11 Development Charges & Appeal · 11.1 Development charges
11.1.1 MRTP Act Sections 124A–124B: levy of development charge, user categories and rates
Chapter VI-A of the MRTP Act (ss.124A–124L with s.124K-1, inserted in 1992) makes every Planning or Development Authority levy a development charge on development, use or change of use that needs permission; s.124B classifies users into four categories and fixes minimum rates through the Second Schedule, expressed as a percentage of the ready-reckoner rate of developed land.
- MPSC ATP
- Standard level
- 10 min read
- Free
Core facts
- Chapter VI-A: "Levy, assessment and recovery of development charge", ss.124A to 124L (plus s.124K-1, 2015, applying it to Regional plan areas).
- Inserted by the MRTP (Amendment) Act, 1992 (Mah. XVI of 1992), in force from 10 August 1992.
- s.124A(1): the Authority shall levy the charge on institution of use, change of use, or development of land or building for which permission is required under the Act.
- "The Authority" in this Chapter = the Planning Authority or the Development Authority.
- s.124A(2): the charge is levied on the person who institutes or changes the use or carries out the development.
- No charge where permission was granted (or deemed granted) before 10 August 1992 (first proviso, added with retrospective effect by Mah. X of 1994).
- Demolition of an existing building, structure or erection is outside the Chapter (further proviso).
- s.124B(1): four user categories — Industrial, Commercial, Residential, Institutional.
- Category is decided by the predominant purpose of use.
- s.124B(2) (substituted by Mah. 34 of 2010): rates in column (4) of the Second Schedule; the Authority may enhance them, and may reduce an enhanced rate, but never below the Schedule rate.
- Second Schedule base rates (residential/institutional): 0.5% of ASR rate of developed land for land development; 2% for building or construction.
- Commercial = 2 times, industrial = 1.5 times the residential/institutional rate.
Explained
What attracts the charge (s.124A)
- Three triggers, each only where MRTP permission is required:
- institution of a use of land or building;
- change of use of land or building;
- development of land or building.
- If land attached to a building is used for a purpose independent of the building, the charge may be levied separately for the land and for the building (proviso to s.124A(1)).
The 1992 cut-off (provisos to s.124A(2))
- Clause (i): no charge where development permission was already granted or deemed granted before 10 August 1992. It covers a commencement certificate, any other permission under the MRTP Act or any other law, or (in Mumbai) an Intimation of Disapproval under s.346 of the Bombay Municipal Corporation Act, 1888.
- This applies whether or not the work had started or finished, and whether or not a completion certificate had been issued, before that date.
- Clause (ii): if only land development (sub-division, layout, land reclamation, no building) was permitted before 10 August 1992, no charge for that land development. A later building permission attracts the charge only for the building or construction.
- s.12 of Mah. X of 1994 ("removal of doubt"): charges wrongly collected on or after 10 August 1992 on such pre-1992 permissions had to be refunded or adjusted, with interest at 14% per annum.
User classification (s.124B(1))
| Category | Basis | Multiplier on base rate (Second Schedule Part II) |
|---|---|---|
| Residential | Predominant purpose | 1 (base) |
| Institutional | Predominant purpose | 1 (base) |
| Industrial | Predominant purpose | 1.5 times |
| Commercial | Predominant purpose | 2 times |
Second Schedule, Part I (residential or institutional use) Areas covered: Municipal Corporations, Municipal Councils, Nagar Panchayats, Special Planning Authorities and New Town Development Authorities.
| Item | Nature of development | Rate |
|---|---|---|
| (a) | Land development, no building or construction | 0.5% of ASR rate of developed land |
| (b)(i) | Only building, where charge under (a) already paid | 2% |
| (b)(ii) | Only building, land developed before 10 Aug 1992 so (a) not payable | 2% |
| (c) | Land development and building | 0.5% for development + 2% for construction |
- "ASR" = the Annual Statement of Rates (the Stamp Duty Ready Reckoner) prepared under the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995, made under the Bombay Stamp Act, 1958.
Derived rates (Part II(1))
| Use | Land development | Building |
|---|---|---|
| Residential / Institutional | 0.5% | 2% |
| Industrial (1.5×) | 0.75% | 3% |
| Commercial (2×) | 1% | 4% |
- Part II(2): in Municipal Corporation areas, reconstruction or a material change in a building is charged at the Part I rate for building-only development.
Rate flexibility (s.124B(2))
- The Authority may enhance the Schedule rate from time to time.
- It may reduce an enhanced rate, but not below the column (4) rate. The Schedule is a floor.
