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Indian Real Estate News : Mumbai
BMC to relax proposed property tax increase
Source: The Times of India, Mumbai Nov 14, 2011
The civic body's dreaded revision of the already high property tax hangs like the Sword of Damocles over every homeowner's head. But there's a sliver of good news for Mumbaikars: With an eye on the civic elections, the Brihanmumbai Municipal Corporation (BMC) has revised the levy at which property tax is computed. The levy, if accepted by the standing committee, will marginally reduce the tax paid by residences by 10-15%, around 33% for offices, and 30% for banks. TOI has a copy of the revised proposal.

Barely two months ago, the BMC had announced that it was planning to shift the property tax calculation structure from the existing rateable value system, which is based on rent, to a capital value system—based on the market price of the property. In other words, under the present structure, property tax is computed on the basis of the rent paid by tenants, but now it will be computed on the existing market rate. For instance, a homeowner in Bandra currently pays Rs 4.23 per sq feet per month by way of rateable property tax, but would have had to pay Rs 8.58 under the tax structure that was initially proposed. Under the reduced rates, the suburban homeowner will have to pay Rs 7.32 per sq feet per month (See table).

As per the revisions, the civic body has proposed to compute tax at 0.35% of the capital value for residences that have metered water connections, 1.31% for offices and 2.93% for banks. The BMC had earlier proposed to compute tax at 0.41% of the capital value for residences, 1.95% for offices and 3.91% for banks. The revised formula was drawn up by the civic administration as the standing committee had rejected the levy two months ago stating that it was too high.

Now, as per the capital value schedule, one will have to pay Rs 7.32 per square feet, which means Rs 7,320 for a 1,000-sq-ft flat. Compared to a homeowner in Bandra, a Borivali resident who owns a similar 1,000-sq-ft flat will pay a comparatively lower property tax - Rs 2,300 under the new revised structure. "Though the reductions are marginal, the civic body will still be generating more income from properties in the island city, which have a higher property value than suburbs under the revised levy," said advocate Tarun Ghia.

Rajendra Mehta, president of Property Lessors Association said: "While the revised levy for residences is reasonable, the levy for offices and banks is still very high. It needs to reduce by another 30%. Even with a further 30% reduction, the civic body will still generate revenue of approximately Rs 5,500 crore from property tax annually."

According to chairman of the standing committee Rahul Shewale, the revised formula will soon be tabled in the standing committee. "This is going to bring uniformity in the tax paid by suburbs and island city residents. The change is also mandated under the Jawaharlal Nehru National Urban Renewal Mission," he said.
Tag: India real estate, property tax
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