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Real Estate Slowdown Bites India’s Richest Civic Body

No new taxes, higher allocation for infrastructure in BMC’s budget for 2018-19.



Residential and commercial buildings n Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)
Residential and commercial buildings n Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

A real estate slowdown has forced Mumbai to scale back its earnings estimate from its biggest income source even as India’s richest municipal corporation increased allocation for infrastructure and introduced no new taxes.

The Brihanmumbai Municipal Corporation budgeted for a expenditure worth Rs 27,258 crore in 2018-19, a 9 percent increase over the previous year. BMC nearly doubled its allocation for key infrastructure projects at Rs 4,144 crore, including a 29.2-kilometre coastal road that will connect south Mumbai with its northern suburbs.

Its development planning department, the biggest income generator since Octroi was abolished under the Goods and Services Tax, earned Rs 3,947 crore against the estimated Rs 4,997 crore in the year ending March. The department earns fees from developers and infrastructure charges.

Real Estate Slowdown Bites India’s Richest Civic Body

Back-to-back disruptions from a currency purge, a new housing law that arms homebuyers against mis-selling and the GST hurt housing demand. New launches fell across big cities, including Mumbai, the nation’s second-biggest real estate market.

The effects of the slowdown in the real estate sector are beginning to show, BMC Commissioner Ajoy Mehta said while presenting the budget. The corporation budgeted a scaled-down Rs 3,947 crore for 2018-19 from the development department.

Real Estate Slowdown Bites India’s Richest Civic Body

Infra Projects

The BMC allocated funds for its key infrastructure projects, including Rs 1,500 crore for the coastal road. The work on the Rs 15,000-crore project is expected to start in April.

The corporation also provided Rs 2,665 crore for implementing some of the projects under Mumbai Development Plan 2034, including 41 playgrounds, eight dispensaries, hospitals, and cemeteries and nine hostels for working women.

To finance infrastructure projects, the civic body for the first time will withdraw Rs 2,743 crore from its special reserve of Rs 69,000 crore. “Our focus is to keep a check on revenue expenditure and increase capital expenditure,” said Mehta.

No money was budged from Octroi as it doesn’t exist under the nationwide GST that subsumed a web of central and state levies. The corporation will be compensated by the state government for the loss.

BMC proposed to raise charges for services like factory permits, licence fees for wholesale markets and fee for medical treatment in BMC hospitals.

Fire Department Upgrade

The corporation provided Rs 180 crore to create a dedicated fire safety compliance cell, upgrade equipment and set up new fire stations. That comes after recent fire incidents, including the one in a pub that left 14 people dead.

Other Key Highlights

  • Health budget increased to Rs 3,379 crore from Rs 2,774 crore.
  • Education Department to get Rs 2,569 crore compared with Rs 2,023 crore last year.
  • Rs 209 crore for solid waste management.
  • Storm water drain department to get Rs 565.6 crore, up from Rs 446.4 crore last year.
  • Rs 244 crore for gardens.
  • Rs 10 crore for Swachh Bharat Mission.