The civic body of Bangalore city, BBMP, is set to introduce guidance value-based property taxes from April 1, which will substantially raise tax outgo for owners renting out homes or commercial space. This may compel landlords to hike rents further in a pincer effect to offset higher taxes.
Rental Spaces to Attract 2-5 Times More Tax
As per BBMP’s new property tax structure keyed to guidance values, rented residential spaces will attract 100% more tax than self-occupied homes. For commercial properties, the multiplication factor is even higher at 3-5 times depending upon category like malls, hotels etc.
Though variables like ACs don’t add to liability like before, base values being higher coupled with rental premiums will inflate taxes, expect owners. Further rises in subsequent years possible too.
Tenants Eventually Bear Brunt
Experts argue that while BBMP rationalizes that overall collections will not swell significantly, individual tax amounts on rented properties can rise multiple times under new regime.
This will compel owners to pass on hiked costs as higher rentals to tenants, already facing affordability pressures. A cascading effect can potentially strain tenants who get no matching upgrade in municipal services.
Teething Troubles Likely
There are also concerns that tax miscalculations may be common initially given BBMP doesn’t have granular mapping of all streets and buildings classified under zones currently. This can lead to errors in applicable rents deduced, impacting accuracy.
Teething troubles notwithstanding, BBMP feels guidance value linkage will streamline and simplify framework while buoying its revenues. But the pinch could be prolonged for end-users.
