By Vipin Agnihotri
In an attempt to iron out the big disparity in property taxes in Mumbai, state government is all set to finalize the levy of property tax on the basis of Capital Value Based System (CVS). Initial signs are that few Island city residents may be exempted from the new system, or may get discounts in property tax.
It is worthwhile remembering that the rateable value system, coupled with the Maharashtra Rent Control Act, offers a cushion to age-old residential as well as commercial properties against a realistic hike in property tax. Point to be noted here is that a property tax under the rateable value system is calculated on the basis of yearly rent.
When The India Street analyzed the whole situation, it was revealed that in Mumbai all rental properties have the protection of the Rent Control Act, which has more or less frozen rent to 1940 levels or allowed a maximum hike of 5 percent effective from 2000. According to the existing rateable value system, the island city, which is home to old properties, has to shell out a minimal property tax but the same is exorbitantly high in suburbs. Now after the shift from rateable value to capital value there will be rise in taxes for residents of the island city.
Plenty of experts are of the opinion that in case the state government approves the proposed system of calculating property tax on the basis of market capital values, it is quite mandatory that they revise rates in the Ready Reckoner, as there is a big gap between rates indicated in the present Reckoner and prevailing capital values.
For instance, Ready Reckoner values for areas such as Peddar Road and Malabar Hill are in the range of Rs 14,000 to Rs 21,000. On the other hand, average capital values as per the market for all these areas are around Rs 33,000 per square fit.
In my opinion, the impact of the amendment would be much steeper in South Mumbai properties. As a matter of fact, suburban areas may not see that big a differential between old and new buildings. Furthermore, there must be an area-wise assessment taking into perspective actual land rates, infrastructure and amenities being provided and then tax value should be determined.
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