The Supreme Court has upheld the order of the Bombay High Court (HC), in which the HC had quashed the rules framed by the Municipal Corporation of Greater Mumbai (MCGM) for levying property taxes. The apex court order comes as a huge relief for real estate developers, who were forced to pay prohibitive property tax based on the future sale potential of land.
The MCGM has been levying property tax based on the “capital value of the land under construction” formula, which has forced developers to pay exorbitant amounts in tax. Central Mumbai Developers Welfare Association (CMDWA) had filed the petition, challenging the rules framed under the Capital Value system by the MCGM.
The SC order also means the MCGM may have to refund the amounts with interest collected as prohibitive taxes from the developers from 2010 till now. It is estimated that the MCGM has earned the revenue of about Rs 5,000 crore per annum from taxes imposed on land under construction.
“It is a big relief to Mumbai’s developers, as this excessive increase in the levies on the land under construction had rendered projects unviable and under construction properties started getting stalled. The MCGM had gone further to start auctioning and attaching the under-construction properties and declaring the developers’ defaulters who could not pay those excess dues. This stringent imposition of the Land Under Construction Tax levied since 2015 was one of the primary reasons why redevelopment across Mumbai got stalled and mid-way projects were stuck,” said Dharmesh Chheda, founder and president, CMDWA.
