Taarabt was outstanding for victory over Fulham on Saturday.
Redknapp said: "I kept seeing him on telly, he looked like he was worth £20million, I sold him too cheap!
"But I never wanted to let him go at Tottenham. I was scared to let him go. I always felt he had a value even if he wasn't starting.
"He could still come off the bench and turn a game for you. But it was hard for him to get in the team back then and in the end Daniel [Levy] said: "Look, if he's not going to play, we might as well sell him and get a big sell-on fee" and that's what the club did."