The Dehradun Municipal Corporation has fallen short of its target of collecting Rs 20 crore through house taxes. The corporation was able to collect Rs 18 crore in financial year 2017-18. The DMC is, however, still collecting taxes.
“We are still collecting house tax since we want everyone to pay their taxes. We will slap fine on those who fail to pay even after extending the deadline,” said tax superintendent Dharmesh Kanjoli.
Meanwhile, mayor Vinod Chamoli said that house tax would be collected even from slums built on private lands. Of the 129 slums in the city, 18 are built on private lands.
The real estate market has been depressed for a few years now. But this financial year things are looking better, albeit with a note of caution. Sarjan Shah, managing director, Group Satellite, a Mumbai based real estate developer, believes 2018-19 will continue to be a cautious year, where “developers will look to consolidate and exhaust existing inventory before launching new projects while buyers and investors will continue to wait to see if there is further price correction or consolidation in the market.” In an e-mail interaction, Mr Shah discusses developments in realty market and outlook for the new fiscal. Edited excerpts:
Real estate has been depressed for several years now. Do you see things changing?
Real estate has gone through some unrelated challenges since 2008 – political instability, constantly changing regulations, unequal application of rules, and the burgeoning RTI industry of blackmailers. These practices combined with the entry of unscrupulous operators in the industry led to a loss of confidence in the public mindset. None of these factors had anything to do with actual demand-supply dynamics which have remained healthy throughout.
Going forward, we will see velocity of sales and transactions picking up as the fundamental need for real assets for end users as well as sophisticated investors is perpetual. What was needed was regulatory stability, which we now have through RERA and the new DCR for Mumbai (expected shortly), and cleaning up/consolidation in the industry. Well-established players have taken advantage of the distress and picked up a variety of assets / deals through new structures like JDAs and DMCs.
We are already seeing a lot more institutional capital flowing into the sector, with large global funds looking at deploying long-term, patient capital to the sector. They are usually the first movers, after which consumer funds usually follow.
While we don’t expect too much of a dramatic price increase in the short to medium term, Mumbai-specific real estate continues to be an excellent long-term alternative asset class.
Instead of buying homes people seem to have put money in mutual funds (SIP instead of EMI) as they don’t have trust in builders, frequent delays etc. How can buyer confidence return?
Firstly, no SIP gives you a roof over your head and the quality of life that one desires so it is not a correct comparison to make, unless we are talking about second and third homes for investment purposes alone. So as far as actual end-user sales go, there is no alternative to the need to own your home. As far as investments go, residential real estate in India yields below-market rental income, so the only objective is long-term capital appreciation. On that count, real assets will continue to be an excellent option to hedge against volatility in equity markets. Keep in mind also that Indian equity markets are not as deep or mature as western markets and as such volatility due to myriad factors continues to plague the average investor, and real estate in prime cities like Mumbai continues to be the safest store of wealth.
As to lack of confidence in developers, as I have said above, RERA is the turning point as it has become a truly effective, efficient and just dispute redressal mechanism which holds developers responsible for their commitments, and provides immediate relief to distressed buyers. This combined with the increased transparency in the approvals process has already led to significant increase in buyer confidence which will continue to improve as RERA matures.
How will 2018-19 be for real estate? Are there signs of market reviving, buyers returning?
2018-19 will continue to be a cautious year, where developers will look to consolidate and exhaust existing inventory before launching new projects while buyers and investors will continue to wait to see if there is further price correction or consolidation in the market.
There’s lot of unsold inventory across several markets in the country. By when do you think the backlog will clear?
Absorption rates in Mumbai will increase dramatically in the last two quarters of FY 2018-19 for a variety of reasons, including matured operations of RERA, GST teething issues resolved, increased project delivery on existing projects nearing completion and the return of institutional capital to the sector.
With the civic administration increasing the property tax that came into effect since April 1, property tax is going to cost citizens very dearly as the tax rate for residential properties has gone up five times and that of non-residential properties by four times.
For the first time ever, owners of vacant lands also have to pay property tax. All the 59,000 properties that were found in the survey – new properties, extended structures in properties and re-construction of old properties –will come under the new tax net. In addition, parking space, residential and non-residential swimming pools, open to sky properties are also taxable.
For reinforced cement concrete (RCC) residential structures, the tax of 50 paise per square feet per month has been increased to Rs 2. For gaothan areas, the tax at 40 paise has been raised to Rs 1.60. For properties made with stone, mud, brick or tiles, the tax has been raised from 40 paise to Rs 1.60 in the city and from 30 paise to Rs 1.20 in gaothan areas.
