The Hidden Costs of Redevelopment: Life in Mumbai's New Luxury Towers

Mumbai: Middle-class housing societies are often enticed by the promise of larger flats in brand new buildings equipped with modern amenities like banquet halls, gyms, and swimming pools. However, the reality sets in much later when the project is complete, and old residents move into their new apartments. In Mumbai's redevelopment market, a little-known and not widely discussed issue is the substantial increase in monthly outgoings and property taxes that families must pay for their new homes.

In a brand-new luxury tower in Bandra West, original residents who received 20% larger apartments in the redeveloped property are now paying outgoings and municipal taxes up to Rs 26,000 a month. In the old building, each flat owner paid barely Rs 5,000 a month, inclusive of taxes. In another redeveloped Bandra building, the average outgoings per month (excluding property tax) for an owner is Rs 12 per sq ft, compared to just Rs 3 per sq ft in the old building.

In south Mumbai, tenants of old cessed buildings protected under the Rent Act pay a mere Rs 100 to Rs 200 a month as rent. However, once their properties are redeveloped, their monthly outgoings can skyrocket to Rs 10,000 to Rs 20,000 a month for a 1,000-sq-ft flat, and up to Rs 30,000 to Rs 40,000 per month for a 2,000-sq-ft home in more luxurious buildings.

Property experts explain that maintenance costs in redeveloped buildings in south Mumbai typically range between Rs 10–Rs 30 per sq ft. In premium south Mumbai buildings, operational expenses can range from Rs 60,000 to Rs 75,000 per month or more, depending on the scale and amenities. Property market sources emphasize that these costs reflect the reality of maintaining modern infrastructure and amenities.

Post-possession, many residents notice a significant increase in maintenance charges. This increase is not arbitrary; it reflects the true cost of maintaining a premium building. In older structures, maintenance was low because facilities were minimal. Developer Sanjay Devnani points out that maintenance charges in a new building can increase drastically after redevelopment, sometimes by more than three times. There are multiple factors responsible for this significant rise. In older buildings, if maintenance standards are low, monthly maintenance charges are usually minimal. Additionally, property taxes are calculated based on older ready reckoner rates applicable to aged buildings. In such cases, maintenance charges may be around Rs 2,500 per month. However, once the building is redeveloped, the quality of maintenance improves significantly.

Anuj Mehta, director of Dhuleva Group, suggests a sustainable model. He proposes that if a society receives Rs 2 crore as a principal corpus and invests it at 7–8% annually, it can generate Rs 14 to Rs 16 lakh per year. This recurring income can help cushion operational expenses without eroding the principal. Once the corpus is depleted, the society loses its financial safety net.

After redevelopment, flats are typically larger in size and are assessed at current ready reckoner rates for property tax purposes. One of the major escalations is due to high property taxes. The addition of modern amenities in larger projects significantly increases the maintenance cost per sq ft, often 5-6 times the older rates. Devnani recommends keeping the corpus with the society rather than distributing it to individuals to help maintain a maintenance-free society. However, many societies disagree due to some members' greed.

Housing expert Chandrashekhar Prabhu warns that what appears to be a beneficial arrangement may not be in the best interests of the so-called beneficiaries. Mumbai follows the capital value system, where market prices, which increase every year, are used to calculate taxes. Earlier, the rateable value system was used, with the rateable value equivalent to 11 months' rent. The switch from rateable value to capital value means that taxes are now based on the latest sale transactions, affecting all residents regardless of when the building was built. The depreciation clause does little to ease the burden, leaving residents to wonder why they must pay such unexplainable increases without a corresponding increase in amenities. To avoid public outcry, the government has exempted flats less than 500 sq ft from property taxes, but the rest of the city continues to bear the brunt.

However, developer Nayan Shah believes that if the corpus amount is invested wisely, almost 80% of the monthly costs can be covered.