Developing Mobile Application for Land Value Capture Scheme to Finance Urban Rail Transit Projects

Abstract

Land value capture (LVC) has shown great potential in financing urban rail system infrastructure, such as transit-oriented development (TOD). However, the government of Indonesia has not tapped this potential in order to close its infrastructure financing gap. This study aims to determine the incremental rate captured through a tax-based LVC mechanism and develop a property market-based mobile application to implement the scheme, with six TOD areas in seven stations of the Mass Rapid Transit (MRT) Jakarta Phase I project as the case study. This research used literature and benchmarking studies to collect data, followed by the calculations of the transport premium, total value increment, and value capture rate for the betterment tax implementation to obtain its research objectives. The results showed that a 5.82% value capture rate could recover 53.8% of the government's initial investment for the project. Based on that figure, betterment tax rates of 0.3% and 0.1% are proposed for residential properties within the radius of 100-400 m and 400-700 m from transit stations, respectively. Meanwhile, 2.5% and 2.4% tax rates are proposed for commercial properties within the radius of 0-300 m and 300-600 m, respectively. Furthermore, the activity workflow for a mobile application in which the government can issue tax invoices and taxpayers can make payments is also proposed to facilitate the implementation of LVC as an alternative source to finance TOD projects.

Keywords

• betterment tax
• land value capture
• mobile application
• transit-oriented development