The Union Budget, presented by Finance Minister Nirmala Sitharaman on Sunday along with the recommendations of the Sixteenth Finance Commission, describes a set of fiscal and institutional reforms aimed at strengthening urban local bodies by improving their own revenues, expanding access to capital markets and implementing greater financial transparency. For the BMC, which is grappling with rising infrastructure costs and a shrinking pool of usable reserves, these measures are expected to provide much-needed fiscal space.
The 16th Finance Commission, in its report tabled on Sunday, maintained that there is a need to increase property tax collection in urban local bodies (ULBs) and has laid down a set of guidelines to be followed by the state government.
Property tax is one of BMC’s main sources of income, with Bombay have the highest property tax rates in the country.
In the previous financial year, which ended on March 31, 2025, BMC collected Rs 6,172 crore or nearly 99.54 per cent of its estimated property tax target of Rs 6,200 crore for the financial year 2024-25.
Some of the guidelines proposed by the Finance Commission include adoption of a Geographic Information System (GIS)-based digital property tax register and linking it with a GIS-based master plan of cities to ensure automatic updating of the property tax register whenever the master plan is revised.
“Therefore, the registry will accurately reflect the current use of the land, allowing for an upward revision of the property tax,” the report states.
In addition, the report also calls for periodic enumeration and periodic updating of property tax in accordance with the increase in the guideline value in state laws and regulations. The commission has also mandated an online common property database.
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“This property database can be conveniently linked with other databases such as water, sewer, electrical, business license and building permit for automatic verification of property attributes and assessment records,” the report states.
Meanwhile, when contacted, civic officials maintained that the BMC had already started the process of GIS tagging of properties in Mumbai.
“Apart from carrying out GIS tagging of properties, we are also developing a 3D mapping facility of all existing properties and structures that are assessed by BMC. Under this project, a 360-degree 3D module of the properties will be created and stored in our databases and if the owners make any changes to them, it will be trapped in the system easily, enabling us to conduct proper assessment,” said an official from BMC’s property tax department. indian express.
Municipal bonds to finance infrastructure projects
While I was doing it budget In her speech, Sitharaman had also proposed a refund of Rs 100 crore for municipal corporations in the country seeking to issue municipal bonds above Rs 1,000 crore to generate revenue.
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Municipal bonds are debt securities issued by municipal corporations or ULBs to raise capital to finance key public infrastructure projects. At present, BMC has taken up infrastructure project works with a total capital of Rs 1.5 lakh crore, almost double the BMC’s current reserve corpus of Rs 81,774 crore.
“Of the Rs 81,000 crore reserve we have, only 49 per cent or Rs 39,500 crore could be used for infrastructure projects, while the total size of these projects is almost four times this usable amount. This clearly indicates that in the coming years there will be a liquidity crisis in the BMC,” a civic official said on condition of anonymity.
Therefore, the BMC is in the process of raising capital from the market by issuing municipal bonds.
“The Union Ministry’s announcement to incentivize municipal bonds comes at a time when we are already working towards meeting the credit rating criteria. Once this process is completed, we will be able to move forward in terms of listing bonds against fixed interest,” an official said.
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Speaking to the Indian Express, civic officials maintained that initially the BMC is considering issuing bonds of up to Rs 12,000 crore to finance some of the key infrastructure projects, including STP and water conveyance tunnel projects. The BMC may also issue toll-based bonds for the upcoming Mumbai Coastal Highway project, aiming to pay the interest rates by collecting toll taxes from the high-speed corridor.
In 2021, when the BMC was debating the idea of bringing these high-cost projects afloat, authorities had explored the possibility of raising municipal bonds, however, that process did not materialize.
Drive towards transparency
The Finance Commission, in its report, has also laid out a key set of conditions on the basis of which these funds would be released.
One such key parameter includes making audited financial records of local bodies available in the public domain.
Furthermore, the report also states that there needs to be an annual increase in own revenue (OSR) of all ULBs of at least 5 per cent to qualify for these grants.