Mumbai’s supply of compact homes is steadily declining as redevelopment, rising land and construction costs, and growing demand for premium housing reshape the city’s residential market. At the same time, municipal authorities are considering a sewage tax that could affect homes measuring below 500 sq ft.
The proposed levy is aimed at strengthening municipal revenues and follows the earlier abolition of property tax for smaller homes under the previous Maha Vikas Aghadi government. Since water and sewage charges form part of property taxation, more than 50,000 homes could potentially come under the proposed tax framework.
Urban governance expert Rishi Aggarwal said, “We are living in a time where climate concerns and water scarcity is a reality. Water is a valuable resource and pricing the entire water cycle is very important from sourcing to sewage treatment to drive efficient use. Water is also a basic need and hence BMC should devise usage fees based on principles of equity, financial feasibility and environmental economics,” says Rishi Aggarwal, an urban governance expert and founder of Mumbai Sustainability Centre.
Water metering remains another challenge, particularly in older buildings. Urban planner Gautam Kirtane said, “Most places in the island city do not have water meters. Even if a few have it, a building or a society has it. Ideally homes should have their own water meters, so that individual usage can be monitored real-time like gas and electricity,” says Gautam Kirtane, an urban planner.
Mumbai’s affordable housing supply has also contracted. Anarock data shows homes priced below ₹1.5 crore accounted for 57% of supply in 2021 but fell to 34% in 2025 and 39% in the first half of 2026. Homes below ₹40 lakh represented just 6% of launches in Q2 2026.
Redevelopment is accelerating this shift. A NAREDCO-JLL report identified around 1,200 active redevelopment projects, with many new developments favouring larger 2BHK, 3BHK and 4BHK homes.
Meanwhile, luxury housing continues to expand, highlighting the widening contrast between Mumbai’s premium residential market and its shrinking stock of smaller homes.
Source: NDTV Profit
