SC upholds Bombay HC order quashing property tax opposed by developers

Real estate developers say they paid exorbitant amounts to municipality as Land Under Construction Tax

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.