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Property Tax Collection in Mumbai Dropped by 34%

Property Tax in Mumbai

Property Tax in Mumbai

Almost 3-quarters down the fiscal, property tax collection in Mumbai displays a 34% shortfall compared to last year as the Brihanmumbai Municipal Corporation (BMC) has issued no residential bills in the middle of confusion over a waiver policy for homes under 500 sq.ft.

Property tax collection in Mumbai was Rs 1,637 crore till 13th December 2019, while last year BMC had collected Rs 2,495 crore till the same date.

Property tax in Mumbai is the largest revenue source for BMC. This year, tax collection has been executed only from commercial firms since the civic body has issued no residential property tax bills at all this year as it has not updated its software and other systems to reject living units under 500 sq.ft while making bills.

The software update has been kept waiting as there is a lack of clarity on whether residential units under 500 sq.ft are to be charged nothing at all or given only a base amount waiver while being asked to pay the other, smaller components of the bill like the various cess on it.

In a recent meeting with the new Chief Minister of Maharashtra Uddhav Thackeray, the civic administration flagged the issue of fund crisis at a time when the BMC plans to take up many big ticket-size projects such as Goregaon-Mulund Link Road and 29.2 km long Coastal Road project.

As per critics, BMC may not touch even half of property tax target

The Shiv Sena, the party which rules the BMC deliberative wing, and is headed by CM Uddhav Thackeray had in its 2017 civic poll manifesto promised property tax waiver for residential units under 500 sq.ft in area.

The BMC also drastically increased its collection target to Rs 8,300 crore this year from the Rs 5,000 crore it used to set itself before now. Critics are skeptical about the Municipal Administration reaching even half of its target.

BMC officials said that the corporation estimates around 4 lakh properties every year. Though the BMC would issue property tax bills amounting to over Rs 5,500 crore every year, the collection target used to be set at only about Rs 5,400 crore.

As outstanding property tax before the beginning of the fiscal was over Rs 10,000 crore, the collection target was improved this time.

A BMC official said, “This time our target for collection is estimated at Rs 8,300 crore keeping in mind the fact that Rs 10,000-crore plus is the outstanding property tax demand of every year that is carried forward on average and we should begin recovering it”

The pending software upgrade and delay in sending out bills were obstructing a significant revenue source, said Asif Zakeria, a Bandra Corporator.

It is expected that the collection will rise once the clarity on the waiver is achieved and bills are issued, said BMC official. They further said that many companies pay property tax in the last month. Therefore, the tax collection in March month always the highest.

The poor collection was due to offering rebates for garbage segregation by BMC, allocating large sums to the cash-strapped BEST Undertaking and commencing infra projects. “I am going to demand a financial white paper,” said Samajwadi Party Leader in the BMC Rais Shaikh.

How to calculate property tax in Mumbai?

The property tax is a %  of the capital value of the property.

Property Tax = Tax rate * Capital Value

Here Capital Value = Rate of base value * Total carpet area/area of land in case of vacant land * building type * age factor * usage factor * floor factor

Property tax payment due date and penalty

Due Date: 30th June

Penalty: It is charged at 2% per month in case of a delay in payment beyond the due date on the outstanding amount.

How to pay property tax in Mumbai?

Property tax can be paid both online and offline.

Online payment

BMC/MCGM

  1. Visit BMC online portal i.e. https://portal.mcgm.gov.in/irj/portal/anonymous
  2. Under the “Online Services” tab click on “Pay Property Tax”
  3. Enter your property account number and choose whether you need to view “outstanding bills” or view “receipts” or “make payment” and click accordingly

Navi Mumbai/NMMC

  1. Visit NMMC online portal i.e. https://www.nmmc.gov.in/navimumbai/
  2. Under “Online Service” click on “Property” and enter you “Property Code” and click “Search”

Offline Payment

If you want to pay manually, it can be paid at the nearest assistant revenue office or BMC helps centers or citizen facilitation centers at all ward offices.

