Betterment fee approved, but experts say it's a bad idea

 The Cabinet on Wednesday gave its approval to the innovative financing mechanism proposed by the Urban Development Department to mobilise resources to fund major transport infrastructure projects in the state.

While the government is keen on imposing betterment tax, urban experts think otherwise. Some say that the proposal gives way to more urban chaos, while others say that there is no rationale behind the government’s decision. “Already several resident welfare groups are opposing rapid urbanisation in residential areas. The government is encouraging this unbridled growth,” said a former IAS officer.

Urban planner V Ravichandar said that if an area improves due to certain interventions, taxing the beneficiaries is fine. But it is more important to ensure that the money collected is duly used.

G Ramesh, associate professor, Centre for Public Policy, IIMB, said that there are many pros and cons to this. Globally, wherever there is value appreciation, it is being captured immediately. The flip side is that betterment happens five to 10 years later, though the property prices escalate much in advance in catchment areas. Also, the government should fix the time period of betterment when the fee is being collected and development should happen in that particular area where the fee is being collected. There is a need for a clear policy justifying the promises, consequences and plans of fee collection.

It is said that land value around mass transit system would go up once the system becomes operational. To capture the appreciation in land value, betterment fee is being levied. It is different from Floor Area Ratio (FAR) concept, which is voluntary. Betterment fee will be mandatory and is mentioned under Section 20 of the Bangalore Development Authority Act, 1976.

The government clearly states that the fee will be levied only on non-residential properties. On those land holdings where the size exceeds the minimum threshold, the fee will also be imposed in impact areas falling within the fixed distance of one km from where the new project comes up.