Mumbai, April 03, 2018: JLL, India’s largest real estate services firm, estimates that over 140 Indian cities can raise development capital through the issuance of Municipal Bonds, in their latest report, titled ‘Municipal Finance: Funding urban development in India’. The report highlights that the Ministry of Housing and Urban Affairs has actioned a Credit Rating System – one of the transformational reforms under which 500 cities and towns have been given credit ratings to ensure investments. The other revenue sources for urban centres are user charges for specific services, taxes and non-tax revenues, grants, loans and other receipts. The report also estimates that as much as INR 25 crore can be raised annually through advertising fees by municipal bodies of metropolitan cities of India.
MONEY RAISED THROUGH ADVERTISING FEES
Advertising fees are trending as a key instrument for revenue augmentation in the urban centres of India. The advertising fee, or revenue collected through the leasing of advertisement rights on assets owned by various government agencies, have the potential to be a game changer in the near future. It is to be noted that many Indian cities are now focusing on developing, planning and expanding this opportunity to assets that present an advertisement fee opportunity including public convenience facilities, lamp posts, public parks an open spaces, and government buildings.
The report notes that metropolitan cities (population of 1 million and over) have a potential to attract average revenues of over INR 25 crore per year through out-of-home advertising. Cities that have a population of up to 1 million, revenue from out-of-home advertising is estimated in the range of INR 75 lac to 1 crore per annum. For smaller municipalities and town panchayats, the estimated revenue generation potential through advertising is estimated in the range of INR 10 to 25 lac per annum. Mega cities have an even higher potential of generating revenue through advertisements revenue and tax and can be in the range of INR 75 to100 crore depending on the availability of space in their assets.
Category of cities
Average annual revenue potential through advertisement tax & fee (INR)
77 – 100 cr
Municipal Corporations > 1 million population
Municipalities / Urban centres up to population of 1 million
75 lac – 1 cr
Smaller municipalities & town panchayats
10 – 25 lac
IMPORTANCE OF MUNICIPAL BONDS
Municipal bonds are financial instruments issued by urban local bodies to raise money for specific infrastructure projects. SEBI regulations (2015) regarding municipal bonds states that municipalities must: (i) not have negative net worth in any of the three preceding financial years, and (ii) not have defaulted in any loan repayments in the last one year. Therefore, a city’s performance in the bond market depends on its fiscal performance. One of the ways to determine a city’s financial health is through credit ratings. The government has initiated credit ratings to evaluate the credit worthiness of every possible local town. Of the total 20 ratings ranging from AAA to D, BBB (-) is the ‘Investment Grade’ ratings and cities rated below BBB (-) need to undertake necessary interventions to improve their ratings for obtaining positive response to the Municipal Bonds to be issued.
Shankar Arumugham, Chief Operating Officer, Strategic Consulting, India and Sri Lanka, JLL said, “Non-traditional forms of raising capital including Municipal Bonds and alternate revenue streams such as advertisement tax and user fees can provide additional capital up to 30% of the total requirement in various urban centres in the future. While smaller centres can generate a greater percentage of their requisite capital through alternate funding methods, larger metropolitan cities can also receive significant contributions that can be used for development purposes.”
Indicating a positive economic development of the country, India’s urban centres are growing at a rapid pace. However, this growth is causing significant strains on urban infrastructure and services, where massive upgrades are needed. This has necessitated local governments to consider planned urbanization and peripheral expansions that would need a steady stream of revenues greater than what is generated currently by most urban centres. Traditional forms of revenue generation like taxation and grants no longer suffice the scope, expanse and speed for the required development. Thus, municipal bodies have to find new ways of raising capital to sufficiently fund their endeavours.
A solid financial structure is essential to the success of cities in meeting the growing needs of urbanization. The Smart Cities Mission was the first initiative by the government that linked not only all the Government of India schemes (such as AMRUT, Affordable Housing under PMAY, National Heritage City Development and Augmentation Yojana, the Swachh Bharat Mission, Skill India, Make in India, Non-Motorized Transport, Multimodal Integration, Last Mile Connectivity Options and Green Mobility Schemes) but also all the funding mechanisms that are available through convergence. Changing urban landscapes will alter the way urban local bodies manage funding to balance the city’s economy.
RBI hikes interest rates by 0.25%, projects 6.4% economic growth for FY’24
Wednesday, 8 February, 2023: The Reserve Bank of India in its latest bi-monthly monetary policy announced on Wednesday, 8 raised...
RICS Global Commercial Property Monitor: Real Estate sentiments takes further knock
New Delhi, February 7, 2023: The Royal Institution of Chartered Surveyors (RICS), reports in its Global Commercial Property Monitor for...
BCD bags project to develop apartments in Chennai; expands to Tamil Nadu market
Bengaluru, 7 February, 2023: BCD Group, on Wednesday announced that it had received a project to develop semi-luxury apartments Project...
Aradhya Homes Phase-3 set for possession
Gururgam, February 7, 2023: Gurugram based real estate player, 4S Developers, is all set to give possession of its premium...
Growth oriented Budget, needed more thrust to real estate to spur demand: NAREDCO Maharashtra
Mumbai, February 6, 2023: NAREDCO Maharashtra has called the Budget presented by the Finance Minister well balanced and growth oriented, but...
CRC Gp pledges over Rs 800 cr investment
New Delhi, February 6, 2023: CRC Group through its SPV IT Infrastructure Park Pvt. Ltd. would invest in constructing an international...
Guest Column4 weeks ago
Vertex launches its largest project, VIRAAT
Report3 weeks ago
After 2018, 2019, highest number of project registrations in 2022 in U.P. RERA
Guest Column4 weeks ago
The Office Pass (TOP) to open a 26000 sq ft
New Launches3 weeks ago
NAREDCO urges Government to launch SWAMIH-2 with widened scope
project4 weeks ago
2.2 million square feet Mega Project of 4S Developers to cost more than 2500 cr
Guest Column3 weeks ago
SKA Orion to be completed a year before schedule, set to hike prices due to rising input prices says Director Sharma
Guest Column4 weeks ago
Ashiana Housing’s new project in Jaipur
Guest Column4 weeks ago
Commercial real estate to explode in Delhi-NCR in 2023: Rise Infraventures