No property tax hike for homes less than 500 sq ft in Mumbai

The property taxes of 16.89 lakh homes in the city will not be hiked for the next five years, with the state cabinet on Wednesday approving a proposal to protect owners of properties less than 500 sq ft from any increase. “These properties had been protected from an increase till April 2015, after which their taxes would have gone up manifold. Wednesday’s decision will ensure these smaller properties remain protected for the next five years,” chief minister Devendra Fadnavis said.
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Updated on May 28, 2015 01:22 AM IST
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Hindustan Times | By, Mumbai

The property taxes of 16.89 lakh homes in the city will not be hiked for the next five years, with the state cabinet on Wednesday approving a proposal to protect owners of properties less than 500 sq ft from any increase. “These properties had been protected from an increase till April 2015, after which their taxes would have gone up manifold. Wednesday’s decision will ensure these smaller properties remain protected for the next five years,” chief minister Devendra Fadnavis said.

While the move comes as relief for small home owners, it is also being viewed as a political decision by the Fadnavis-led cabinet, with an eye on the BMC polls, as this order has overturned a decision taken by the Sena-controlled civic body in March.

The civic body’s standing committee, where the Sena has majority, had approved imposing the capital value-based property tax system on smaller residential properties, instead of the current system, where the tax is based on the properties’ rental values. The shift from the rental to capital value-based system would have increased the property tax by up to 40%.

While the BMC has not carried out a detailed study on the impact of such a decision, the property tax paid by smaller houses in the island city would have gone up, as their rents are paltry – dictated by the Maharashtra rent control act, 1999.

Wednesday’s decision, therefore, will be a big relief for such properties.

The announcement comes a day after a delegation of city Bharatiya Janata Party (BJP) leaders met Fadnavis to demand that the hike be called off.

However, some owners may not benefit from the cabinet’s decision. “There are many properties whose owners pay higher rents because the space is situated in prime localities. These properties would have paid lower taxes had the new system been introduced,” said an official, not wishing to be named.

The civic body too will be affected by the move. Sources in the BMC said they are looking at losses of Rs150 crore annually.

While introducing the new capital value-based system, the BMC had decided to tax all properties under the new system, but the then Congress-Nationalist Congress Party (NCP) government decided to exempt homes with less than 500 sqft carpet area for five years. This exemption had ended on March 31, 2015.

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