Karnataka cabinet clears 1% fire cess on new multi-storey buildings

The state cabinet on Thursday decided to levy a 1% fire cess on new multi-storey buildings coming up in Bengaluru and rest of Karnataka in what builders see having a marginal impact on their initial investment in upcoming projects and possibly increasing property prices.

The cabinet decided to amend the Fire Force Act, 1964, to pave the way for the levy of 1% fire cell along with the property tax on new multi-storey structures. The cess, the government said, will help boost the efficiency of the fire force department.

According to Bengaluru’s real estate developers, the proposed levy would add to an already rising cost burden, driven by soaring construction expenses and multiple taxes.

Builders are likely to pass on the new cess to homebuyers, pushing property prices higher. Industry stakeholders warn that such recurring cost inflations may dampen demand and hurt ongoing and upcoming projects.

“The state government is grappling with revenue issues and hence burdening one of the largest sectors in the city. There is no clarity on what this cess is and why it was rolled out,” said the chairman of a real estate firm that has large residential and commercial developments. He spoke on the condition of anonymity.

Deputy leader of opposition Arvind Bellad of the BJP slammed the government move. "After increasing metro fares, bus tickets, milk prices, they have now imposed a 1% cess on all high-rise buildings — including apartments, schools, hospitals and offices. How much more do they expect us to pay? Instead of fixing mismanagement or curbing corruption, they are squeezing honest, tax-paying citizens even more,” he wrote on microblogging site X, adding: “This isn’t governance — it’s exploitation. And it is always the middle class and working families who suffer."

The cess is aimed at raising funds to strengthen the fire safety infrastructure and emergency response capabilities across Karnataka’s rapidly urbanising cities, particularly Bengaluru.

While the move is driven by public safety concerns, Bengaluru’s developers are raising red flags over the timing of its introduction and the financial strain the cess could cause.

“The fire cess is seen as another blow to developers’ bottom lines, especially for large-scale projects. In the absence of subsidies or incentives to offset the additional burden, the added cost is likely to be passed on to end-users, pushing property prices further upward in a market that’s already grappling with affordability issues,” the managing director of a large real estate development firm said, also on the condition of anonymity.

There is no clarity on how the government plans to levy the cess under the proposed amendment: whether it is going to be like the construction workers welfare cess or like the solid waste management cess that is built into the property tax.

Industry insiders estimate that a 1% cess on property tax could run into about Rs 1 crore for a residential project of 1 million sq ft.

According to industry insiders, the cess will be applicable to new constructions and linked to licensing processes, with the state reserving the right to revise rates periodically.

With developers under pressure to maintain margins and meet regulatory compliance, many fear this could disrupt ongoing and upcoming projects, slow down new launches, and temper buyer sentiment. They are calling for clearer guidelines, phased implementation and greater transparency in fund utilisation to ensure the policy improves safety without derailing growth.