Idea for vacancy tax pilloried by developers
Mumbai Tenants’ associations say that if the government wants to increase the supply, it should do so by levying a ‘vacancy tax‘ on vacant and unsold flats in Greater Mumbai. The associations’ call follows a recent proposal mooted by the Centre-draft Model Residential Tenancy Act 2011-to do away with antiquated rent control legislation and bring paltry old rentals on par with market rates. Tenants’ groups, however, view the proposal as a threat.
“About 93,000 new residential flats are said to be vacant in Greater Mumbai. Rent control acts do not apply to them. Yet, owners do not let these apartments out,” said advocate S N Shroff, who is an expert on tenancy laws. “This is how artificial shortages are created in the name of free market, driving rents upwards.” Shroff said that if the government is serious about creating more accommodation it should impose a “vacancy tax” on such units. “Keeping flats vacant should invite severe financial penalties. This single measure will lead to a situation in which artificially manipulated prices will find their true market levels.”
Economist Ajit Ranade said that agencies like MHADA should create 6,000 to 7,000 houses every six months and auction them through a transparent process. At the same time, he added, the government should provide subsidised land to contractors to construct rental housing which can then be handed over to a third agency to maintain and rent at market rates.
The idea to levy a ‘vacancy tax’ on vacant and unsold flats pilloried by developers and landlords, with the group calling the proposal “unjust”. Builders said the ideal way to increase realty in the market would be by creating laws that make it easier for landlords to evict tenants who default on rent payment.
“It is simple enough to take back fixtures such as televisions or cars when a person defaults on installment payment. But to evict a defaulting tenant involves years in court,” said Sunil Mantri, a developer. Arguing against a ‘vacancy tax’, Nayan Shah, the CEO of Mayfair Housing Pvt Ltd, said there are several genuine reasons why people do not let out their flats. “The demand for a vacancy tax is silly and a diversionary tactic. The objective of the proposed Model Tenancy Act (mooted by the Centre) is to get more investment in the rental housing sector,” Shah said.
Developers also argued that the figure of 93,000 unsold and vacant flats recently proposed in a study was not correct. Vimal Shah, Akruti City, said the number “has no base”. “At best, about 5,000 ready flats would be available in the island city. Around 70,000 flats are sold annually in the Mumbai Metropolitan Region and there is actually a tremendous shortage of ready flats,” Vimal Shah said.
Mantri said that the flat owner should be allowed to decide whether to rent out the property or not. He pointed out that in Europe and the US, nearly 80% of all properties are rental, “but here people are scared to lose their property and hence do not want to rent”.
Mantri said that the government should encourage pension funds, mutual funds and private trusts to invest in rental housing. “If the government were to ensure that the landlord will not lose his property, 50,000 rental housing with reasonable rents can be created in a short time,” he said.
Times of India- Builders reject idea flat out ; Tax vacant flats to boost supply
Greater Mumbai, Landlord-Tenant, Model Residential Tenancy Act, Model Residential Tenancy Act 2011, Mumbai, Mumbai Properties, Mumbai Tenants associations, rental housing, unsold flats, vacancy tax on unsold properties, Vacancy tax on Vacant properties
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