Bengaluru floods: Knight Frank suggests Value Capture Financing route for infra development

File image of a vehicle stuck in the flooded KR Circle underpass in Bengaluru

A report by property consultants Knight Frank India suggests Value Capture Financing (VCF) for financing infrastructure development in Bengaluru, especially to avoid flooding. The report, titled Bengaluru Urban Flood, released on May 31, said that a comprehensive storm water master plan and alternative flood control techniques are the need of the hour.

However, a sustainable infrastructure for the plan could be challenging as it involves enormous capital expenditure in the form of initial costs and long-term operation and maintenance costs. This is where the report calls for the VCF route.

What is Value Capture Financing?

It is based on the principle that private land and buildings benefit from public investments in infrastructure and policy decisions of governments.

The different instruments of VCF are land value tax, fee for changing land use, betterment levy, development charges, transfer of development rights, premium on relaxation of floor space index and floor area ratio, vacant land tax, tax increment financing, zoning relaxation for land acquisition, etc.

What is the current situation in Bengaluru?

Currently, Bengaluru has 842 km of primary and secondary drain. To complement spatial expansion, the city broadly requires an addition of approximately 658 km of primary and secondary drains. As per Knight Frank estimates, the capex requirement for the construction of new drains, in addition to the rejuvenation of existing drains, is estimated to be Rs 2,800 crore.

What are the other solutions?

Bengaluru can also adopt nature-based solutions, such as the ‘sponge city’ model, to tackle urban flooding, the report said.

‘Sponge city’ is a new urban construction model for flood management, being implemented in China and aimed at strengthening ecological infrastructure and drainage systems.

Such a concept lays emphasis on tackling urban surface-water flooding and related urban water management issues, such as purification of urban runoff, attenuation of peak run-off, and water conservation, the report said.

“In addition to a master plan, alternative flood-controlling techniques can enhance the city's ability to manage stormwater effectively. It is essential to prioritise investment in infrastructure, alongside the city's economic growth to create a harmonious and resilient urban environment,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

Rajeev Vijay, executive director of government and infrastructure advisory, said the state government needs to recognise Bengaluru as a prized asset and the master plan should be implemented in 2-3 years.

If not, the flooding issue will affect the real estate sector in the city within years' time, he added.

Tackling the situation

V Shipashree, lead consultant of research at Knight Frank gave examples of cities like Mumbai and Chennai that have already tackled the flooding issues.

The Municipal Corporation of Greater Mumbai carried out an extensive study of the city's stormwater drains.

"Post-2005, a project was implemented for Rs 1,000 crore to remove the encroachments on stormwater drains. And till 2022, about Rs 4,000 crore was invested in the project," she added.

She added that currently, Bengaluru needs Rs 556 crore to build new stormwater drains and Rs 300 crore to rejuvenate existing ones.

Shantanu Mazumdar, executive director of Knight Frank, Bengaluru, added that currently, Bengaluru has 842 km of existing primary and secondary drains. The city needs an additional 658 km of stormwater drain network to mitigate the recurring floods in Bengaluru.

The report also pointed out that about 1 percent of Bruhat Bengaluru Mahanagara Palike's total capital expenditure is towards the maintenance of stormwater infrastructure in the city.

A majority of collections from real estate, that is from stamps and registration, goes to the state government as opposed to BBMP, which collects about Rs 3,500 crore every year in property tax (which is also 20 percent less than their target). As of March 2023, the revenue department has collected Rs 17,000 crore in registration. Over time, experts have called for better budgeting in the state for an adequate appropriation of funds.