Maharashtra Cuts Rent for Long-Term Leased Housing Society Plots

MUMBAI: In a move that could provide relief to over 3,000 housing societies within the limits of Greater Mumbai, the Maharashtra government has decided to lower the rent levied on government lands where the lease contract has not expired.

The State leases out land across Mumbai city and its suburbs through various agencies such as the district collectorates to private parties and cooperative housing societies for periods ranging from 30 years to 999 years. In government parlance, these lands are called Occupancy Class II and were allotted for specific purposes to groups such as freedom fighters, ex-servicemen, artists, writers, journalists, and so on. There are restrictions on the free sale or transfer of such plots, and approval is required from the collector to convert them into freehold land.

On December 14, the Maharashtra government issued a government resolution (GR) to revise the long-term lease percentage for land where the lease term has still to expire. The last GR on revising the lease percentage for government properties was issued by the revenue and forest department on December 12, 2012. In this, the valuation methodology to calculate the land’s value was based on the prevailing ready reckoner rates.

Taking into account a recent decision by the Bombay High Court, the valuation adopted is now based on a formula where 25% of the land value is considered the government’s share and 75% that of the leaseholder. Lease rent will now be charged at a specific rate only on the government’s 25% share. This decision was taken in the state cabinet on December 11, and the GR was issued three days later.

As per the GR, while revising the long-term lease amount that had exceeded a 30-year period in 2012, the calculation showed a major difference compared to those plots where the lease had expired. “This discrepancy created a feeling of injustice among long-term lessees whose terms had not ended,” reads the GR. “Therefore, there is a need to take a policy decision for long-term (90, 99, 999 years) leases in Mumbai city and suburban districts whose terms have not yet expired.”

The GR adds, “Hereon, for such long-term leases, if the duration has surpassed the minimum period of 30 years, and the date when the annual rate revision is due was 01/01/2012 or later, the lease rent should be assessed at the old rate until 31/12/2011. From 01/01/2012, the rent should be assessed by considering 25% of the capital valuation of the concerned property as the government’s share. If the date of revision is after 31/12/2011, the rent for such leases should be assessed by considering 25% of the capital valuation of the concerned property as the government’s share from that date.”

In case the original leaseholder of the property has transferred the rights as well as the physical possession of the land to another individual or institution, the unearned income will be recovered from the person in possession of the land. The lease should be transferred to their name, says the GR.

This move is expected to provide significant relief to long-term lessees and reduce the financial burden on housing societies, thereby contributing to the overall economic stability of the region.