For tin shed/fibre/wood properties, the increase in tax is from 20 paise to Rs 1.10 in the city, while for gaothan area it has been raised from 20 paise to Re 1.
Non-residential RCC structures will now be taxed at Rs 7.20 as against Rs. 1.20 which was the previous tax rate. For gaothan non-residential RCC properties, the tax has been increased from Rs 1-1.20 to Rs 4.80.
For non-residential stone/mud/brick/tiles properties, the tax stands at Rs 4.80 as against 75 paise. In gaothan areas, it has been raised from 60 paise to Rs 3.60. For non-residential properties made built with tin shed, fibre or wood, the tax was 45 paise. It has now been increased to Rs 3 in the city and Rs. 2.50 in the gaothan areas.
If the tax per year for a 500sq-ft residential property was Rs 1647, the tax now stands at Rs 6,500. While the tax for a non-residential property per year was Rs 3,952, it now stands at Rs 23,716. Owners of 500sq-ft vacant plots will have to shell out Rs 1,376 as against Rs 98 per year.
Mobile towers will have to pay at least Rs 15,000 as property tax per month. Cinema halls and theatres will have to pay taxes as per seating capacity and profit. The rate as per seating capacity and profit will be compared to the built-up area and the one that is maximum will be levied as property tax. Service charges will also be levied on central government offices.
“Property tax will now be levied on every vacant plot. If on a plot of 1,000sq-ft, there is construction on only 500sq-ft, tax will be imposed even on the remaining 500sq-ft where there is no construction, as per the rate of the land,” informed an NMC official.
He added the tax was formulated as per Maharashtra Municipal Corporations Act section 127 (a) which mentions the provisions for deciding property tax and that as per section 2 (49) which defines property as construction and vacant land in NMC limits. “Existing tax payers do not come under the current tax method,” said the officer.
The state-owned Bharat Sanchar Nigam Ltd (BSNL) has blamed the Nashik Municipal Corporation (NMC) for charging excessive property tax.
The BSNL has said it is not against paying property tax, but the NMC should not levy surplus property tax. The BSNL also said it will file a writ petition in the Bombay high court in a day or two.
The BSNL has contended that the civic body should recover property tax of Rs 5,000 for a flat measuring 1,000 sq ft, while the NMC charges property tax of Rs 1.5 lakh per tower for a space of 200 sq ft on the terrace of the same building. The BSNL has sent a letter in this regard to the NMC on Saturday.
The BSNL’s reaction comes after the Nashik Municipal Corporation (NMC) took possession of 16 cellphone towers across the city for defaulting payment of Rs 1.97 crore.
In 2006, the BSNL moved the Bombay high court against the NMC for taking action against the telecom company for defaulting property tax of three towers. The court had granted status quo for the three towers.
Nitin Mahajan, BSNL’s general manager said civic facilities like water are not availed for towers, but the NMC levies property tax on towers with excess rates. “In Karnataka and Chhattisgarh, there has been a uniform policy and property tax of Rs 11,000 is charged annually there,” he said.
In 2016, some telecom companies had moved the Supreme Court to levy high property tax on cellphone towers by the civic bodies concerned in various states. “The Supreme Court had passed a judgment that the tax levied by civic bodies is exorbitant and cellphone companies may challenge this in the high court,” Mahajan said.
He added that they were not against paying property tax, but it should be implemented properly. “The NMC’s action may hit company services to its customers, institutes and commercial establishments. We will move the high court in this regard in a day or two,” Mahajan said.
The Bruhat Bengaluru Mahanagara Palike (BBMP) officials on Monday said that there will be no extension of 5% rebate on property tax this time and requested tax payers make payments before April 30 to avail the benefit.
Venkata Chalapathy, joint commissioner (revenue), BBMP said, “Property tax collection for the financial year of 2018-19 has begun and citizens can make payments via both online and offline modes. For offline mode, they can generate challans at BBMP ward offices as well as at all branches of Canara Bank, HDFC, Axis and ICICI in the city. Unlike last year, there are no technical glitches associated with tax payment software or at other levels. So there will be no extension of rebate.”
For the current financial year, BBMP has set a target of Rs 3320 crore property tax collection. It can be noted here that for the financial year 2017-18, the cash-strapped civic body had set a target of Rs 2600 crore, but it could collect only around Rs 2100 crore.