State legislature passed bill amending Mumbai Municipal Corporation Act, 1888, allowing BMC to collect property tax arrears affecting 1.05 million properties in Mumbai.

Property owners had paid only 50% of tax due for 16 years pending litigation. BMC in 2012 switched from rental value to capital value system with retrospective effect from 2010. Housing societies challenged this in Bombay High Court, which in 2014 struck down the retrospective application. Supreme Court upheld the High Court, ruling the municipal commissioner lacked power to frame rules with retrospective effect.

New bill amends Section 154 of Mumbai Municipal Corporation Act, empowering municipal commissioner to prescribe formula for capital value with retrospective or prospective effect. BMC can now recover remaining 50% of tax from property owners with retrospective effect from 2010.

Exemption: Does not apply to residential properties of 500 sq ft or less, which were exempt from property tax since 2022.

Opposition MVA legislators walked out during assembly debate. Former BMC standing committee member Asif Zakaria criticised the retrospective recovery as "grossly unfair and impose an unjust financial burden on lakhs of tax payers."

BMC achieved 87.86% of property tax target (₹6,449 crore) by March 24, 2026. Additional municipal commissioner urged payment before March 31 to avoid penalties. BMC Civic Facility Centres open March 26-31 (except March 27), 8am to midnight.

BMC sent letters on March 16 to MMRDA and MHADA demanding immediate payment of property tax arrears.

As of January 31:

• MMRDA: Rs 1,685.6 crore arrears across 128 properties (Rs 946.2 crore unpaid taxes, Rs 739.4 crore penalties). Dues stem from casting yards and Metro stations.
• MHADA: Rs 601.6 crore from 3,636 properties (Rs 222.5 crore penalties). Arrears linked to properties including BDD chawls.

BMC's property tax collection this year: Rs 6,331 crore (exceeded last year's Rs 6,200 crore ahead of schedule). Property tax is BMC's single largest revenue source, levied on over 9 lakh properties. Since 2017, when octroi was scrapped with GST rollout, BMC's dependence on property tax deepened. Around 3.6 lakh properties in Mumbai are exempt from property tax as their carpet area is under 500 sqft (policy since 2022). BMC House recently passed a notice of motion seeking to increase exemption limit for residential units from 500 sqft to 700 sqft.

BMC wrote to Mumbai Metropolitan Region Development Authority (MMRDA) and Maharashtra Housing and Area Development Authority (Mhada) on March 16 seeking immediate payment of property tax dues totalling over Rs 2,287 crore. BMC stated property tax is its primary revenue source and critical for funding civic services and infrastructure projects.

As of January 31:

• MMRDA: Rs 1,685.6 crore arrears across 128 properties (Rs 946.2 crore unpaid taxes, Rs 739.4 crore penalties)
• Mhada: Rs 601.6 crore arrears from 3,636 properties (Rs 222.5 crore penalties)

Mumbai's municipal budget of Rs 80,952 crore projects development charges revenue of Rs 12,050 crore in FY27. Development charges are fees for building approvals, construction premiums, and additional floor space index (FSI) charges for building higher. These are now the second-biggest revenue head for BMC, after state compensation for subsumed octroi and local body tax under GST.

Development charges exceeded projected property tax income. BMC earned Rs 6,261 crore in FY24, Rs 10,400 crore in FY25 (against estimated Rs 8,800 crore), and Rs 8,138 crore by January in FY26, with revised estimates exceeding Rs 11,000 crore for the full year.

The increase in ready reckoner rates last year by 3.4 percent after a two-year gap contributed significantly. Ready reckoner rates indicate property or land value in a location and are used to calculate construction premiums and charges.

With BMC funding large capital projects including Coastal Road (North) and road concretisation, the city is expected to grow taller with more high-rises. Both BMC and developers are expected to exploit height restrictions under current development control rules, especially in South Mumbai and some suburbs, to build taller and load more FSI on smaller land parcels.

South Mumbai has high development potential due to legacy plots, cessed buildings, and slum redevelopment projects with higher permissible FSI. Vertical growth is supported by infrastructure development including new metro corridors and road infrastructure, reducing travel times.

The Brihanmumbai Municipal Corporation (BMC) has decided to e-auction 6 properties including vacant plots, residential plots, commercial plots, and hotels valued at Rs 455.48 crore that are property tax defaulters. Two additional property owners have been given 21 days notice to pay tax or face auction. BMC has set a target of property tax collection of Rs 6,200 crore for financial year 2025-26.