Bangladesh
Land value capture in Bangladesh
Several land value capture instruments are used in Bangladesh (Table 2.4). The national legal framework foresees charges for development rights and infrastructure levies, but they are rarely implemented, due to insufficient administrative capacities. There is no legal framework for developer obligations. Large-scale development projects sometimes adopt land readjustment. Land management is used little for strategic purposes.
Enabling framework
Bangladesh is a unitary parliamentary democracy. At the regional level there are 8 divisions. These are further divided into 64 districts and 495 sub-districts, which include municipalities, union councils and city corporations. All these local government bodies are constitutionally autonomous and not hierarchical (OECD/UCLG, 2019, p. 163[1]).
City corporations, municipalities and union councils are in charge of public services and land use planning. However, most do not have master plans and do not make use of land value capture, owing to lack of capacities and resources. National-level organizations assist them on this endeavor.
The national government is responsible for creating the legal framework for land value capture.
Charges for development rights
Local governments and special purpose bodies can implement charges for development rights and collect the revenues. They may levy the charge when developers or landowners apply for land use rezoning. Although the charge is foreseen in national law and local authorities have high discretion in issuing planning permits, it is rarely implemented. Since very few cities have formal zoning plans, it is seldom possible for the authorities to check the allowed construction type against the actual construction type.
The charge is paid in cash at the time the land use conversion is authorized. For instance, in the city of Dhaka, an assessment committee proposes a conversion fee on the basis of an area-wide land valuation. In the city of Chattogram, the valuation is case by case. Smaller municipalities with no land use plans charge the fee when building use changes.
Large cities adopt charges for development rights more often. In Dhaka and Chattogram, the special purpose bodies in charge of urban development set the charge by zone, granting permission for land use change and collecting the revenues. These bodies have sufficient technical capacity to assess and charge the fee. However, not all cities count with similar levels of capacity.
Significant obstacles to the implementation of the charge are the lack of land use plans and local ordinances and the low technical capacity to assess and charge the fee. Moreover, the quality of land registries is low, with most areas lacking a formal ownership record.
Land readjustment
Land readjustment is used for the purposes of urban expansion and farmland consolidation. Local governments, special purpose bodies and private developers frequently implement land readjustment projects, most commonly in greenfield land. Local governments and special purposes bodies collect the revenues.
In private-led projects, developers must submit a detailed land-use plan for approval by the local government. In addition, all landowners must give their consent, with at least 75% of them agreeing to transfer their land to the leading entity before the project starts. The participation of the remaining 25% may be enforced through expropriations, with compensation at three times the registered land value. The government carries out the necessary expropriations only occasionally.
For projects initiated by local governments and special purpose bodies, participation is mandatory against compensation, according to the State Acquisition and Requisition Act (2017).
A share of 30% of the area is reserved for public improvements and services, such as public roads, public utilities, schools, parks and green space – from which participating landowners will benefit. Local authorities may reserve plots for future sales or leases, to generate revenues. Third party investors can receive readjusted plots in return for their investment.
After readjustment, landowners receive an area proportional to their original holdings. In private projects, landowners must receive a plot with a surface area not less than 50% of their original holdings. They may be reallocated to different plots within the area. They cannot exchange reallocated plots for cash but may be required to pay compensation if the readjusted plots are more valuable than the original ones.
Although national guidelines recommend utilizing land readjustment as a primary land development tool, a legal framework to guide land readjustment schemes has not yet been developed. Other obstacles that limit the use of land readjustment are the low quality of land cadastres as well as legal mandates to protect areas of environmental, cultural or historic significance.
Infrastructure levy
Landowners can be required to pay a levy for government-built infrastructure from which they specifically benefit, for example for public roads, public utilities and green space. Local governments and special purpose bodies need permission from the national government to implement the levy and receive the revenues. They rarely implement the levy, being Rajshahi city the only practising example.
The Rajshahi Development Authority (RDA) applies infrastructure levies to road construction projects. The levy should amount to 50% of the land value gains resulting from project execution according to the Town Improvement Act (1953). Nonetheless, the Rajshahi Development Authority only charges 10% of those.
Local governments can resort to a fixed impact radius to identify affected landowners. The RDA considers the properties within 300 feet from the project to benefit from road construction. Within these 300 feet, there are three scales for payment. The fee must be paid upon completion of public works, and no exemptions or discounts are admitted. This fee is revised every 3-5 years based on the land records approved by the general committee meeting of RDA.
Landowners often resist paying the levy. To facilitate collection, local governments charge the fee only when landowners ask for building approvals or ex post facto clearance of land use or building status. Sometimes it takes years to collect all fees for a single project.
The lack of individual town planning ordinances setting infrastructure levies hampers the widespread use of the instrument. Most municipalities lack administrative and technical capacities to calculate and levy the fee. The unwillingness of owners to pay the fee is a significant obstacle.
Strategic land management
The priority of strategic land management is to facilitate development with a public purpose, foster planned urban growth and take into account local infrastructure needs. National, district and local governments, as well as special purpose bodies, carry out strategic land management and receive related revenues. Local authorities need permission from the national government to do so. If the acquired land is bigger than 50 bighas (125419 square meters), the Ministry of Land takes over the responsibility of land acquisition.
The government can freeze land prices before the announcement of a public investment or zoning change and buy land at that price. This mechanism allows capturing the increase in land values created by the announcement of public projects.
The government rezones and redevelops the acquired land, alone or in partnership with private developers, which raises land prices. Afterwards, the government may either sell or lease the land, transfer it to another public entity or retain it. In the capital Dhaka, the retention time varies between 1-2 years, but in other jurisdictions it tends to be longer. The government recovers investment in land acquisition and development through selling or leasing developed plots.
Leasing has been introduced with the aim to increase government revenues and to facilitate social housing development projects. The ground rent is calculated as a percentage of the land value, based on the land transaction record of the previous 12 years. Local governments or special purpose bodies award the lease to the highest bidder. Revenues are modest, as the government holds little land to lease.
In all, large-scale strategic land management has limited use. With scarce land resources, governments find difficult to purchase land in advance. New projects respond to ongoing demand rather than to strategic planning.
The lack of financing, low capacity of local governments and lack of coordination between public entities also hold back implementation. Furthermore, for some projects, the rate of return is small, which does not always justify the cost of the operations.
References
[3] OECD (2022), “Subnational government structure and finance”, OECD Regional Statistics (database), https://doi.org/10.1787/05fb4b56-en (accessed on 13 January 2022).
[8] OECD (2021), “Subnational government structure and finance”, OECD Regional Statistics (database), https://doi.org/10.1787/05fb4b56-en (accessed on 25 November 2021).
[2] OECD (2017), Land-use Planning Systems in the OECD: Country Fact Sheets, OECD Regional Development Studies, OECD Publishing, Paris, https://doi.org/10.1787/9789264268579-en.
[1] OECD/UCLG (2019), 2019 Report of the World Observatory on Subnational Government Finance and Investment - Country Profiles, OECD/UCLG.