maximum hike of 5 per cent effective from 2000. Since rent controlregulation has existed in Mumbai for around 65 years, actual rent israrely used as the basis for assessing property tax. Mostly, pre-1940rental levels or marginally increased rent are used to calculate tax. So,according to the existing ratable value system, the island city, which ishome to old properties, has to shell out a minimal property tax but thesame is exorbitantly high in suburbs.
It is a well known fact that an old residential building constructed inyear 1966 on Peddar Road has Municipal Tax of only 25 paise per Sq.Ft.where as a new residential building constructed around year 2002 ischarged 5 Rupees per Sq.Ft. Whereas, both the buildings enjoy samemunicipal facilities. A difference of almost 20 times leaves the gap thatmust be bridged. Further difference of property tax between an old 5star hotel at Lands end, Bandra, and new 5 star hotel just opposite it isalmost 10 times as old hotel was constructed more than 45 to 50 yearsago and new hotel was constructed not more than 7 years ago.
Ratable value system has always been a leeway for the older buildingsof the city. The rent control act protected them. However this reform islikely to balance the property taxes levied in the city and suburbsirrespective of the date of its construction. The capital value systemconsiders factors like current capital cost and life of the property, itslocation, quality of construction, and even cost of the living of theinhabitants. To determine the market value, tthe BMC plans to adopt the Stamp Duty Ready Reckoner rates with slight variations. Once themarket value is decided, this market value will remain constant for five years. On this market value a certain per cent will be charged as property tax for one year. The corporation will decide this rate of tax every year in its annual budget.But, the proposed Capital value system, even though irons out thecreases of inequity, doesn’t really offer a perfect and stable solution.The dynamism in the property tax system is perplexing. In the capitalvalue system, the tax will fluctuate according to the increase or decrease of market value of the property, whereas in the case of therateable value system, due to rent control act, the rent once fixed cannot be increased, hence the rateable value will always remainconstant.
Sunit Gupta, Stamp duty and market valuation expert says, “The newcapital value system is based on Stamp Duty Ready Reckoner issuedby Town Planning and Valuation Department of Government of Maharashtra. The Ready Reckoner itself is very controversial as it doesnot reflect the true market value of all the properties in Mumbai andshould be used only for stamp duty collection purposes and for no