Who are applicable to get concession/exemption on payment of property tax?

  • Flats/houses measuring less than 500 sq.ft are exempt from payment of property tax.
  • A concession of 60% for houses/flats measuring between 500 to 700 sq.ft.
  • Property particularly used for public worship/charitable purposes.
  • Properties belong to the Diplomatic or Consular Mission of a foreign state as specified by the government.

 

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Properties to Get Costlier as Stamp Duty in Mumbai Hiked to 6%/commonfloor

Stamp Duty CF

Stamp duty and registration charges in Mumbai continue one of the largest sources of revenue for the state government of Maharashtra. As a matter of fact, the government has been pitching on Mumbai’s real estate boom to encourage growth and development.

The Maharashtra government’s decision to raise a 1% surcharge on stamp duty for properties in Mumbai, could negatively affect the realty market and home buyers, nowadays when property deals are already charged with high tax rates.

It would be raised on the sale, lease, mortgage, and gift of real estate transaction, within the area of the Brihanmumbai Municipal Corporation (BMC). The existing stamp duty on houses in Mumbai is 5%, which will now increase to 6%, making properties more costly.

Stamp Duty CF

How the Stamp Duty Hike Will Impact the Homebuyers?

This move is particularly discouraging for the mid-segment homebuyers who are thinking of buying property due to easy availability of options and reduce interest rates currently.

Hence, if the ready reckoner rate for a property is Rs 2.75 lakhs and the agreement value is Rs 5,50,000,00 lakhs, then, the stamp duty will be calculated on the agreement value of Rs 5,50,000,00 lakhs.

A Comparative Study of Property Charges Before the Hike

Assume you buy a 200 sqm flat near Andheri where the Ready Reckoner rate for residential property is Rs 264200 per sq.mt. Considering the property’s agreement value is the same as the Ready Reckoner Rate in the locality, your property price calculation will be as follows:

Total Cost of the property before the hike

A. Area of the flat

200 sqm

B. Ready Reckoner Rate

Rs 2,75,000/sqm

C. Price of flat (AxB)

Rs 5,50,00,000

D. Stamp Duty (5% of C)

Rs 27,50,000

E. Registration fee

(1% of C or 30,000, whichever is less)

Rs 30,000

F. Total cost (C+D+E)

Rs 5,77,80000

A Comparative Study of Property Charges After the Stamp Duty Hike

Total Cost of the property after the hike

A. Area of the flat

200 sqm

B. Ready Reckoner Rate

Rs 2,75,000/sqm

C. Price of flat (AxB)

Rs 5,50,00,000

D. Stamp Duty (6% of C)

Rs 33,00,000

E. Registration fee

(1% of C or 30,000, whichever is less)

Rs 30,000

F. Total cost (C+D+E)

Rs 5,8330000

The above table is showing that before rate hike one has to Pay Rs.5,77,80000 for a 200 sqm flat in Maharashtra but after a rise of 1% as a surcharge, for the same property, people have to pay Rs.58330000 which goes Rs.550000 more.

But wait, this isn’t the actual cost of the apartment. There are many other un-advertised costs which are hidden and are calculated over and above the advertised price. And yes, do n’t make the mistake of underestimating these costs as they normally make up to 20% of the advertised cost.

Here are what all the costs a builder/developer will charge you when you actually buy the apartment/property and sign the buyer’s agreement in Maharashtra:

What Are the Hidden Charges a Homebuyer Have to Pay to Buy a Flat in Mumbai?

Nature

Amount in Rs.

