Mumbai hotels decry BMC's paltry ready reckoner payments

Updated: Jul 29, 2020, 07:20 IST | Vinod Kumar Menon | Mumbai

Hoteliers demand that the civic body waive off other charges such as property tax, GST to compensate for loss

(Clockwise from left) Indie Stays at Kalina; dorms and rooms offered by Indie Stays
(Clockwise from left) Indie Stays at Kalina; dorms and rooms offered by Indie Stays

Hotel associations have raised their concerns about the civic body using ready reckoner rates for calculating the rates of rooms where COVID-19 warriors and quarantined citizens are being accommodated.

Property lawyers, too, have pointed out that the practice is wrong as only the cost of land is considered for calculating rates as per Stamp Duty Ready Reckoner Rate (SDRR), without considering the construction cost, ambience and other services.

Gurbaxish Singh Kohli, president, Hotel & Restaurant Association Western lndia (HRAWI) wrote to the civic chief Iqbal Singh Chahal regarding meetings of hotel representatives with the Masurkar Committee (committee headed by Deputy Municipal Commissioner (Zone III) Parag Masurkar) and its assurances. "It was clarified by the Chairman and AMC (Estates) that the April 30 circular on 'Token compensation' based on SDRR rates was not applicable to hotels and there was no reason to worry that any hotel would be charged at that rate. It was also clarified by the committee that the SDRR rates are meant specifically for open spaces, maidans, halls and other premises, wherein the BMC only utilises the space and all other amenities such as electricity, food, light, water, furniture, fans, etc. are provided by the BMC, therefore, Hotels do not fall into that category, even though mentioned in the Circular," the letter said.

Also Read: Give us our money, hotel tells BMC and hospitals

Kohli demanded that all hotels be paid as per the revised rates mentioned in the BMC's July 10 circular. "If the circular dated July 10 is not made applicable with retrospective effect then the purpose of Mr. Masurkar's Committee would stand defeated. All Hotels who have been unjustly paid very low rates either based on 'Token Compensation – SDRR rates' or as per old rates be now paid as per circular dated July 10 with retrospective effect. We request that these revised rates should be applicable for all hotels irrespective whether they are used as CCCI specifically or for MTDM emergency workers," said Kohli.

Kohli's letter also added, "Furthermore, the circular dated July 10 has fixed the rates based on star rating… out of 55,000 hotels in India, only 1,548 are now yet availing the star rating classification, due to the disincentives attached to it. It was agreed by Masurkar's Committee that as far as the issue of star rating was concerned, the BMC would accept certificate of confirmation of star rating from the Association for Hotels who have presently not opted for star rating classification."

"There is an urgent need to record the SOPs with regard to quick payments, in line with the objectives and decisions taken by Masurkar's Committee," Kohli's letter said

'Why us?' ask hotel owners
Around 85 to 90 hotels in the city were used by the BMC for either frontline workers or asymptomatic patients who were put in quarantine. This is other than star hotels, in and around international and domestic airports, where passengers were quarantined and were made to pay for their stay.

Among those being made to run for their money are three Shetty brothers, who floated a star-up, Indie Hotels LLP, three years ago and decided to start a 'new age', no frill modern lodging facility with 30 rooms and 29 dormitory set-ups in Kalina.

The three brothers, Rakesh, 42, Roshan, 40, and Rohit, 38, told mid-day, "It took over two years for us to have our 'new age' place ready. It became operational in April last year. Booking is done online and patrons get to use technology, luxury, comfort, and a plush stay at a reasonable rate without kitchen facility. Ordering in is allowed," said Shetty.

The problem began soon after the lockdown when civic staff from the H East ward pasted a notice on the main entrance. "We were taken aback when we learned that without taking us into confidence, they were taking our property under the Epidemic Diseases Act. We expressed our concerns about the new construction and the high-tech facility but the local ward official said that if we do not agree, an FIR will be filed against us. We had no option but to hand over the property from April 1," the brothers said.

They added, "The BMC took over the entire housekeeping and food was supplied through their caterer. Around sixty people, including some frontline staffers, arrived and soon the BMC started running the centre as a quarantine facility," they said.

What shocked the brothers further was that for their hotel spread over a 10,000 sq feet area, they would get a compensation of 2 per cent on the basis of SDRR rate, where the value of the property is between R2.50 lakh to R3 lakh per sq feet. "As per this calculation, we would be paid around R3 lakh, which is not even the breakeven for our daily operational expenses. BMC's monthly payment offer was equal to our two days' collection," they said.

The brothers have taken a loan worth crores to set up the hotel and are paying a monthly EMI of over R27 lakh and overheads such as maintenance bills and staff salaries.

"Compensation for hotels has been based on the star category which is not a correct yardstick as new-age hotels do not go for star categorisation. Also, compensating all hotels by putting them in basket-based star categorisation doesn't make sense as each has different cost of capital, efficiency, employee cost, etc," said Rakesh, who runs the hotel. "We contributed for our city during the pandemic and are surprised with the way we are being treated. Especially, when all the big five star hotels have closed their doors."

"Even if BMC is not in a position to compensate us, it could at least give credit or waivers for property tax, GST, Income Tax, etc in lieu of our earnings," Rakesh said.

Expert speak
Advocate Vinod Sampat, founder president of Stamp Duty and Registration Payers Association said, "The BMC is failing to understand that the market value of an immovable property is decided using the government ready reckoner only to calculate the stamp duty valuation, and whichever is higher (agreement value or SDRR value), the duty is paid accordingly."

"The BMC must understand that the ready reckoner rate is applicable only under certain circumstances and moreover the state government gave an undertaking in a contempt petition at Bombay High Court's Aurangabad bench in 1993, stating that they won't use ready reckoner rates to determine the stamp duty value," Sampat said.

"It is wrong on BMC's part to pay hoteliers at a lower rates, which in my opinion, is nothing more than window dressing and clearly an abuse of power, by civic officials," Sampat added.

BMC speaks
Ashish Bhoir, Assistant Engineer (Maintenance), H East ward, said, "The SDRR rates are approved by our high authorities and we are only following their directions." When asked if the Masurkar Committee's revised rates will be made applicable to such hotels, where SDRR rates were used, he said, "It is a policy matter and I won't be able to comment."

2%
Proportion of ready reckoner rate offered for Indie Stays by BMC

Rs 27 lakh
Approx. EMI Shetty brothers have to pay

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