State govts may seek share in property appreciation due to infra projects

MUMBAI: Govt considering proposal to charge impact fee in areas where property prices are on the rise because of infrastructure projects.

If you own a plot of land or even a flat in an area where property prices are on the rise because of an infrastructure project, you could end up paying an ‘impact fee’ or ‘betterment charges’ while selling that property.

The state government is considering such charges on real estate transactions that are impacted by the infrastructure projects such as Metro corridors, the Trans-Harbour Link, and coastal roads among others.

Urvinder Pal Singh Madan, the MMRDA commissioner, confirmed the Urban Development Ministry was working on a couple of proposals to this effect.

“Two such proposals are being considered. One is to charge impact or betterment fees in areas where prices of property will increase due to infrastructure projects, and the other is to offer a higher floor space index (FSI) for a premium in areas impacted by these projects,” Madan said. In other words, if citizens are benefitting from infrastructure projects launched by the state government, they will have to share the benefits with the government.

“If private individuals are benefitting through public investment in infrastructure as prices of their properties increase substantially, they must pay back certain percentage of this appreciation to public authorities,” Madan said.

The impact fee is routinely applied in the United States, Canada and the UK to recover part of the capital expenditure made on infrastructure, and is now increasingly used in China as well.

In India, similar charges are being levied in Gujarat to finance the Bus Rapid Transit System (BRTS) and governments of Rajasthan and Karnataka are also considering the option to finance Jaipur and Bengalaru Metro projects respectively.

The MMRDA has been financing its projects through funds raised by selling its land stock, and through long-term soft loans from multilateral agencies such as the World Bank and the Japan International Cooperation Agency (JICA).

The MMRDA, which developed the Bandra-Kurla Complex, is now left with only 74 hectares of land, but can still generate funds to finance infrastructure projects. However, experts believe the MMRDA should create a steady stream of revenue which will finance infrastructure projects in the long run.

Manish Agarwal, head of infrastructure practice at PricewaterhouseCoopers India, said, “The impact fee is widely used all over the world to finance infrastructure projects. This charge is imposed either as a cess on property tax or a cess on property transactions.”

Credits Mumbai Mirror

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