The state government and the BMC have a commitment under the Memorandum of Understanding (MOU) signed with the Centre under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to approve the legislation, already placed before the legislature, by March 31, 2008.

Property tax is currently being collected on the basis of the rateable value system, which leads to tax calculation on the basis of hypothetical rent. However, rents have been frozen at 1940 levels under the Maharashtra Rent Control Act, which keeps the rateable value of properties covered under the Act very low. This system, critics say, leads to a situation where the residents of newer buildings in the suburbs have a higher tax liability. The proposed amendment plans to assess property tax based on the present capital (market) value of the house.

While the state government claims that the amendment will bring about parity in the property tax system, the move has met with stiff opposition from MLAs from old areas of the city. They fear that attempts at rationalisation may lead to a hike in tax liability for residents.

Minister of State for Urban Development Rajesh Tope, who chairs the joint select committee, said he was hopeful that the committee would approve the amendment in its March 5 meeting.

The government may amend the proposed rules to charge the tax on capital value of the property. While the rules provide for an exemption from the new formula to houses of up to 225 square feet in size, MLAs from the island city have demanded that this ceiling be hiked. It is likely that this limit will be hiked.

However, senior Urban Development department officials said that if the legislation was not approved at the next meeting, they would request the Centre to grant more time for the repeal to the state, which is largest beneficiary under JNNURM.

Raj Purohit, BJP MLA from Mumbadevi and a member of the joint select committee, said they had demanded that an opinion be sought from the state counsel on the impact of the amendment on two petitions filed by the property owners in Supreme Court against the state’s Rent Control Act.

Purohit, a former Minister of State for Housing in the erstwhile Sena-BJP government and also heads an association of tenants, said an adverse impact because of the amendment would hurt the “2 crore tenants across the state covered by the Rent Control Act.”