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The TDR conundrum

Rasheed Kappan, Jan 11, 2014, DHNS:
Properties are demolished for road-widening but, without cash compensation.

Denied compensation at market value for lands lost to public projects, many Bangaloreans are instead offered virtually worthless TDR certificates. Though it is a voluntary option, many owners are threatened with forcible acquistion if they don’t oblige.

For Bangaloreans with their properties trapped in a zone earmarked for a road-widening or an underpass project, the Transferable Development Rights (TDR) option has turned out to be cruel joke. Denied monetary compensation linked to market rates by the cash-starved BBMP, these property owners are instead given Development Rights Certificates (DRC). But to their utter shock, many have realised that these DRCs are virtually worthless since they hardly fetch a fraction of their land cost!

Its financial situation in a mess, the Palike had hit upon the TDR option to get land owners give up their property to make way for infrastructure projects. Despite rules clearly stating that TDR could only be voluntary, many fell for the promises only to repent later. In theory, the tradeable certificates issued in exchange of the area surrendered by them for various projects, could be either used to build beyond their allotted floor space or sold to property developers. But owners have found it tough to find buyers, and even if they did, they had to sell the certificates for a much lower price.


Residents of the Elgin Apartments on Hosur road were quick to grasp this, as they collectively posed a stiff challenge to the BBMP’s move to get their properties cleared for a widening project. 

“The Palike expects us to part with our properties free of cost. They ask us to fill out an application which is virtually a pre-written note that we give up our rights over the land. We are a democratic country and we expect every agency to go by the law of the land,” says the Elgin Apartment Association president, Purushottam.

They had outrightly rejected the offer of TDR, and for good reason. Explains Purushottam,“TDR has no value, particularly in the central Bangalore area. If you surrender 1,000 sqft of land, you are giving up Rs 2 crore worth of property. The TDR certificates offered as an alternative will not even fetch Rs 10 lakh.” 

He wonders why they shouldn’t wait for implementation of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act that promises to double the compensation package in urban areas. Real estate developers and Cushman and Wakefield, a global consultancy firm, had indicated that this legislation, passed in Parliament recently, could trigger cost escalation for large infrastructure and residential projects. However, the property owners are widely expected to benefit.    

The BBMP is aware of the new Land Acquisition Act. But there is no clarity on its implementation in the State yet. Palike sources say they have requested the State revenue department to offer a roadmap on its execution in the City. While the Act could help the Palike acquire land faster by paying 75 per cent of the compensation amount upfront, the requirement of getting approval from 70 per cent of the land-losers could prove tricky.
 No takers in ‘A’ zone

BBMP officials admit that TDR is no longer an attractive option for property owners in zone-A that inclues old areas such as Jayanagar, Basavanagudi, Malleswaram, MG Road, Frazer Town and surroundings. “Nobody in Zone-A wants to give up their land for these certificates as the land value per sqft is steep. 

They want compensation and nothing less. Only a few who cannot wait for years for land acuisition-linked compensation accept it. So, the TDR action is happening mostly in Zone-C, in areas such as Mahadevapura and Yelahanka, where the guidance value is calculated in terms of acres. TDR works out better for them there since the certificate values are calculated on square feet basis,” explains a Palike official linked to land acquisitions.  

However, the land-losers are reportedly not given a choice to reject TDR in these outlying areas. A senior BBMP official from the Mahadevapura zone indicated this when he emphasised that the property owners had to accept the certificates or face forcible acquisition. In Zone-B too, the acceptance of TDR and DRC certificates has fallen sharply. Palike insiders themselves admit that not more than 20 per cent of the property owners facing the risk of losing land were ready to take the TDR option. 

“Property rates have risen even in Zone-B due to their proximity to the city centre. A majority wants compensation here too,” the official says. Last year, the Palike had issued only about 300 DRC certificates in all its eight divisions combined. 

So, what is the legal basis for TDR and the issue of DRCs? The State Government had amended the Karnataka Town and Country Planning Act 1961 to empower local bodies (Corporations / Planning Authorities) to permit additional FAR for the land handed over free of cost, whenever land was required for road widening, and / or for formation of new roads, or for development of parks, playgrounds and other civic amenities. TDR came out of this amendment, inserted as Section 14 (b) in the KTCP Act 1961. 

Delayed process

There are cases where property-owners were kept waiting for years to take possession of the certificates. In one such case in Zone-A, a stone’s throw away from Vidhana Soudha, a kalyana mantapa trust had lost 2,120 sqft for a road-widening project during 2008-09. The Palike had refused compensation outrightly, and asked the owners to opt for TDR. 

After fighting a legal battle for years and refusing to pay any money for the certificates, the trust finally got a court direction to the BBMP to release the DRCs within six weeks. Three months later, they are still waiting!

Seven years ago, when the owner of a prominent residential-cum-commercial apartment complex near Race Course road gave up 4,800 sqft of his property for the Airport road widening, TDR was offered as an option. It was the first such case in the City. The zone was “A,” it was right in the heart of the city, and a builder was even ready to buy the certificates at Rs 2,000 per sqft. But the BBMP took years to process the TDR, by which time the going rate had dropped to Rs 800 per sqft. 

“Today, you are lucky if you get even that rate. We will not be able to cover even the repair costs. In any case, we could not wait any longer, and had approached the court two years ago. Recently, we got a verdict in our favour, asking the Palike to pay us compensation,” says the building owner on conditions of anonymity.

But the monetary compensation can happen only through a prolonged acquisition process, which could take three to four years. The Palike will have to request the state government to acquire the property on their behalf, and get the process moving. Having waited seven years, the property owner is gearing up for another long wait. His only consolation: A favourable court order!

‘Useless certificate’

In 2010, former minister S. Suresh Kumar had famously said the TDR certificate was useless, which could at best be framed and hung on the wall in memory of the hard-earned land lost to development. His house on Railway Parallel Road at Ram Mohan Puram was to be reduced to only 10 feet to make way way for a widened Okalipuram-Yeshwantpur corridor. He had urged the BBMP to make TDR more appealing and useful for the land losers. 

At a recent public consultation on the issue, several property owners had sought a revision of TDR rates in the City. Responding to their concerns, the Mayor, B S Satyanaranayan had stated that a proposal to hike the TDR rates in the A (core city), B (between core city and ORR) and C (beyond ORR) zones of Bangalore was in the offing. The rate hike proposal, he had said, would be put in the BBMP Council for approval. Later, the government would be urged to give its nod in the legislature session. 

Currently, BBMP offers TDR on a floor area ratio (FAR) at the rate of 1.5. This means, a property-owner who surrenders land for a public infrastructure project is compensated with an extent of FAR 1.5 times the surrendered extent. This additional builtup area could be used either in the owner’s remaining property itself or another plot. 

Alternatively he / she could trade the TDR along with a Development Rights Certificate (DRC) in the market. It is learnt that the Palike’s proposal is to raise the rate to 2.5 times expecting that more property owners would take the TDR option in zones A and B. However, some Palike officials themselves are sceptical whether hiking the rate would show results. If more DRCs are in the market, the demand could fall, defeating the purpose, they argue. 

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