As the Brihanmumbai Municipal Corporation (BMC) increasingly relies on development-linked income, Mumbai’s skyline is expected to grow taller in the coming years. In its latest municipal budget of Rs 80,952 crore, presented by commissioner Bhushan Gagrani, the civic body projected revenue of Rs 12,050 crore from development charges in FY27—an indicator of the city’s growing construction activity.
Development charges include fees collected for building permissions, construction premiums, and payments for additional floor space index (FSI) that allow developers to construct taller buildings or add extra amenities. With the civic body looking to generate more revenue to fund major infrastructure works—such as the ongoing Mumbai Coastal Road North and a citywide road concretisation programme—experts believe high-rise development is likely to accelerate across several parts of the city.
Officials and urban observers note that both developers and the BMC are expected to maximise the development potential permitted under current regulations, particularly in older neighbourhoods of South Mumbai and select suburban areas where redevelopment opportunities remain significant.
Development charges have now become the civic body’s second-largest revenue source, behind compensation from the state government, after octroi and local body tax were subsumed under the Goods and Services Tax (GST). In fact, these charges are projected to surpass property tax collections in FY27.
Revenue from development charges has grown sharply in recent years. The BMC collected Rs 6,261 crore in FY24, which rose to Rs 10,400 crore in FY25—exceeding the initial estimate of Rs 8,800 crore. For FY26, against a projected Rs 9,700 crore, the civic body had already collected Rs 8,138 crore by January, with revised estimates expected to cross Rs 11,000 crore.
A rise of around 3.4% in ready reckoner rates last year also contributed to higher collections. These government-notified property values are used to calculate construction premiums and related charges.
“There has been no word on whether the state government will increase ready reckoner rates again this year. However, with property prices increasing across most key housing markets, the government may want to revisit the rates soon, which, if revised, will land the BMC even more in development charges. However, the dependence on development charges also carries a risk, as BMC’s income may fall if the housing market enters a slowdown or downcycle,” said a Mumbai-based real estate observer.
Industry experts say strong development revenues have also reduced the likelihood of the government lowering such charges despite developers’ requests.
“This development is very positive, as the BMC will have funds at its disposal to upgrade the city’s infrastructure as buildings become taller. It is purely a function of supply and demand that the civic body’s mop-up from development charges is increasing. In the future, we see much of the FSI loading and premium income from South Mumbai, as some areas in the suburbs, such as Bandra and Vile Parle, have height restrictions and permissible building heights may not be realised,” said Gulam Zia, international partner and senior executive director at Knight Frank India.
Others note that vertical expansion is a practical strategy for cities with limited land availability.
“In a land-constrained city like Mumbai, well-planned vertical development can help optimise the use of space while supporting better infrastructure planning. Global cities such as Singapore have demonstrated how high-density development, when supported by strong public transport and urban infrastructure, can enhance overall livability. With several connectivity projects underway in Mumbai, including new metro corridors and road infrastructure, travel times across the city are gradually reducing,” said Parag Munot, managing director of Kalpataru Ltd.
Source: Money Control
