CHENNAI: Tamil Nadu government is considering a proposal wherein it will raise funds for affordable homes for economically poor sections through Land Value Capture (LVC) mechanism or tapping the increase in land prices by redevelopment and infrastructure projects. It is learnt that the mechanism could be included in the draft State urban housing and habitat policy prepared by German agency GIZ.
The LVC is a process of capturing the increase in the value of land generated by infrastructure projects like providing better accessibility. This adds value to an area, which is reflected in land and property values.
The idea is based on the premise that most people are willing to pay a premium to enjoy the advantages of living or working close to such an area as a result the government captures this higher value though taxes and other schemes, and recycles the revenue to pay for further improvements to infrastructure.
Sources told Express that funds raised through LVC could be channelised towards Tamil Nadu Shelter Fund, to fund the ambitious housing project by building affordable homes for the poor.The funds could help create affordable housing stock by both public and private agencies and the State shelter fund shall support in creating dwelling units, sources said.
Besides implementing LVC, the State is also looking at reducing the stamp duty to make dwelling units more affordable. Sources also said the draft State housing policy is also includes tapping Tamil Nadu Construction Workers Welfare Fund for financing rental housing and creating infrastructure for migrant construction workers. The other financing mechanism being considered is promoting Real Estate Investment Trust, a company that owns, operates or finances income-producing real estate.