How Will Exemption From Property Tax on Homes Under 500 Square Feet Affect Mumbai Real Estate Market?

Affordable housing is a hot topic nowadays, particularly in the Mumbai real estate market, where flat costs are fast increasing. However, the cost of the physical unit alone has an effect on the price, as do all the additional fees associated with the property purchase procedure.

Chief Minister Uddhav Thackeray declared on 1st January 2022, after a meeting with the state urban development department, that property tax on residential units up to 500 square feet placed inside the Mumbai municipal area boundaries would be cancelled.

However, what does this really imply?

Numerous real estate professionals and experts in Mumbai believe that this is a critical choice since it will give an incentive for people looking to purchase properties under 500 square feet. This will also have a significant influence on the city's inexpensive real estate market, since the number of affordable home sales has decreased somewhat. Indeed, the luxury real estate category in Mumbai has seen an increase in sales. This decision eliminates the extra expense of property tax for Mumbai's middle-income group when they purchase a house in 2022.

Who is excluded from the law?

Only individuals who live inside the boundaries of the BMC are eligible for this waiver: territories extending from South Mumbai to Mulund in the central suburbs, Borivali in the western suburbs, and Mankhurd just before Navi Mumbai's municipal borders.
A few days after the announcement, the Cabinet Minister for Urban Development and Public Works requested the Navi Mumbai Municipal Corporation (NMMC) to file an application to include Navi Mumbai in the property tax remission.

Reading between the lines

The waiver is only available to individuals who pay their property taxes to the BMC, although there is some misunderstanding about the sorts of properties that would be covered. According to Madhav Chopde, a real estate consultant, the majority of residences under 500 square feet and inside the boundaries of the BMC are classified as ancient structures.

According to reports, this waiver's eligibility will be determined by four crucial factors:The majority of homes in old Mumbai that are less than 500 sq ft are either under the Slum Rehabilitation Scheme or are tenements and buildings dating all the way back to the 1960s. All of these are eligible for the exemption;

New construction: New housing societies, as well as those whose inhabitants are scheduled to take possession of their houses in the coming months, will qualify for the waiver. These are mostly small-scale development projects and stand-alone structures;

Independent dwellings: If the state government extends the decision to the Mumbai Metropolitan Region (MMR) or suburbs, many 500-square-foot independent residences may qualify for the exemptions as well. The sole exception is that you will not qualify for the waiver if you own an independent property that is less than 500 square feet but has additional levels that exceed 500 square feet;

Studio apartments: Developers selling small-sized residences in heavily populated districts of Mumbai that often fall under the BMC boundaries would also be excluded.

Enhancement of affordable housing opportunities

Some of Mumbai's biggest real estate developers believe this is a prudent approach, since the loss of the tax exemption would be offset by higher-priced residences in the city.

This ruling, it seems, would benefit more than 15 lakh Mumbai residents. The State Government's revenue 'loss' would be countered by the real estate sector reviving, with Mumbai's middle-to-upper-income segments acquiring apartments in record numbers.

It should be mentioned that the state government's efforts, such as the stamp duty decrease during the pandemic, sparked significant real estate purchases during a genuine downturn and sparked a good momentum for real estate in Maharashtra in late 2020 and the first quarter of 2021.

Historically, the Mumbai real estate market has responded enthusiastically to any genuine inducement, and this recent step on the property tax exemption for inexpensive houses in Mumbai may undoubtedly add a lot of zip to affordable home purchasing in Mumbai.