BMC proposal for LBT on builders raises hackles

BMC proposal for LBT on builders raises hackles

PROPERTY prices in the city could go up further,with BMC considering a proposal to bring construction activity under the purview of local body tax (LBT).

PROPERTY prices in the city could go up further,with BMC considering a proposal to bring construction activity under the purview of local body tax (LBT). BMC proposes to charge LBT from builders on per square metre basis.

As per the proposal,for every floor up to four storeys,LBT will be Rs 100 per sq m. For a building without an elevator,it will be Rs 150 per sq m up to seven floors. Beyond seven floors,LBT will be Rs 200 per sq m. “The proposal is at a nascent stage. We will call for suggestions from organisations,including the construction industry. There is no specific mandate to tax builders as of now,but there is an option to amend LBT rules,” a senior BMC official said.

Santosh Dalvi,partner at KPMG and indirect tax expert,said levying LBT on constructions could be a mechanism to simplify tax calculation.

“Builders anyway import raw material such as cement and sand. So,instead of taxing every individual consignment,BMC is looking at taxing the end product,” said Dalvi. BMC will,however,have to iron out the concept to avoid double taxation in case developers are purchasing raw material locally from a company importing them.


Construction companies are yet to hear from BMC on the proposal,but builders have started opposing the move. They contend that multiple taxes have pushed up property prices. “We pay for fungible FSI and development charges. This new tax will put more burden on the real estate industry. It will ultimately be passed on to the consumer,” said Mayur Shah,managing director,Marathon Group,a developer.

Vimal Shah,managing director,Hubtown (earlier known as Ackruti Developers),agreed that the government should draw a line beyond which it should not tax the real estate industry. “This is a crucial concern if the government wants affordable housing for the common man,” said Shah.

Pankaj Kapoor,founder and managing director of Liases Foras,a real estate rating and research firm,said,“If the government taxes the construction industry further,it is killing whatever little incentive the sector has to remain in business.”

Traders have been protesting LBT for almost a week now.

Property prices up 66% in 4 years: Report

A report by real estate consultancy Jones Lang LaSalle says Mumbai has seen a sharp rise in property prices in the past four years. “Over the past four years,property valuations in the financial capital have increased by an average of 66 per cent,” said Ramesh Nair,managing director,West,JLL (India). The rise was 52 per cent in Gurgaon and 46 per cent in Bangalore.

The Malad-Borivali belt has seen the highest increase of 85 per cent,while in south Mumbai,it has been the lowest at 42 per cent. “The primary reasons for Mumbai’s ‘unreal’ price movements is the limited supply of ‘clear’ land,” said Nair. Yet another reason is the reduction in new launches during this period,says the report. The price rise is also attributed to the civic body changing construction norms through new Development Control Rules (DCR),hints the report. “The new DCR rules caused many projects to come to a grinding halt as developers and architects struggled to adapt projects to a new set of mandatory norms,” it said.