Imposing special development fees to recover investment costs

Context

• The Nehru Outer Ring is a road construction project intended to connect and further develop urban  settlements and satellite townships in  the Hyderabad Metropolitan area
• With a length of 158 km, the 8 lane expressway links several key areas in the wider metropolitan region

Problem

• The local government authority struggled with limited financial resources and a need to recover investment costs from its projects
• Hyderabad Metropolitan Development Authority (HMDA) aims to abate issues  related to rapid and unplanned development  such as long commute times and congestion

Innovation

• The HDMA is incentivizing the development of large capstone projects (such as integrated townships) along the  route via special regulations and ad hoc  incentives
• At the same time, HDMA is charging impact fees on the capstone projects to ensure cost recoup for the infrastructure provided

Stakeholders involved

• HMDA — Prepared the development plan and regulations
• Hyderabad Growth Corridor Limited (HGCL) — SPV to monetize the project
• Local Investors — Contribute to cost recovery through payment of impact fee

Results/Impact

• HMDA’s Development Plan has encouraged overall growth by clustering social and economic activity along new transportation corridors
• Proceeds from the impact fees and the other charges/taxes have led to the formation of the Hyderabad City Development Fund, which is tasked with  further development and improvement of the ORR
• The ORR acts as a bypass for the traffic on national and state highways and in turn reduces accidents by avoiding movement of commercial traffic in the city