In a huge relief for more than 3,000 housing societies across Greater Mumbai region, the Maharashtra government has decided to reduce the lease rental for government lands where long-term lease agreements are still operative. This move, undertaken to rid a long-acknowledged anomaly in valuation, was initiated through a government resolution, GR.
The state of Maharashtra leases the land in the city and suburbs of Mumbai through various departments such as district collectorates to private individuals and cooperative housing societies. The lease terms are normally ranging between 30 years to a maximum of 999 years. Known officially as Occupancy Class II lands, these properties were allotted for specific purposes to groups such as freedom fighters, ex-servicemen, artists, writers, and journalists. Transfers or sales of such plots require approval from the collector, and there are strict restrictions on converting them to freehold land.
The latest GR revises the methodology used to calculate lease rent for plots where the lease term has not yet expired. Historically, the valuation of these properties relied on prevailing ready reckoner rates, as per the last resolution issued in 2012. However, a recent Bombay High Court ruling prompted the government to adjust the formula: 25% of the land value is now considered the government’s share, with the remaining 75% attributed to the leaseholder. Consequently, lease rent will now only be charged on the government’s 25% share, significantly reducing the financial burden on lessees.
According to the GR, this move addresses perceived inequities in lease calculations for long-term lessees. “While revising the long-term lease amount in 2012 for plots exceeding a 30-year period, a significant difference arose compared to plots whose lease had expired. This discrepancy created a feeling of injustice among long-term lessees whose terms had not ended,” the resolution noted. By standardizing the valuation, the state aims to ensure fairness for lessees across Mumbai.
The GR also specifies the timeline for recalculating lease rent. For long-term leases that have surpassed the minimum 30-year period, the rent should be assessed at the old rate until December 31, 2011. From January 1, 2012, onwards, the rent is to be calculated based on 25% of the capital valuation of the property as the government’s share. If the date of revision falls after December 31, 2011, the same 25% calculation applies from that point forward.
One of the key provisions is regarding the transfer of lease rights. If the original person holding a lease has handed over the property or possession of it to another person or organization, then it is imperative to get back the unearned income, and the lease should then be transferred to his or her name.
Analysts believe that this is only going to have far-reaching implications for the housing market in the city of Mumbai. Because the reduction in financial pressure is expected to promote sustainability and stability in regions with fluctuating lease agreements, the housing societies that have plots in valuable locations may greatly benefit because the new formula is expected to generate substantial savings every year.
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