The Hindu : Unit Area Method gets the nod

Online edition of India's National Newspaper
Tuesday, Apr 08, 2003

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Unit Area Method gets the nod

By Our Staff Reporter

NEW DELHI APRIL 7. Taking a major step towards reforms in the area of property tax, the Delhi Assembly today passed the Delhi Municipal Corporation (Amendment) Bill, 2003, giving its go-ahead to a new Unit Area Method for House Tax assessment. It was also decided to constitute a seven-member House Committee to scrutinise the proposals of the Evaluation Committee which will decide the rate at which the properties would be assessed.

Intervening in the debate on the passage of the Bill, moved by the Urban Development Minister, A.K. Walia, the Chief Minister, Sheila Dikshit, said the present system was outdated and promoted "inspector raj'' which was detrimental to the interests of the people. Under the existing system, the property tax levied on the lands and buildings is based on the annual rateable value. This is defined to represent the annual rent at which land or building might reasonably be expected to let from year to year.

Ms. Dikshit further said that in the case of self-occupied properties, the rateable value is determined with reference to the cost and value of property. Similarly, in the case of rent control properties, the standard cut is a basis of the rateable value. This standard rent is fixed at 10 per cent of the aggregate amount of the market price of land at the time of the commencement of the construction and the reasonable cost of construction. The factors required for determination of the rateable value are so subjective that they lead to the dominance of ''inspector raj'' with attendant malpractices, corruption, litigation and loss of potential revenue.

Dr. Walia said the new area-based method of property tax assessment was the outcome of a long drawn quest made by experts and administrators to explore a simple, transparent, more or less mechanical and standard mechanism for determination of the annual value of properties. Under the new system, unit area value of a property is fixed with reference to such characteristics of the property as location, occupancy, age, structure and use the same is then multiplied by the area of a vacant land or covered space of a building to find out its annual value. The annual value so determined becomes the base for levy of property tax. Under this system, all similar and similarly placed properties would come to be assessed similarly and would be subject to the same tax incidence.

Dr. Walia explained that the prominent cities where the unit area method had been adopted were Bangalore, Ahmedabad, Chennai and Patna and the system is reported to be working well. The system proposed for the MCD is based on the recommendations of an Expert Committee which was appointed by the Delhi Government in July last year.

Earlier, sharp exchanges on the issue were witnessed during the meeting of the Congress Legislature Party (CLP) held in the morning. The Congress MLAs were divided over the provisions of the Unit Area Method and were against certain recommendations of the Expert Committee. The Kamla Nagar MLA, Shadi Ram, warned that implementation of the new method would prove costly for the party in an election year and the issue should be left untouched till Assembly polls are over.

In fact, the MCD Commissioner, Rakesh Mehta and the Expert Committee chairman was also present at the CLP meeting to set at rest the fears of the legislators on the House Tax issue.

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