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The National Highways Authority of India (NHAI) is working on a mechanism to share gains in land value on account of upgradation of highways as it looks to part-finance urban projects amid increasing costs of land acquisition, said people with knowledge of the matter. 

The move will help the authority raise extra budgetary resources for urban highway projects and ring roads, they said. 

Basically, the central government builds the roads and funds them. It will be an attempt to capture the value enhancement, especially in urban projects, so that part-finance of the projects and meets the viability gap funding. 

Through value capital financing (VCF), the Centre will partner state governments and development authorities to share betterment levy, land value taxes and development charges. Betterment levy is a tax that the state collects on a plot of land that it has made better by building roads, metros, airports, etc. 

The appreciation in land value on account of the development of highways is generally captured by real estate brokers, who essentially benefit at the cost of taxpayers' money. With betterment levy, or VCF, the government may get sellers of land around highways to pay a cess in tandem with the appreciated value of the land, to be shared between the Centre and states.

To begin with, the model will be feasible only for urban projects, both greenfield and brownfield, according to the official