Shiny flat, steep outgoings: Life after redevelopment in Mumbai

Mumbai: Middle-class housing societies are enticed with tempting redevelopment offers of larger flats in brand new buildings equipped with banquet halls, gyms and swimming pools.But realisation dawns much later when the project is complete, and old residents shift into their new apartments. In Mumbai's redevelopment market, a little-known and not talked about issue is the crushing increase in monthly outgoings and property taxes families must pay for moving into a new tower.
In a brand-new luxury tower in Bandra West, original residents who got 20% larger apartments in the redeveloped property are paying outgoings and municipal taxes up to Rs 26,000 a month. In the old building, each flat owner paid barely Rs 5,000 a month, inclusive of taxes. In another redeveloped Bandra building, the average outgoings per month (excluding property tax) for an owner is Rs 12 per sq ft. Earlier, it was just Rs 3 per sq ft.In south Mumbai, tenants of old cessed buildings protected under the Rent Act pay barely Rs 100 to Rs 200 a month as rent. However, once their properties are redeveloped, their monthly outgoings can shoot up to Rs 10,000 to Rs 20,000 a month for a 1,000-sq-ft flat, while a 2,000 sq ft home in a more luxurious home could incur Rs 30,000-Rs 40,000 per month.Property experts said maintenance in rehab buildings in south Mumbai typically ranges between Rs 10–Rs 30 per sq ft. And in premium south Mumbai buildings, operational expenses can range between Rs 60,000-Rs 75,000 per month or more, depending on scale and amenities.Property market sources said these costs reflect the reality of maintaining modern infrastructure and amenities. "Post possession, many residents notice an increase in maintenance charges. This increase is not arbitrary; it reflects the true cost of maintaining a premium building. In older structures, maintenance was low because facilities were minimal,'' they said.Developer Sanjay Devnani said maintenance charges in a new building often increase drastically after redevelopment, sometimes by more than three times."There are multiple factors responsible for this significant rise. In older buildings, if maintenance standards are low, monthly maintenance charges are usually minimal. Additionally, property taxes are calculated based on older ready reckoner rates as applicable to aged buildings. In such cases, maintenance charges may be around Rs 2,500 per month. However, once the building is redeveloped, the quality of maintenance improves significantly," he said.Anuj Mehta, director, Dhuleva Group, demonstrated a "simple" sustainable model. He said if, for instance, a society receives Rs 2 crore as principal corpus and invests it at 7–8% annually, it can generate Rs 14 to Rs 16 lakh per year. "That recurring income can meaningfully cushion operational expenses without eroding the principal. Once the corpus is depleted, the society loses its financial safety net." After redevelopment, flats are typically larger in size and are assessed at current ready reckoner rates for property tax purposes. One of the major escalations is due to high property taxes. Furthermore, the addition of modern amenities in larger projects significantly increases the maintenance cost per sq ft, going up 5-6 times the older rates."We recommend the corpus to be kept with society rather than being given to individuals to help in maintenance-free society, but most societies disagree due to some members' greed," added Devnani.Housing expert Chandrashekhar Prabhu said what appears to be a hunky-dory affair may not be in the best interests of the so-called beneficiaries. "Mumbai is following the capital value system. This means market prices, as they increase every year, will be considered as a base to calculate the tax. Earlier, it was the rateable value system, when the rateable value was equivalent to 11 months' rent. When we switched from rateable value to capital value, we did not realise the taxes would increase on the basis of the latest sale transactions and everyone, irrespective of when the building is built, will have to pay as per the market. The depreciation clause does very little to ease the burden, leaving the resident to wonder what crime he has committed to be forced to pay unexplainable increases without an increase in amenities. In order to avoid a public outcry, the govt has exempted flats less than 500 sq ft from payment of property taxes. But the rest of the city has to suffer," said Prabhu.However, developer Nayan Shah said, "If the corpus amount is invested wisely, almost 80% of the monthly costs can be covered."