Mumbai Sees 15% Average Property Tax Hike; Flats Below 500 Sq Ft Stay Exempt

Mumbai’s property tax regime has seen major shake-ups, with the Brihanmumbai Municipal Corporation (BMC) announcing a 15% on average increase in property taxes for fiscal year 2026. The property tax increase is based on the higher ready reckoner rate, which affects the capital value of properties. The change will impact property owners' cash flow, the flats less than 500 sq ft will remain exempt so a good portion of the city's population will be less strained.

Understanding the Property Tax Hike

The BMC announced an average property tax increase of 15% (the first increase in almost ten years). The last increase was in 2015, and there was supposed to be another in 2020, but it was postponed due to COVID-19. The BMC says the increase is not due to changes to the Immoveable Property Tax structure but are the result of the ready reckoner rates increase for FY26. 

Ready reckoner rates are the legitimate or accepted government value of properties and are based on the legislated market value of the properties. The existing ready reckoner rate is used to work out property tax for the year. If the ready reckoner rates raised, then the base capital value of the property increases, thus how much property tax is due also increases. 

Let's say, for example, that a property owner pays ₹50000 a year property tax - Their liability will now increase to about ₹57,500. This applies citywide to all properties its just the degree of the rise will differ according to each occupied property, length and location of the property.

Flats Under 500 Sq Ft Remain Exempt

Although property taxes are increasing for the majority of property owners, the BMC has maintained its position regarding the property tax exemption for flats up to 500 sq ft. This policy, in place since 2022, has provided notable relief for small flat owners in a city known for its inflated real estate expenses. 

 With approximately 4,00,000 housing societies in Mumbai, this exemption continues to benefit many of its residents. Estimates suggest the exemption saves citizens ₹460 crore a year. In keeping the exemption in place, the government hopes to support lower and middle income earners through general housing affordability across the city.

Also Read: Q1 2025 Housing Sales in Tier 2 Cities Fall 8%, Value Gains 6%

Legislative Framework and Context

The property tax hike aligns with the provisions of Section 154 (1C) of the Mumbai Municipal Corporation Act, 1888. Under this law, the capital value of properties must be revised every five years to reflect current market conditions, which often results in increased property tax.

This periodic revision ensures that tax assessments remain aligned with market dynamics, enabling the BMC to maintain adequate revenue streams for municipal services and infrastructure development.

Deferral of Garbage Fee Collection

In a related development, the BMC has deferred its proposed solid waste management fee, commonly referred to as the garbage tax. Initially introduced in April 2025, the garbage tax aimed to cover daily waste collection costs from residential, commercial, and industrial establishments. The proposed fee ranged from ₹100 to ₹7,500, depending on the property's size and nature.

However, with the property tax hike already placing a financial strain on residents, Maharashtra Chief Minister Devendra Fadnavis and Deputy Chief Minister Eknath Shinde decided to delay the garbage fee implementation. This move offers temporary relief to property owners while providing the government with time to reassess the levy’s impact.

Implications for Mumbai Residents

The 15% property tax hike will undoubtedly affect property owners, particularly those owning larger flats or commercial properties. On the other hand, the continued exemption for smaller flats ensures that low and middle-income families remain shielded from the financial burden.

The exemption policy may also influence buyer preferences, encouraging a shift toward smaller housing units to capitalize on the tax benefits. For developers, the changes underscore the need to balance inventory across various property sizes and price points to meet evolving market demands.

Additionally, the deferred garbage fee provides temporary respite but highlights the need for a sustainable waste management strategy that balances affordability with efficiency.

Conclusion

The revision in Mumbai’s property tax system presents a mixed bag for its residents. While the average 15% hike adds to the financial burden for many, the continued exemption for flats under 500 sq ft offers critical relief for a large segment of the population. The deferral of the garbage fee reflects the government’s awareness of the cumulative impact of these changes on citizens.

As Mumbai’s real estate market adapts to these updates, property owners and prospective buyers must stay informed about their tax obligations and benefits. The city's evolving tax framework underscores the importance of striking a balance between revenue generation and affordability in one of the world’s most dynamic urban centers.

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