Wednesday, 18 March 2009

Bhutan : Land compensation to be revised

18 March, 2009 - The government’s compensation rates for land and houses acquired for developmental work will soon be revised upwards by as much as 1000 percent for some rural lands, according to a document acquired by Kuensel.

For now, the cabinet has agreed to the revision in principle only, following a report by the property assessment and valuation agency (PAVA) report on the issue. The previous government rates were seen as being too low.

Landowners in cities like Thimphu, Phuentsholing, Gelephu, Samtse and Damphu will see some increase in the compensation rates.

In the case of rural landholders, compensation rates will apply to chuzhing (paddy), kamzhing (dry), and cash crops land. There is, however, no revision for sokshing (shrub) and tsamdro (pasture), as they fall under the government, according to the Land Act 2007.

The rural land compensation rates will be different for each of the 20 dzongkhags, based on a formula, where estimated income from the land for the next 20 years, its market value, and the value assigned to land by financial institutions will be factored in. The closer the land is to a municipal boundary, the higher the compensation.

The compensation rates earlier were Nu 350 per decimal for chuzhing and Nu 200 per decimal for kamzhing across the country. The proposed average value for rural land in all dzongkhags, except Thimphu, according to the document, range from about Nu 2000 to Nu 8000.

The urban land rates for towns like Thimphu, Phuentsholing, Gelephu, Samtse and Damphu (Tsirang) will only see marginal increases. The rates will be based on land usage, though location will still play a key role. Earlier, it was based on the commercial and residential designation. Thimphu, for example, will now have around 27 different rates, based on land usage and location.

The urban core area rate in Thimphu, as per the proposed revision, would be Nu 1383.80 per square foot for the most prime location, compare to the earlier compensation of Nu 1,083. However, compensation for urban lands in 17 other dzongkhags, except Thimphu, Samtse and Tsirang, has decreased slightly.

For buildings and structures, there’s higher compensation with a reduced rate of deprecation on the estimated value of the house. Earlier, permanent structures were calculated with a decreasing value of 3.5 percent per year after construction, with a lifespan of 70 years, after which only 8.26 percent of the estimated value was given as scrap value. However, in the new system, there will be no deprecation calculated for structures for the first five years. The shelf life has been proposed at 75 years, with an after-life value calculated at 30 percent.

In another reform, traditional Bhutanese mud and wood houses of rural areas have been shifted from semi permanent to permanent category.

The proposed revised rates are expected to address socio-economic inequality, create a land market, prevent speculation, and also open credit options for owners. The aim of the proposed rates is also to address compensation issues, which are likely to emerge because of planned development activities, including mega hydro projects.

By Tenzing Lamsang

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