Property tax exemption to boost market for small houses in Mumbai

Property tax exemption for 500 square feet houses comes with preconditions. The old houses (less than 500 square feet) that are registered with the Mumbai municipal corporation and new buildings with an OC permit from the civic body can alone avail the benefits of the exemption. Also, the civic officials are upset over the decline in revenue due to increasing number of smaller flats that will be built in future to seek tax exemption.

The Maharashtra state government has decided on property tax exemption on houses that have an area of up to 500 square feet in Mumbai. This comes with preconditions to stop people from taking undue advantage of the waiver which might lead to a decline in property tax collection. Property tax is the prime source of income for the civic body. There are two main conditions mentioned in the Gazette notification related to this decision. The old houses which have less than 500 square feet area have to be in the records of the municipal corporation as on January 1. This will restrict the division of houses into two or more parts to take benefit as such partitions are legal.

However, the BMC officers are baffled with the second condition. A senior officer with the BMC said the civic body was against the exemption for new buildings with smaller houses. "The decision will change the thought process of customers as well as that of developers. Customers will go for buying homes less than 500 or 700 square feet in area and obviously developers will make smaller flats or design them in such a way that two adjoining flats can be merged together," said Anand Gupta, chairman of the Infrastructure Committee of the Builders Association of India.

The BMC earns around Rs 5,000 crore from property tax every year. The civic body collected Rs 5,132 crore property tax in the financial year 2017-18 and have a target of Rs 5,206 crore this year. A major chunk of revenue comes from the 15 lakh houses which are less than 500 square feet in area. If the civic body waives off property tax, it means a reduction of Rs 350 crore in tax inflow. If more and more smaller houses develop in the near future, the loss of revenue will increase along with it. "The span of time for which this exemption will hold valid is unclear," Gupta said.