Homeowners undertaking redevelopment of old houses should prepare for increased annual property costs. Bigger flats and modern amenities like lifts and gyms mean higher maintenance charges. Property taxes also rise as they are now linked to the property's current market value. This shift from older rent-based assessments to capital value systems impacts yearly outgoings significantly for residents...

When old apartments are redeveloped, it can lead to more space, better comfort and modern amenities. But there’s a catch. The catch is the maintenance fees, which typically go up after redevelopment since modern buildings are pricier to maintain.

There’s also the expense of running the building’s facilities and the increased property tax. Older buildings might lack features like lifts, gym, safety systems and power backups, but after redevelopment, these amenities might be added by the builder. This means higher cost for managing infrastructure and services that older buildings usually don’t have.

According to a TOI article, in a new luxury residential building in Bandra West, the original residents who got 20% larger apartments in the redeveloped property are now shelling out up to Rs 26,000 a month in outgoings and municipal taxes. Before the redevelopment, the owners were paying Rs 5,000 a month, taxes included.

Keep reading to understand why this happens and what should homeowners who are redeveloping their apartments know.

Under the new capital value system, how are property taxes determined?
Nachiket Bhatwadekar, Managing Director, Residential (West India) at Colliers, said to ET Wealth Online: “Under the revised system, property tax is generally linked to a property's current market value rather than.

Bhatwadekar says: “In many cities that follow this method including Mumbai, residential properties are taxed at roughly around 0.4% of capital value, while commercial properties attract significantly higher rates due to their business use.”

Some municipalities like BMC also provide relief for smaller homes, often protecting compact units from sharp increases. Overall, the system aims to make property taxation more transparent and aligned with actual property values.

Is it true that property taxes would increase on the basis of the latest sale transaction?
Bhatwadekar says that property tax does not increase simply because one flat sells at a high price, as authorities rely on standardised valuation methods rather than individual transactions. When a building is redeveloped, the earlier tax assessment is replaced with a fresh valuation, based on the new struct.ure.

Bhatwadekar says: “Because the property is now newer, typically larger, and built to current standards, its official value increases, which can lead to higher property tax. This rise is driven by reassessment of the improved asset rather than by market speculation or individual high-value sales.”

Sana Khan, Associate Partner, SNG & Partners, Advocates & Solicitors, says that it is true that property taxes would be assessed keeping in mind the ‘value of property’ as indicated in the Stamp Duty Ready Reckoner for the time being or the market value of such property as the base value.

According to Khan, until 2009, property tax computation was placed solely on the basis of rateable value.

Khan says: “Since the rateable value was purely based on the rent/licensee, it had become a common practice to manipulate the rent by splitting the rent into various components like furniture & fixture, business etc. which led to huge revenue loss to the corporation. The entire trick of dodging the property tax was let go.”