Property tax collections now fund less of municipal spending for major cities

Property tax coverage is getting cloudy

Sustainability of India’s major municipal corporations has been declining, as expenditure has grown faster than the revenues and their ability to raise taxes has been getting hampered, a Moneycontrol analysis reveals.

On May 21, the Municipal Corporation of Delhi had to rollback additional user charges on garbage collection after public outcry. MCD had levied an additional user charge for solid waste management.

India’s richest corporation, which manages the city of Mumbai, has witnessed revenues, including state transfers, rise 12.6 percent on average when expenditure has risen over 20 percent over the past eight years.

Delhi’s municipalities (MCD and the New Delhi Municipal Corporation) have witnessed revenue growth lag expenditure by two percentage points over the last four years.

But more disconcerting is their ability to raise money from taxes.

Property tax, one of the primary contributors to revenues has lost the ability to fund spending by cities.

In 2018-19, while Mumbai could derive at least 20 percent of its expenditure from property taxes, it is expected to cover less than a tenth in 2025-26.

Delhi’s case is no different. From 16 percent of total spending in 2022-23, property tax’s coverage of city’s expenditure dropped to 14 percent in 2024-25.

Although Bengaluru sits better with over 25 percent coverage, the share of property taxes in spending has declined as well and is set to drop further this year.

Do amnesty schemes help?

The MCD earlier this week announced another amnesty scheme, four years after rolling out one, but MC analysis shows that schemes tend to have little impact on revenues.

In 2022-23, while the amnesty scheme provided a one off fillip raising an additional Rs 400 crore, the following year property tax collections dipped again to earlier levels.

Delhi had collected Rs 2,032 crore in 2021-22 before the amnesty scheme and ended up collecting Rs 2,137 crore in 2023-24, a year after.