January 7, 2021 1:23:11 am
The BMC, India’s richest civic body, will take a big financial hit following the Maharashtra government’s decision to slash premiums payable for construction activity. Income from construction premiums and levies is the third highest revenue grosser for the BMC. But with the construction industry reeling under lockdown and fewer new projects being planned, records show that BMC’s income had dipped sharply in the last few years.
In 2017-18, BMC had earned Rs 4,193 crore from construction premiums and levies. But by 2019-20, its earning from the head had dropped by over 40 per cent to Rs 2,993 crore. With the government now lowering premiums by 50 per cent, civic officials projected that this income with dip further.
Last September, BMC Commissioner Iqbal Singh Chahal, while consenting to the state’s proposal to reduce premiums, had highlighted that this would lead to a further drop in revenues, impacting the civic body’s overall financial health. While income from construction levies and premiums accounted for 18 per cent of the city’s total income in 2017-18, this has already come down to 12 per cent by 2019-20. Ahead of the Assembly polls in the state, then Devendra Fadnavis government had lowered premiums for availing additional floor space index.
On Wednesday, BJP MLA Ashish Shelar questioned how the government plans to recoup the BMC for the loss of revenue.
But a senior state official said BMC’s collections from the income sources between April and August last year was just Rs 262 crore amid lockdown restrictions. “Given the poor collections in the first five months, the potential loss in absolute numbers due to the lowering of premiums won’t be much,” said the official. Shelar said: “While government had extended benefit worth crores to builders, there is no clarity on if this will lead to reduction of home rates.”
Besides Mumbai, neighbouring Thane, where construction premiums accounted for 19 per cent of the civic body’s total income, will also take a big hit in potential income from the source. In Pune, construction premiums account for an average 8 per cent of the civic body’s annual income. The same is 4 per cent in Nagpur.
The government is hoping that the rush to avail the sop fuels the property market as witnessed in the case of the previously announced stamp duty concessions.
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