The news report that caught my attention this week was the proposed increased in property tax— an idea mooted in the draft budget. The headline didn’t really come as a surprise because a rise in prices or taxes is now a common trend after budgets. But what one must look at is returns. What are citizens getting in return after paying the increase rates?
Let’s look at how PMC earns its money. Months after last year’s budget, it became evident that PMC was missing some key targets. Several departments of the civic body had failed to reach their projected revenue numbers and the problem worsened to such an extent that there were whispers claiming the targets were impossible in the first place. Overall, there was a 30% dip in earnings.
Now, the PMC’s major revenue generators are local body tax, building permissions, property tax, water bills, signage and hoarding permissions and the anti-encroachment department. But the top three earners are GST (see graphics), building permissions and property tax.
Thanks to the current tax system, the PMC is able to make money off of every transaction being done in the city. Some parts of your payment go towards the civic body, as payment for infrastructure. So, thanks to Pune’s growing population, PMC has been receiving crores every few months because of the various transactions we are carrying out as citizens. But this money must be invested for developmental plans – it must come back to citizens in the shape of footpaths, streetlamps and cleaner neighbourhoods.
Next, is the building permissions department, which until a few years ago was one of the biggest revenue earners for the PMC. Every square foot of property sold within PMC limits, brings the civic body Rs 200. For example, if one crore square foot of property is sanctioned, the PMC stands to make a windfall of Rs 200 crore.
For the past few years, the earnings from this department have been steadily dropping. The problem unbalanced infrastructure plan. Any businessperson knows there are two ways to make money — less turnover, higher margins; more turnover, lesser margins. PMC was operating on the first tactic.
Properties in the better developed parts of the city were giving PMC higher returns. But the prices quoted in these developed suburbs made apartments and homes extremely expensive. PMC then started losing property buyers to PMRDA and PCMC because buying within the limits of these two civic bodies was cheaper compared to PMC’s areas. This meant the PMC was missing all new entrants to the city. The new generation was simply ignoring the PMC areas because of high property costs. This explains why PMC has stalled on revenue from building permissions.
Now let’s discuss the urban development (UD) department. From policies such as banning construction within 100 ft of foothills to no development along streams, it has become almost impossible to build within PMC limits. Also, the urban development department still doesn’t have a clear parking policy. If you want better-planned spaces or buildings, you must first lay down proper guidelines and ensure that they are not changed every few months.
The UD must also learn to distribute infrastructure evenly. Even in “smart” areas such as Baner-Balewadi, there is no even distribution of water supply. Several roads have no clear signs and there are areas within this “smart” suburb auto-drivers still refuse to service
The writer heads a real estate firm in the city.