- Exceptions to this scheme (MIDC's lower rates under s.124B(2A) and the 100% Vital Urban Transport Project increase under s.124B(2-1A)) are in UPL-DC-02.
- Regional plan areas (s.124K-1, Mah. 43 of 2014, w.e.f. 22-4-2015): ss.124A–124K apply where permission is given under s.18(1)(ii) or (iii) (Village Panchayat in gaothan, or Collector); the charge is assigned to the Village Panchayat for basic amenities and infrastructure.
Common traps
- ✗ "Section 124B classifies users into three categories." ✓ Four: industrial, commercial, residential, institutional (agricultural is not one).
- ✗ "The Authority may reduce the rate below the Second Schedule rate with State approval." ✓ Never below the column (4) rate (proviso to s.124B(2)).
- ✗ "Chapter VI-A came into force on 11 January 1967." ✓ The Act began on 11 January 1967; Chapter VI-A from 10 August 1992.
- ✗ "Land development for hospital use attracts 2% of ASR." ✓ Land development (no construction) for residential/institutional use = 0.5%; 2% is for building.
- ✗ "Commercial use is charged at 1.5 times the residential rate." ✓ Commercial = 2 times; industrial = 1.5 times.
- ✗ "Demolition of a building attracts development charge." ✓ Demolition is outside Chapter VI-A; reconstruction is chargeable.
Quick revision
- Chapter VI-A = ss.124A–124L; inserted by Mah. XVI of 1992; from 10 Aug 1992.
- s.124A: Authority shall levy on use, change of use or development needing permission.
- Permissions before 10 Aug 1992: no charge (proviso added by Mah. X of 1994).
- Demolition: outside the Chapter.
- s.124B: four users, by predominant purpose.
- Second Schedule (Mah. 34 of 2010): 0.5% land, 2% building, of ASR developed-land rate.
- Industrial 1.5×; commercial 2×.
- Authority may enhance; never below Schedule rate.
- ASR = Stamp Duty Ready Reckoner (Bombay Stamp Act, 1958).
- UDCPR 2.2.13: deposit before permission / CC.
Go deeper: Deeper, Mains writing (beyond what MPSC ATP usually asks)
Deeper Advanced
- Why a percentage of ASR. Before 2010 the Schedule fixed rates in rupees per sq m. The 2010 substitution linked rates to the ready-reckoner rate of developed land, so the charge rises automatically as land values rise.
- "Predominant purpose". A mixed building is not split into many categories under s.124B(1)(b); the dominant use decides. Separate levy is possible only through the s.124A(1) proviso (land used independently of the building).
- Link with UDCPR. UDCPR Regulation 2.2.13 requires the charge under ss.124A(1)–124L to be deposited before the development permission or commencement certificate is issued, calculated for each land parcel using ASR rates. It also lists cases such as:
- no charge on renewal of permission, compound walls, maintenance, internal repairs or strengthening without extra floor space;
- full charge on reconstruction after demolition;
- on a revised permission after work has started, charge only on the additional land and built-up area.
- Demolition vs reconstruction. Demolition alone is outside the Chapter (s.124A proviso). Reconstruction is chargeable (Second Schedule Part II(2) in corporations; UDCPR 2.2.13(vii) in full).
- Who pays. The person undertaking the development is liable (s.124A(2)). Where a promoter under the Maharashtra Ownership Flats Act, 1963 develops, the promoter is liable (s.124E(6); see UPL-DC-03).
Mains writing Mains writing
- Frame: development charge is a land-value-linked levy that makes those who develop land pay part of the cost of the public amenities the development will need.
- Analysis points:
- Linking rates to the ASR keeps revenue in step with land prices, but ASR errors flow into the charge.
- The Schedule floor stops a race to the bottom between authorities; enhancement lets growing cities raise more.
- Higher multipliers for commercial and industrial use reflect higher demand on infrastructure.
- The 1992 cut-off and its 1994 retrospective clarification show how a new levy must protect existing permissions.
- Way forward: publish authority-wise rates online; integrate the calculation with online building permission systems; review multipliers for mixed-use and transit-oriented development.
- Example: a commercial complex pays 1% on land development and 4% on the building of the ASR rate, against 0.5% and 2% for a similar residential project.
Practise this topic. Questions on Development Charges & Appeal, with answers explained.
All Development charges notes · MPSC ATP syllabus · MPSC ATP Mock Test 1 with answers · Start free
Medha AI writes its own notes and checks them against the sources listed. Medha AI is an independent preparation service. It is not affiliated with, endorsed by or connected to APPSC, TSPSC, MPSC, UPSC or any other commission or government body.