Calculation Basis

BSP

3000000

1200 Sq. feet * 2,500

PLC

 120000

4% of BSP. PLC location depends on buyers

EEC & FFEC

  60000

1200 Sq. ft * Rs. 50 per Sq. ft.

EDC & IDC

120000

1200 Sq.ft. * Rs.100/ Sq.ft.

Open Car parking space

125000

Fixed amount (differ from project to project)

Covered parking space

200000

Fixed amount (differ from project to project)

Club membership

 45000

Fixed amount (differ from project to project)

Power back-up

 30000

Fixed amount (differ from project to project)

Electric Connection charges

   3000

Fixed amount (Approximate value)

Water, Drainage, and Sewerage

   3000

Fixed amount (Approximate value)

Stamp Duty

180000

6% of BSP. Need to be paid to the government

Registration Fees

30000

1% for every state

GST Tax

360000

12% of BSP. Need to be paid to the government

Total Advertise Cost

3000000

Total (Extra and hidden costs)

1276000

Grand Total

4276000

Please note that all the charges are calculated on the basis of Super Built-up Area and not Built-up Area. As per industry standards, the difference between the super area and built-up area is approximately 18-20%. i.e. while you pay the price for 1200 sq.ft. (super area), the actual built-up area in your apartment would be somewhat 960 sq.ft. (1200 – 20% of 1200) = 960 sq.ft.

Government’s Decision to Deduce the GST Rates

This is not the end. Recently, the GST Council has made a decision to reduce the Goods & Service Tax (GST) rates for under construction projects to 5% from the effective rate of 12%. Keeping in mind the objectives of  “Housing for All by 2022”, the government has reduced the GST to marginal 1% for affordable housing. Apart from that, completed projects which have received Occupancy Certificate (OC) will not attract GST.

Rationalization of GST Rate:

Residential Segment Type

Existing Effective GST Rate

New Effective GST Rate

ITC Availability

Residential properties outside affordable segment

12%

5%

Without ITC

Affordable housing properties

8%

1%

Without ITC

Once the decision will come into force, the property rate will decrease and will benefit the homebuyers across the nation. The above property calculation table where the GST rate is taken as 12% on the BSP, the buyer has to pay Rs.3,60,000 as GST charges on their home. The purchase will be reduced by Rs.2,10,000 (Rs.360000 – Rs.1,50,000). We can say that homebuyers will save up to Rs.2,10,000 on their purchase.

How the Stamp Duty Hike Will Impact the Mumbai Property Market?

Property in Mumbai is remarkably overpriced and most of the demand is moving towards Navi Mumbai and Thane. Now, those who are moving from the suburbs to the Island City will be the ones who would be most affected. If the surcharge is imposed, homebuyers will move to Thane and Navi Mumbai for their housing needs more actively.

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BMC to form a new cell for monitoring 30 years old buildings in Mumbai

Brihanmumbai Municipal Corporation (BMC) will soon form a new cell for auditing neglected buildings which are under its jurisdiction. The new cell will recognize structures that are older than 30 years and will issue notices to the concerned societies for further structural audits.

As per the new policy, the municipal corporation has made it necessary for the dweller or owner to give in the structural inspection of the building.

The policy will be uploaded on the BMC website in December to encourage suggestions and objections from general public.
Initially, the civic body had only one committee to take care of the issues associated with the neglected buildings but now BMC has formed a total five committees to deal with appeals related to such buildings.

Out of five committees, four will make available for appeals related to private buildings and one for municipal buildings. Recently, the policy received a green signal and will be applied to ensure speedy recovery of ramshackle buildings and evade building collapses in future.

The policy makes it necessary for the occupants to inform the civic building and factory department about the status of structure. The policy is only valid for private and municipal buildings which are under the civic body’s jurisdiction. BMC has made it compulsory to get the structural audit done by registered a BMC structural engineer.

If a building certified as non-dilapidated collapses in future then registration of that specific engineer who certified the building will be void and the BMC will initiate legal process against the person for the same.

Once a structure receives notice from the civic body then it is the owners/tenants’ concern to submit the structural audit to BMC within a month’s time. BMC will later scrutinize the status and select the category of the structure.

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