The Mumbai real estate sector has recently been galvanized by several major Government decisions. The Central Government has already given it a major boost courtesy the Union Budget 2019-20 which had several pro-investor and buyer measures including zero taxation on notional assumption of rental income on self-occupied second homes, the increase in the TDS threshold on rental income up to Rs. 2.4 lakh and of course, zero taxation on personal income up to Rs. 5 lakh. Additionally, there was a major announcement where the Government announced the exemption on capital gains up to Rs. 2 crore on two homes once in a lifetime for a buyer/investor.
Also, the PMAY (Pradhan Mantri Awas Yojana) has been a game changer for the realty sector in the country overall, spurring rapid growth of affordable housing in and around major cities including Mumbai. Additionally, in a recent move that could give the Mumbai realty sector a major boost, the Government announced a cut in GST rates to 5% from 12% on under construction properties. Ready to move properties do not attract GST while GST has been lowered to just 1% on affordable housing units as compared to 8% previously. These measures will definitely lend impetus to the housing sector in one of India’s costliest markets and now the State Government has given a further incentive for homebuyers and real estate developers alike.
Learning more about 100% property tax waiver in Mumbai
Residential units that are sized between 501 sq. ft. and 700 sq. ft. will have tax rates going down by 60% as per the decision taken by the Maharashtra State Government. This is certainly a major decision that will spur higher property sales in this category. The biggest decision, however, is that the Government has confirmed 100% property tax waiver on housing units sized below 500 sq. ft. This will naturally spark massive demand for affordable housing and even mid-range units all throughout Mumbai.
However, this 100% property tax waiver will be applicable only on housing units which are located within the limits of the Mumbai municipal area. This decision will be executed on a retrospective basis from the 1st of January, 2019, as per reports. What makes this decision all the more significant is the fact that a whopping 64% of all residential housing units situated within the Mumbai municipal area limits will come under this segment. Residential housing units sized between 501 and 700 sq. ft. will also find more takers now that property taxes have been reduced by 60%. The Maharashtra State Cabinet meeting was conducted sometime earlier and this could have been the final meeting prior to the enforcement of the Model Code of Conduct for the Parliamentary elections. The decision to offer relief on property taxes was taken at this vital meeting as per reports.
As per senior government officials, the MCGM or Municipal Corporation of Greater Mumbai usually mops up property taxes to the tune of Rs. 5,500 crore annually. This decision will naturally entail lower revenues to the tune of around Rs. 350 crore although it will boost the real estate market and transactions may also go up accordingly. Roughly 6.36% of overall revenues from property taxes may have to be written off as per senior officials. Other officials have also stated that tax waivers were being demanded by the Shiv Sena back from the year 2015 onwards although several officials were against the move on account of projected revenue losses arising from it.
However, the demand was given further impetus reportedly by the Bharatiya Janata Party (BJP) which has now cleared this decision prior to the Lok Sabha elections which are to be held soon. A full tax holiday was offered as a promise by the BJP and Shiv Sena alike as part of their election manifestos for the Municipal Corporation of Greater Mumbai back in the year 2017. There were plans made for announcing this decision in the budget speech given by the MCGM Commissioner although these plans were paused for a while. The Maharashtra State Cabinet has also made some other moves including the junking of the oil refinery venture at Nanar. The proposal of the alliance with the BJP was accepted by the Shiv Sena post the agreement on the property tax waiver demand. Chief Minister of Maharashtra, Devendra Fadnavis had reportedly stated previously that the demand had been approved by the BJP.
This new decision comes after Congress President Rahul Gandhi had also declared his intention to offer slum redevelopment works for homes sized up to 500 sq. ft. Aditya Thackeray, the leader of the Yuva Sena, has already confirmed the property tax waiver decision through his tweet as per reports. The final decision was declared by Girish Bapat, the Minister for Parliamentary Affairs. The proposal was initially given by the BMC (Brihanmumbai Mumbai Corporation) and was approved by the Maharashtra State Cabinet. Decisions were also approved pertaining to tax concessions and also the fees relating to the promotion of registered societies undergoing redevelopment by themselves on private, government owned or semi-government owned lands.
16 proposals were given the nod in all which included the new Shahu, Phule and Ambedkar Scheduled Caste-Navbouddha Ashram School initiative which will have these schools operated by leading NGOs. These NGOs may not be eligible to receive funds from the Central Government but will be getting financial assistance from the Maharashtra State Government. This homebuyer friendly measure just before the polls will certainly stimulate the realty market in Mumbai and also encourage real estate developers who will find it easier to get buyers for homes sized below 500 sq. ft. Even the 501-700 sq. ft. segment will witness increased traction on account of lower property taxes according to experts.
