City Beat: Taxing Of TDR Allotments May Hit Mumbai Slum Re-Development [Video]

While Mumbai slums desperately need redevelopment, a recent order by the tax tribunal in the city may discourage developers that were so far willing to undertake these projects. According to the tribunal, the transfer development rights that developers earn for undertaking such projects will be subject to taxation under the Maharashtra Value Added Tax Act, or MVAT.

Under an agreement that provides for transfer of development rights, developers are responsible for undertaking slum redevelopment projects without charging anything. In return, the authorities allot them TDRs, under which developers can build extra spaces in other projects. Typically a barter, TDR allotment is generally beneficial for both parties.

According to experts, the latest taxation move may come as a deterrent for the willing developers. To begin with, it had taken some time for slum re-development projects in Mumbai before developers evinced interest in them. And those who undertook these projects were not aware that they might be liable to pay taxes. The tribunal order may have a negative impact on builders' sentiment. As these are not projects aimed to make profits, sops and incentives from the government side are the only way to encourage developers to undertake them.

It must be noted that Mumbai and its infamous slums are in a dire need for redevelopment and any urban development in the city is subject to how efficiently the authorities are able to house the poor and remove illegal establishments.

To make the matters worse, old files are to be reopened and developers are to be made to pay the tax retrospectively.