Karnataka Cabinet clears 1% fire cess on new multi-storey buildings in what builders impact property pricing

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 the builders see having marginal impact on their initial investment of upcoming projects.

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 the new multi-storey structures. The cess, the government said, will help the efficiency of the Fire Force department.

The proposed cess has sparked concern among Bengaluru’s real estate developers. Builders argue that the additional levy adds to an already rising cost burden, driven by soaring construction expenses and multiple taxes.


Deputy leader of Opposition Arvind Bellad (BJP) slammed the proposed cess. "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. This isn’t governance — it’s exploitation. And it is always the middle class and working families who suffer," he said in a post on X.

The new cess, aimed at boosting fire safety infrastructure, is likely to be passed on to homebuyers, pushing property prices higher. Industry stakeholders warn that such recurring cost inflations may dampen demand and hurt the 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 CMD of a real estate firm that has large residential and commercial developments.

Targeted at high-rise buildings, the cess aims to strengthen fire safety infrastructure and emergency response capabilities across Karnataka’s rapidly urbanizing cities, particularly Bengaluru. While the policy is driven by public safety concerns, it introduces a fresh financial layer to the already cost-intensive process of real estate development.

Bengaluru’s developers are raising red flags over the timing and potential financial strain this cess could impose. The city’s real estate market is already coping with soaring material costs, delayed project approvals, and funding challenges

“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,” said managing director of a large real estate development firm.

There is, however, scant clarity on how the government planned to levy the cess under the proposed amendment: whether it is going to be like construction workers welfare cess or like solid waste management cess that is built into the property taxes.

Industry insiders estimate that a 1% cess on the assessed future property tax for upcoming properties, for instance, levy of such taxes on a 1 million sq. ft. residential project could run into close Rs 1 crore.

With developers under pressure to maintain margins and meet regulatory compliance, many fear this move could disrupt ongoing and upcoming projects, slow down new launches, and temper buyer sentiment. As the government gears up to roll out the cess, the real estate community is calling for clearer guidelines, phased implementation, and greater transparency in fund utilisation to ensure the policy improves safety without derailing growth.

“This sudden introduction of Fire Cess, without industry consultation or clarity on the implementation mechanism, could disrupt ongoing and upcoming projects. We urge the government to adopt a phased approach and ensure transparency in how the funds collected will be utilised,” said chairman of a real estate development company from Bangalore.

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. Although it aligns with broader disaster preparedness goals, stakeholders caution that, without proper planning, it risks becoming yet another bureaucratic burden.

Bangalore’s real estate sector, which has seen robust growth and rising institutional interest, now awaits detailed guidelines. Developers and investors are watching closely to evaluate how this policy may impact project viability and urban housing dynamics in the months ahead.