The Municipal Corporation of Greater Mumbai has raised property taxes on buildings located in the key business district of Nariman Point and other major commercial centres of the city that house global investment banks, commercial banks, consulates and other multinational companies.
The move is expected to force landlords to charge tenants higher rent depending on individual agreements. In some cases, landlords have been asked to pay as much as Rs 250 per square foot against Rs 16 to Rs 32 per square foot a year earlier, according to Sharan Khanna, an office bearer of Dalamal Tower.
The Mumbai municipal corporation, one of the country’s richest, has taken recourse to Section 3 (1b) of the Maharashtra Rent Control Act that exempts properties leased to banks, finance companies, multinational companies, public sector entities, consulates and firms with paid-up capital of more than Rs 1 crore from the purview of the Rent Control Act.
Key societies of Nariman Point, which have received notices from the municipal corporation for higher taxes, include Dalamal Tower, Maker Chamber-V, Free Press House, Mittal Court, Bajaj Bhavan, Sakhar Bhavan and Jolly Maker Chamber-II. These buildings house global banks and consulates, such as Credit Suisse, Citibank, the former ABN Amro and the Consulate General of Brazil.
Dalamal Tower has received a notice to pay as much as Rs 17.14 crore as tax for the fiscal year ended March 31, 2009 against Rs 1.59 crore the previous year. Similarly, Mittal Court, another prominent building at Nariman Point, has been asked to pay Rs 19.18 crore for the previous fiscal year from Rs 2.86 crore a year earlier.
"It is difficult to comment on why the rateable value of any property was changed unless I go through the papers for the properties," said Bhimashankar Umbarjee, assessor and collector of taxes at the Municipal Corporation of Greater Mumbai. "The reason for change has been mentioned in the notices that have been served to assessees.’’
"The levy is arbitrary and illegal," said Ramesh Ramchandani, a member of Dalamal Tower, adding, "We will launch a non-cooperation movement.’’ Property owners have already lodged their protest with the corporation.
The move to charge higher taxes comes at a time when the Maharashtra legislators have approved a government move to rationalise the property tax system so that all assessees pay reasonable property tax.
"If the actual rent is to be applied for the recovery of municipal tax, then a tax rate of 112.5 per cent on the rateable value is killing. The rate of tax has to be reduced,’’ said Rajendra Mehta, president, Property Lessors Association, Mumbai. "The rate of tax cannot be 112.5 per cent for commercial properties because it will be more than the rent received by the owners.’’
According to the Capital Value System under the new law, which is yet to be notified by the government, the corporation will calculate the tax to be levied on the market value of the property mentioned in the ready-reckoner for Mumbai.
The reckoner lays down the market value of all the properties in Mumbai. The tax will be a small percentage of the market value of the property.
The formula for charging the property tax will consider various factors like the age of the building, type of construction and the user of the property. Old buildings are expected to enjoy higher depreciation and buildings that are load-bearing (with thick walls, pillars) and chawls will also benefit from the move.
Property taxes on apartments that are less than 500 square feet will pay the same tax for five years after the law comes into force.
Under the new law, properties in Nariman Point that are leased out to banks and multinationals may end up paying only Rs 10-15 per square foot per month against the killing rate of Rs 30-100 per square foot, according to Mehta.
Additional reporting: Makarand Gadgil
