possibilities of applying existing VCF methods need to be examined.
After finalizing the project location, the area of influence of the project for applying the Value Capture tool needs to be delineated. The area of influence of the project will be the area in which land and property values are expected to increase due to project location. The starting point is the value impact assessment in the area of influence, which should form a part of the Detailed Project Report (DPR). Further, stakeholders who will benefit from the setting up of the project will have to be identified and consultations held with them right from the stage of project initiation.
The Value Capture methods for funding a project need to be identified and these methods have to be put in place by the State Governments and ULBs which will include the type and number of VCF tools to be applied, methods of assessing, levying and collecting the incremental value generated, time period during which the VCF tools will be in operation, etc. Moreover, the funds collected from the application of Value Capture methods will have to be placed in a separate account and the way of using the funds by Governments and their agencies will have to be agreed upon. The Value Capture method for the project should be implemented and an efficient mechanism for monitoring of fund management put in place. Regular monitoring and evaluation of the project progress will have to be established and put in the public domain.
As per the National Metro Rail Policy, for enhancing the viability of Metro / MRTS Rail Projects, the commitment by the State Government to adhere the guidelines issued by the Central Government with respect to TOD and adoption of VCF framework should be an integral part of the project proposal.
Transfer of the financial benefits accruing in the influence zone of the metro alignment on account of the TOD policies and VCF framework directly to the Special Purpose Vehicle (SPV) / agency implementing the metro rail is mandated.
The project report should specify the proposed quantum of such benefits being transferred to the project. This requirement would form a mandatory part of all metro rail project proposals.
The policy encourages high-capacity public transport systems be setup through the mechanism of Special Purpose Vehicle (SPV) and focuses on the principle that the Government should provide the infrastructure, but the beneficiaries (indirect / direct users within the city) must pay for the operating costs and rolling stock.