Publication

Abstract : Urban property taxes in India are levied against the annual rental value of the property. At the same time, Indian housing policy has relied upon rent controls to constrain increases in house rents. Since the Courts have found that property assessments are to be based upon rents paid rather than on what the property would fetch in a free market, rent control has adversely affected the level and growth of property tax revenues in Indian cities.In this study the author has constructed a model capable of showing the effect of rent controls on the property tax base of Indian cities. The model, which incorporates the spillover effects of rent control on rents of non controlled houses, is sufficiently general for application to other locations where similar institutional constraints apply. The model is estimated using the data of City of Calcutta. The finding indicates that relaxation of rent controls could result in a more than doubling of Calcutta's property tax revenues, from 160 million rupees to approximately Rs. 350 Million using current rate structures.