Since building owners aren't getting their rent income, it's difficult for them to pay the property tax which funds civic amenities.

Coronavirus pandamic caused lockdown has brought about a rental crisis in Hyderabad Image For Representation
news Lockdown Saturday, May 23, 2020 - 18:56

The economic fallout of the 50-day lockdown is pinching shop owners hard with many struggling to pay rent. As for building owners, not receiving monthly rent hurts since they have to make annual property tax payments to the municipal administration. Further, to avail the property tax discount from the government, the payment has to be made by May 31. The usual deadline is April 30, but the government had extended it to May 31 due to the unprecedented circumstances. However, meeting this deadline too is proving to be hard for many.

The slump in payment of rent has a snowballing effect on the municipal administration as the tax collected is often used for providing the public with amenities like better roads, drainage, footpaths and streetlights. However, officials say that the tax collection has been poor this year.

Srinu runs a shop renting out tents, chairs and utensils for catering in Ameerpet to earn a living, but since the coronavirus pandemic, all functions that attract a crowd, including weddings, birthday celebrations and even funerals have been banned by the Telangana government.

“I haven’t paid the rent since March. The building owner knows that I have had no business and so isn’t insisting on rent for now. But I have to pay it someday,” says Srinu, who along with his family, was solely dependent on the public distribution system to not starve during the lockdown.

”On some days, we had to stand on the roadside, hoping some good soul would provide food packets. It has been hard,” he adds.

To tide over the economic impact of the lockdown, the Telangana government in March had announced a three-month deferment of rent for home and commercial establishments in the state. Those insisting on rent can be penalised and no interest on rent should be charged on the tenants either. However, the deferment is only a relaxation. The rent will be due this July and not everyone may be able to pay up.

“It will take well over a year with no further lockdowns for economic activity to return to normal,” says Raju, owner of a shoe retail store in Ameerpet. It was with a lot of hope that Raju decided to renovate his store in February. He wanted his store to look chic like the branded shoe retail chain next door. “The store was closed for a few weeks due to renovation. It was to open on March 24 but they imposed the lockdown. Now that the shop is open, there are no customers,” he laments.

With the lockdown period being extended multiple times over the period of two months, several small entrepreneurs with whom TNM spoke were hesitant about placing new orders or replenishing stocks.

“There is no school opening rush this year. I didn’t even place an order for school shoes. The stock I have is from February. Even if I want new stock, it has to come from Nagpur or Agra and they have their own issues due to the lockdown and the pandemic. No new material is going to arrive in the markets anytime soon,” says Raju, who has not paid rent since March. “My building owner is understanding. I will have to pay in instalments over the next year and that is if the business resumes normally without any further lockdowns,” he adds

At Saifabad, Anand opened his tailoring shop after 50 days just to finish off pending assignments.

“I have already used up the advance that was given at the time of taking up the orders," says Anand, who has not paid rent since March either. “I'm not taking up any new orders as I don’t have materials like buttons and thread. We buy them in wholesale from Begum Bazaar or Sultan Bazaar, but both markets are yet to become fully operational. It will take some time,” he says.

Those owning commercial establishments are also in a fix.

“I can’t demand rent and I'm well aware of the lack of business,” says a building owner from Mehdipattanam. “I have to pay property tax that amounts to a few lakhs. Apart from property tax, I also have to take care of building maintenance, but there is no rent coming and I am not too hopeful that the situation will improve anytime soon. The marriage function halls I own have now been taken up temporarily by the police to house migrant workers. I'm happy to give the space, but the electricity bill will be on me. I have to put my hand in the last of the Rs 5 lakh in my account just to meet household expenses and I have no other income. I was keeping that money to pay my daughter’s college fees,” he adds.

Property tax is a crucial revenue source for municipalities to provide civic amenities and maintain roads, drainage, sanitation, parks etc. The tax is collected annually and the last date for tax payments are either July 31 or October 15 every year. Payment delays result in fines of 2% per month on the outstanding amount.

 

To improve property tax collections, the Telangana government in 2019 had come up with a 5% discount for residential and commercial property owners, referred to as the Early Bird Scheme (EBS). The deadline to get the discount has been extended to May 31 but there are few takers this year, indicative of the looming rental crisis in Hyderabad.

The Greater Hyderabad Municipal Corporation (GHMC) in May 2019 collected Rs 535 crore as property tax. This year, during the lockdown period from April to May 11, the GHMC has collected just Rs 167.52 crore, according to a press statement.

An official with the property tax wing said, “The rent paid by the tenant is used by the building owner to pay property tax. This is in turn used by the GHMC for amenities such as street lighting, sewerage cleaning, roads, footpath and other works. The fall in property tax collection will hurt these services, which is why we are trying hard to collect the taxes even during the pandemic and extend the  5% discount. We will have to wait till May 31 to know if new measures need to be adopted to improve property tax collection.”