Impact of TMC’s Property Tax Hike on Thane’s Residential & Commercial Real Estate Market

The recent decision of the Thane Municipal Corporation (TMC) to increase property tax by 12% for residential properties and 20% for non-residential properties, along with the proposed/revised property transfer fee linked to the government-approved market value, has created an important issue leading to discussions within Thane’s real estate sector, says Dharmen Thakker Managing Director, Manas Realtors Member, National Association of Realtors – India. “The decision comes after several years without a major revision in property tax and is expected to increase TMC’s annual revenue by approximately ₹104.67 crore,” he adds. As a stakeholder in Thane’s real estate, Dharmen Thakkar says the impact needs to be viewed from a balanced perspective. A tax increase is undoubtedly an additional cost for property owners, but its ultimate impact on the real estate market will depend on how effectively the additional revenue is converted into better civic infrastructure and services. And yes, the initial reactions by a segment of Thaneites suggests that TMC might need to do a rethink, as Thaneites don’t seem to be happy with the decision. “Thaneites are unhappy at unplanned infrastructure, traffic jams and shortages of basic necessities like water and solid waste dumping ground,” he adds. Impact on Residential Property: For existing homeowners, the immediate impact will be an increase in annual property-tax outgo. For a genuine end-user buying a home for self-use, however, property tax generally remains a relatively small component of the overall annual cost of owning a property. The larger concern could be for resale buyers, investors and landlords, particularly when combined with maintenance charges, home-loan costs, insurance and other ownership expenses. To consider an example, the calculation for a 1,000 sq ft flat in Balkum, Majiwada-Manpada indicates an increase in annual property tax from approximately ₹25,039 to ₹28,305. “As such, I do not expect the property-tax increase alone to significantly impact genuine demand for good residential projects in established locations of Thane,” he explains. “Location, connectivity, infrastructure, developer reputation, construction quality and lifestyle amenities will continue to remain the primary factors influencing home-buying decisions,” adds Mr Dharmen Thakkar. Impact on Commercial Property: The 20% increase for non-residential properties is more significant and deserves closer attention. Commercial property owners already consider several recurring expenses while calculating their returns, including property tax, maintenance, society charges, vacancy periods, financing costs and operational expenses. For investors purchasing shops, offices or other commercial assets primarily for rental income, an increase in annual taxation can marginally reduce net rental yield. Landlords may ultimately try to pass part of the additional cost to tenants through higher rents. This could be particularly relevant in locations where commercial rentals are already under pressure or where vacancy levels are comparatively high. Transfer Fee Hike Might Have Bugger Impact for Buyers and Sellers: In my opinion, says Mr Dharmen Thakjar, the revised property transfer fee could have a more direct impact on property transactions than the annual property-tax increase. “The new structure will shift the calculation towards 0.5% of the government-approved market value for authorised properties, replacing the earlier area-based approach. On a property with a government-approved value of ₹1 crore, for example, 0.5% would amount to ₹50,000. “This increases the overall transaction cost for buyers and sellers and should therefore be clearly communicated before a transaction is finalised,” he adds. For resale properties, buyers will increasingly evaluate the total acquisition cost, rather than simply looking at the quoted property price. Will This Encourage Buyers? The tax hike itself will not encourage buyers. If anything, additional recurring and transaction costs can make some price-sensitive buyers more cautious. However, there is another side to the equation. If the additional municipal revenue is effectively utilised for better roads, drainage, waste management, footpaths, traffic management, public infrastructure, cleanliness, water supply and other civic amenities, it can ultimately make Thane a more attractive city to live and invest in. Good infrastructure supports property values. Therefore, the real question is not simply “What impact will property tax increase have?” but rather: “Will citizens receive proportionately better civic services for the additional money they are paying?” If the answer is yes, the long-term impact on Thane's real estate market will definitely be cmore positive. Suggestions as a Real Estate Consultant / Realtors / Stakeholder & A Proud Thanekar: As a real estate professional and stakeholder in Thane, Mr Dharmen Thakkar suggests the following steps to help minimise the negative impact: 1. Maintain transparency in taxation TMC should provide a clear, easy-to-understand calculation methodology so that property owners can understand exactly how their revised tax has been calculated. 1. Improve civic infrastructure visibly The additional revenue should be channelled towards measurable improvements in roads, drainage, waste management, footpaths, traffic infrastructure and other essential services. 1. Protect genuine homebuyers The authorities should ensure that the additional financial burden does not unnecessarily discourage first-time and genuine end-user buyers. 1. Review the transfer-fee structure periodically A transaction-linked fee can have a direct effect on resale activity. The impact on transaction volumes should be monitored, particularly for middle-income and affordable housing. 1. Support commercial real estate With non-residential property taxation increasing by 20%, the civic administration should simultaneously work towards improving commercial infrastructure, accessibility, parking, roads and business-friendly civic services. 1. Improve collection from existing arrears Before continuously increasing the burden on compliant taxpayers, stronger recovery of outstanding property-tax dues should remain a priority. 7. Create a stakeholder consultation mechanism TMC should regularly engage with homeowners, housing societies, developers, brokers, commercial property owners and real estate associations before making major changes affecting the property market. Conclusion: Thane remains one of the most important real estate markets in the Mumbai Metropolitan Region, supported by its strategic location, connectivity, employment opportunities, social infrastructure and continuing urban development. The recent property-tax increase and revised transfer-fee structure will certainly increase the cost of property ownership and transactions. The impact is likely to be more noticeable in the rental, resale and commercial segments than in the primary residential market.Stakeholder I reactions reported post the move have similarly pointed towards a greater potential impact on rentals and resale rather than a major disruption to new-home sales. But taxation should not be viewed in isolation. A well-managed city creates value for its property owners. If higher municipal revenue translates into better infrastructure and civic services, it can strengthen Thane's attractiveness as a residential and commercial destination over the long term. Mr Dharmen Thakkar’s advice to buyers is simple: Do not make a property decision based solely on the tax increase. Evaluate the property's location, connectivity, quality, rental potential, resale prospects and the complete cost of ownership. For sellers and investors, the focus should be on realistic pricing and transparent disclosure of all transaction-related costs. And for TMC, the expectation from the real estate community is equally clear: If citizens are asked to pay more,they should be able to see and experience better Thane.