Redevelopment of ageing residential buildings in Mumbai often promises larger apartments, modern infrastructure and improved living standards. However, homeowners moving into redeveloped properties may also face significantly higher monthly expenses, including maintenance charges and property taxes.
Older buildings typically lack facilities such as lifts, gyms, power backup systems and advanced safety features. When redevelopment introduces these amenities, the cost of operating and maintaining the building rises, increasing monthly outgoings for residents. For example, in a newly redeveloped luxury residential building in Bandra West, original occupants who received flats about 20% larger are now paying nearly Rs 26,000 per month in maintenance and municipal taxes, compared to around ₹5,000 earlier.
Experts say the increase in property tax is largely due to changes in the assessment system. According to Nachiket Bhatwadekar of Colliers, the current tax framework links property tax to the market value of the property rather than its potential rental income.
“Under the revised system, property tax is generally linked to a property’s current market value rather than the rent it could earn earlier,” Bhatwadekar said.
“In many cities that follow this method including Mumbai, residential properties are taxed at roughly around 0.4% of capital value, while commercial properties attract significantly higher rates due to their business use.”
He also clarified that property taxes do not automatically increase due to a single high-value sale within a building.
“Because the property is now newer, typically larger, and built to current standards, its official value increases, which can lead to higher property tax. This rise is driven by reassessment of the improved asset rather than by market speculation or individual high-value sales.”
Legal expert Sana Khan from SNG & Partners explained that municipal authorities now determine property tax using the capital value system, largely based on the Stamp Duty Ready Reckoner or prevailing market value.
“Since the rateable value was purely based on the rent/licensee, it had become a common practice to manipulate the rent by splitting the rent into various components like furniture & fixture, business etc. which led to huge revenue loss to the corporation. The entire trick of dodging the property tax was let go.”
Khan added that under the Mumbai Municipal Corporation Act 1888, factors such as land type, carpet area, usage category and the building’s age are considered when determining property value.
“Contemporary residential complexes require lifts, security, backup power, safety systems, and continuous upkeep. While larger apartments increase each owner’s share of expenses, the main factor is the ongoing cost of running infrastructure and services that older buildings typically did not have.”
She further noted that older structures often have lower tax values due to depreciation, while redeveloped buildings are taxed based on updated capital values and modern infrastructure.
“Therefore, yes old buildings have lower RR value due to their age. However, it may be added that an old building located in a prime location may have a higher RR value as compared to a new building situated in a far suburban area.”
Khan also pointed out that tenants protected under the Maharashtra Rent Control Act 1999 receive permanent alternate housing after redevelopment.
“When an old building is redeveloped, the earlier tenants are given permanent alternate accommodation which gives them the rights as ‘owner’ of the flat unit. Therefore, when such flats are rented out, they are done so as ‘lease’ terms of which are governed under the Transfer of Property Act 1882.”
Source: The Economic Times
