Betterment fee, a twisted logic

Additional burden

Desperate for cash, the Urban Development Department has a brand new idea to fund fancy infrastructure projects in Bengaluru: Squeeze out a hefty betterment fee from properties near Metro stations, dubiously citing an appreciation in their value.

But this proposal, patently unfair to owners who give up land for projects, goes beyond the stations.

Any property that is within a one-km radius of mega projects such as the proposed Light Rail system or flyovers will also have to shell out that extra price.

The betterment fee could be as high as a third of the property’s appreciation cost. This sudden move, based on a questionable claim of cost appreciation, has sparked huge protests by property owners, urban policy experts and builders.

No proof
If true, where is the proof of that appreciation? In what way are pre-existing property owners benefited when a Metro line or station comes up in their vicinity? Why should they pay over and above the property tax that correspondingly rises with enhanced guidance value?

The questions are coming thick and fast. They ought to. For, the property owners and commercial establishments have seen their businesses stagnate both during the project construction phase and thereafter. There is no visible proof of any appreciation.

Mounting traffic congestion near Metro stations, huge issues with parking and paucity of space have actually driven away potential property buyers. Streets such as CMH Road in Indiranagar have lost considerable width due to the Metro pillars, worsening congestion.

Drop in business
Business has dropped by 30% since Metro construction began on CMH Road, says the manager of a 20-year-old garment showroom. “Many other shops have shut shop. We don’t get customers as there is absolutely no parking space, especially for four-wheelers,” he says, preferring anonymity.

Amit Kishore, manager, retail operations at Gokaldas Exports, agrees. Sales, compared to the pre-Metro days, has dropped by 25% at the Wearhouse outlet, barely a few metres from the Indiranagar Metro station. “During the construction phase, sales were down drastically. It has not improved much since, mainly due to the parking issues and lack of adequate footfalls,” he explains. 

The government is on weak ground to charge from existing property owners, reasons a Bengaluru Blueprint Action Group member. “Suppose a business improves after a project, they are bound to ask: You brought us more customers, you got more tax from us. Why should I now pay extra?”

But he points to a bigger, fundamental flaw in the UDD’s levy of the betterment fee. The revenue generated through this fee from a particular area is not used to serve the same area. He elaborates, “It goes to a consolidated pool. The people who actually paid the fee do not benefit in any way.”

Lack of trust
This has inevitably led to a total lack of trust between citizens and the government. Misuse of public funds, rampant corruption in infrastructure projects and a complete lack of public consultation before any mega project have worsened this glaring trust deficit.

An urban policy expert, well aware of the government functioning, notes: “I am wary of the ways to raise money in this manner when your ability to execute a project is not good. Unless you deal with corruption, incompetence and poor planning of projects, I cannot buy your idea.”

Property builders have dubbed the move to levy the additional fee ‘dictatorial.’ Says Suresh Hari, Secretary, Confederation of Real Estate Developers' Association of India (CREDAI- Bengaluru): “When people lose part of their property for a project, why penalise them? Public accountability is lacking.”

Appreciation of property value, if at all, does not happen in a jiffy. “Benefit of the Metro will take another five to 10 years to be fully realised. Nobody will pick up property near a Metro now.”

Cascading effect
Eventually, the common man will have to pay for the additional cost.
“There will be a cascading effect of this fee. Businessmen will naturally transfer this cost to the customers, driving up cost of goods and services,” Hari points out. Kishore echoes this point when he talks about the inevitability of passing the burden. Says he, “Otherwise, traders will not be able to break even.”

Metro does boost connectivity. But the commuters are not always high-paying customers for businesses in the proximity of a station.

Trends indicate that big customers still prefer to drive their personal cars right up to the commercial outlets, for which parking slots are disappearing. How will businesses thrive?
In areas where the Metro line has been around for five years, there is still no evidence or studies to prove that property prices have shot up.

Since pillars have narrowed roads and poor Metro phase-1 design has left no space for dedicated bus bays, stations have actually taken an accessibility hit. So have the property prices.