cordingly, it would be fully justified for the local bodies to
impose betterment levy or impact fee to recover the costs
incurred in development of the project that led to the
economic growth.
Land monetization
Most cities have valuable lands owned by the city or state
governments, housing old structures such as office com-
plexes or staff residences. Redevelopment of such lands
in PPP mode has been tried out successfully in case of
New Moti Bagh and East Kidwainagar areas in Delhi. In
both cases, public sale of just 5 to 10 percent of the resi-
dential layouts for government staff generated enough
resources to redevelop 5 to 10 times the original spaces,
but also the grants for maintenance of the redeveloped
structures for 30 years. This model can be replicated to
create modern built spaces and generate revenue for the
local governments, preferably in public-private partner-
ship mode.
Property taxes
Some municipalities have undertaken geo-spatial map-
ping of the built spaces and after on-ground verification,
updated the records of taxable properties, leading to rise
in collections from property taxes by few hundred per
cent. This is an example of garnering higher revenues in
an equitable manner without raising the tax rates.
Municipalities may also levy tax on applicable Floor
Area Ratio (FAR) rather than on availed FAR. This
would in effect be an equitable model of taxation on va-
cant land and unutilised FAR and lead to enhanced rev-
enue mobilization on a sustained basis.Conclusion
Urbanisation creates wealth. Therefore any investment
in urban development is a source of richness. The public
financial policies need to identify the contours of wealth
that such investments create and aim at collecting a
part, say, 10 per cent, of that wealth by way of taxation,
fees and user charges. That should be adequate to fund
the infrastructure that goes to create such wealth. Mu-
nicipalities need to make a thorough analysis of the costs
and benefits of the development projects and determine
the framework of cost recovery in terms of “Beneficiary
pays” principle. With such analysis in hand, they can se-
cure loans to launch the projects and pay back through
the slice carved out of the wealth that the project would
generate. That would give a financially viable model for
investment in urban development. Of course, other di-
mensions of viability, such as social, environmental,
technological and managerial, would also have to be
worked on simultaneously. <Dr. Sudhir Krishna is former Secretary (Urban Devel-
opment), Government of India and is currently Chair-
man, Delhi Finance Commission and also Chairman,
BIS Committee on Smart CitiesMost cities could not enforce
user charges effectively,
even though they swore to
do so as required under the
JNNURM Guidelines.