Property tax rates in Chennai are rife with anomalies and inconsistencies. Many neighbourhoods in the recently-annexed parts of the Chennai Corporation, despite poor amenities and low rental value, pay the same property tax as the well-developed areas that fetch high rental values.
For instance, Adyar and Semmanchery are two residential places that are worlds apart, but their residents pay the same amount of property tax every half year. In Adyar, where apartments are priced at not less than Rs. 10,000 per square foot, the Corporation charges a base rate of Rs. 1.05 per square foot.
At the same time, residents in Semmanchery — located about 15 km south of Adyar, and badly developed, with hardly any facilities — pay almost the same property tax.
Similarly, those living in Injambakkam and Anna Nagar West pay the same rate. Residents in parts of Nandbambakkam pay the same property tax rate of Rs 1.50 per square foot as residents in MRC Nagar.
The difference between tax rates in Madipakkam and Purasawalkam is only about 20 paise per square foot.
Such irrational rates persist even within the old parts of the city. For example, property tax rates in Muthialpet are the same as those in Thiruvanimyur.
The bulk of the 9.5 lakh residential properties, which pay relatively lower property tax, are within the old city limits. This has denied the Corporation substantial revenues. Government sources said they will take up this issue next year, and rationalise and revise property tax rates.
These anomalies have come about because of two reasons. One, the Corporation, which calculates property tax based on the annual rental value of a property, revised it last in 1998. In the last 15 years, despite land and rental values spiralling, it has not revisited them. The Municipal Corporation Act says that the gap between revisions must be five years.
Secondly, in 2008, following a government directive, the newly-added areas of the Corporation, which were then under different municipalities and panchayats, revised their property tax rates. But the Corporation decided not to do so.
Corporation officials say the low property tax has affected neither their revenue inflow nor their expenditure on projects.
However, it is important to consider the following facts: property tax collection for 2012-13 was Rs. 461 crore, which was only 27.77 per cent of the total revenue. For the current year, the Corporation plans to improve it to Rs. 550 crore. The increase will come from revisions in property tax for commercial buildings and an organic increase in the number of buildings.
This low revenue has resulted in lower per capita capital expenditure. Chennai spends only Rs. 1093. This is much lower compared to cities such as Delhi – Rs 2,032, and other cities in developed countries.
In other words, the Corporation can take up more public services projects if they have additional tax revenue.
Also, the Corporation’s reluctance to revise rates has affected the Chennai Metropolitan Water Supply and Sewerage Board’s revenue since water tax is levied as a percentage of property tax.
