The Supreme Court has upheld
a Bombay High Court order quashing rules framed by Municipal Corporation
of Greater Mumbai (MCGM) for levying property tax based on the capital value of
the land under construction.
City real
estate developers argued they paid exorbitant amounts as Land Under
Construction Tax to the MCGM. The Central Mumbai Developers Welfare Association
(CMDWA) filed a petition in 2016 challenging rules framed by the MCGM under the
capital value system.
MCGM
increased the tax liabilities by almost five times, resulting in making real
estate projects unviable and under construction projects getting stalled, said
the petition.
The judgement is expected to relieve developers from paying huge
amounts towards Land Under Construction taxes.
It may also entail the MCGM refunding amounts with interest
collected from developers since 2010.The estimated amount which MCGM earned was
about Rs 5000 crore per annum from taxes imposed on land under construction, as
per the petition.
“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,” said
Dharmesh Chheda, founder and president of CMDWA, and treasurer of NAREDCO
Maharashtra.
This stringent imposition of the Land Under Construction Tax since
2015 was one of the primary reasons why redevelopment across Mumbai got stalled
and mid-way projects were stuck, he said.