The Corporation of Chennai on Monday pitchforked infotech companies into a separate category of assessees, increasing the rates of property tax they will have to pay by up to 200%.

It may not be time as yet for companies to pull the plug on Chennai as a favoured destination, but industry representatives say they were taken aback by decision. "This is against the state's policy of being an investor-friendly destination," said Nasscom senior director K Purushothaman. "We will now have less incentive to invest in the city."

IT companies in the heart of the city — Teynampet, Kodambakkam, Anna Nagar and Adyar, where the rate has been increased by 200% — will now have to pay the most. Firms in these zones so far paid anywhere between 3/sqft and 9/sqft. They will now have to shell out anywhere between 9/sqft and 27/sqft. This is much more than what IT companies pay in Bangalore (10/sqft per year for companies that own the building and 20/sqft for firms that rent commercial space) or Kolkata (12/sqft per year).

IT companies were so far clubbed with departmental stores and other small establishments in the 'non-residential building' category. The corporation has now moved them under the 'special buildings' category.