Dedicated locality research platform
Enter your email address and you will receive
a link to reset your password
Over the last three years, a significant grassroots financial reform has unfolded, with 70% of India's 4,900 urban local bodies (ULBs) reporting a noteworthy increase in property tax collections. With over Rs 1 lakh crore in Central funding tied to property tax reform in the coming years, 3,086 ULBs across 22 states reported an increase in property tax collection in 2022-23 commensurate with their state’s five-year GSDP (Gross State Domestic Product) growth rate.
Out of the 4,771 ULBs reporting to MoHUA, 3,417 registered an increase in property tax collection for the fiscal year 2022-2023. In fact, this is a criterion for municipalities to be eligible for funds. In total, the 15th Finance Commission had recommended Rs 1,21,055 crore for urban local bodies over five years ending 2025-26. So far, out of Rs 21,791 crore allocated for ULBs under the 15th Finance Commission for this financial year, Rs 5,705 crore has been given.
The Ministry of Housing and Urban Affairs (MoHUA) and the non-profit Jaanagraha collaboratively collect audited accounts of ULBs, emphasizing transparency and digitization. The conditions for accessing the funds get more stringent every year – starting with the requirement that states notify the floor rates of property tax, then submit their annual audit accounts showing property tax collection and finally, have an increase in collections. This practice has evolved after the 15th Finance Commission’s recommendations in 2020 for devolutions to ULBs from 2021-2026.
Among the cities which have reported an increase in collection are 40 out of the 50 cities that have a population over 1 million, including Mumbai, Chennai and Hyderabad. Delhi, Srinagar and Chandigarh are not part of the million-plus cities under MoHUA as they are in Union Territories.
Preceding the implementation of the Goods and Services Tax (GST) in 2017, ULBs had diverse revenue sources, many of which merged with the GST. While states benefited, ULBs faced challenges. Recognizing this, the Finance Commission engaged with ULBs across states, acknowledging their reluctance to increase property tax collections. To induce change, the Commission employed penalties and incentives, tying compliance to grants-in-aid.
According to NK Singh, Chairman of the 15th Finance Commission, property tax serves as a vital avenue for ensuring the sustainability of ULBs. He states that we cannot genuinely have the devolution of the three Fs – functions, finance and functionaries, embedded in the Constitutional amendment, without their becoming financial entities. Singh emphasized that ULBs have yet to achieve their full financial sustainability, hoping for continued stringency in conditions from successive Finance Commissions.
An RBI report from November 2022, based on a sample of 201 municipal corporations, underscores the importance of property tax, constituting 31-34% of their own revenue. However, challenges such as poor enforcement mechanisms, outdated exemptions, property undervaluation, and weak tax administration contribute to significant under-recoveries in many Indian cities.
As a result of the Finance Commission recommendations, for the first time, the financial data of all ULBs is being put in the public domain through cityfinance.in, which was launched in June 2020. Jaanagraha CEO Srikanth Viswanathan notes a substantial shift in property tax reforms since 2020, highlighting the significant financial stakes involved, including over Rs 1 lakh crore under the 15th Finance Commission, Rs 5,000 crore as credit worthiness grant, Rs 50,000 crore linked to property tax reform in additional borrowing for states, and incentives under AMRUT.
A 2021 toolkit by MoHUA and Jaanagraha emphasizes the potential of property tax collections, setting an aspirational target of reaching Rs. 40,000 crores in 2024, up from the current estimate of approximately Rs. 20,000 crores. This comprehensive reform seeks to ensure financial sustainability at the grassroots level, aligning with the larger vision of devolution and governance reforms recommended by the Finance Commission.
Propscience is India’s dedicated property news portal. We cover the latest events, news, trends, deals, new launches and more.
All our services and tools are completely free of cost and available 24X7!
We use cookies to give you the best possible service while using our website, please click accept and carry on browsing if you're happy with this. For more information see our Privacy Policy.
Okay, Got it!This disclaimer ("Disclaimer") is applicable to the entire Site. Upon entering the Site it is recommended that you immediately read the Terms and Conditions and Privacy Policy listed therein. Your continued usage of this Site will indicate your unconditional acceptance of the said Terms and Conditions and Privacy Policy. You hereby agree that Propscience reserves the right to modify at any time, the Terms and Conditions and Privacy Policy governing this Site without prior notification. Your usage of the Site implies that you will be bound by any such modification. You agree and acknowledge that it is your responsibility to periodically visit the Site and stay updated with the Terms and Conditions and Privacy Policy of the Website.
The information contained in this Site has been provided by Propscience for information purposes only. This information does not constitute legal, professional or commercial advice. Communication, content and material within the Site may include photographs and conceptual representations of projects under development. All computer-generated images shown on the Site are only indicative of actual designs and are sourced from third party sites.
The information on this Site may contain certain technical inaccuracies and typographical errors. Any errors or omissions brought to the attention of Propscience will be corrected as soon as possible. The content of this Site is being constantly modified to meet the terms, stipulations and recommendations of the Real Estate Regulation Act, 2016 ("RERA") and rules made thereunder and may vary from the content available as of date. All content may be updated from time to time and may at times be out of date. Propscience accepts no responsibility for keeping the information in this website up to date or any liability whatsoever for any failure to do so.
While every care has been taken to ensure that the content is useful, reliable and accurate, all content and information on the Site is provided on an "as is" and "as available" basis. Propscience does not accept any responsibility or liability with regard to the content, accuracy, legality and reliability of the information provided herein, or, for any loss or damage caused arising directly or indirectly in connection with reliance on the use of such information. No information given under this Site creates a warranty or expands the scope of any warranty that cannot be disclaimed under applicable law.
This Site provides links to other websites owned by third parties. Any reference or mention to third party websites, projects or services is for purely informational purposes only. This information does not constitute either an endorsement or a recommendation. Propscience accepts no responsibility for the content, reliability and information provided on these third-party websites. Propscience will not be held liable for any personal information of data collected by these third parties or for any virus or destructive properties that may be present on these third-party sites.
Your use of the Site is solely at your own risk. You agree and acknowledge that you are solely responsible for any action you take based upon this content and that Propscience is not liable for the same. All details regarding a project/property provided on this Site are updated on the basis of information available from the respective developers/owners/promoters. All such information will not be construed as an advertisement. To find out more about a project / development, please register/contact us to visit the site you are interested in. All decisions taken by you in this regard will be taken independently and Propscience will not be liable for any such loss in connection with the same. This Site is for guidance only. Your use of this Site - including any suggestions set out in the Site and or any use of the resources available on this Site, do not create any professional - client relationship between you and Propscience. Propscience cannot accept you as a client until certain formalities and requirements are met.
We use cookies to give you the best possible service while using our website, please accept it and continue browsing if you're happy with this. For more information see our Privacy Policy