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Real estate slowdown hits Maharashtra’s economy

No hike in circle rates for the first time in nine years, experts say 'expected downward revision'

By: Express News Service | Mumbai |
April 1, 2018 6:10:51 am
Real estate slowdown hits Maharashtra's economy Ready reckoner (RR) rates are market values of properties, which are determined by the government for payment of stamp duty. (Source: Express photo by Jaipal Singh/Representational)

With real estate prices dropping in Maharashtra’s cities, the Maharashtra government on Saturday decided not to increase the government-fixed circle rates, also known as ready reckoner values, for properties across the state. This would be the first time since December 2009 when the annual guidance values for properties in Maharashtra have not seen an upward revision.

Ready reckoner (RR) rates are market values of properties, which are determined by the government for payment of stamp duty. These rates- published annually- also impact the construction cost of a real estate project, since several premiums and charges collected by the municipality and the government are linked to the ready reckoner values.

On Saturday, Maharashtra’s Inspector General of Registration and Controller of Stamps issued an order, notifying that the RR values in 2018-19 will continue to be the same as those notified for 2017-18 across all the zones in the state. “Considering the current slow down in the construction industry, a decision not to revise RR rates has been taken,” Kawde said. Even the annual statement of rates (ASR) for construction have not been modified for now.

Leading builders’ outfits- The Maharashtra Chamber of Housing Industry (MCHI-CREDAI) and the National Real Estate Development Council (NAREDCO)- had earlier approached Chief Minister Devendra Fadnavis, demanding a downward revision in the RR values in wake of the slump in the construction sector. A ministerial committee, appointed by the Chief Minister, meanwhile, had backed the proposal for not hiking the rates in the coming fiscal. Kawde’s order mentions that his department had acted as per the “directives of the state government.” Incidentally, earlier in the month, the state government had raised hopes in the construction sector over the possibility of a “downward revision” of rates for the first time ever. It had done so by introducing a provision in laws permitting it to reduce RR rates.

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“There was real scope for reduction in rates this year,” said Advocate Dharmin Sampat of Registration Fee and Stamp Duty Payers Association (Regd.), while pointing out that there had been an average 7 per cent increase in rates last year, despite the continual slow down.

Sunit Gupta, a property valuation expert, echoed this viewpoint. “The government has missed a golden opportunity. Even if they were not willing to decrease RR rates for government’s revenue collection purposes, it could have at least decided to compute stamp duty for property transactions on carpet area basis.”

While the state has made it mandatory for builders to sell apartments on the basis of an apartment’s carpet area, the state’s revenue department continues to collect stamp duty on the basis of built-up areas, which include thickness of the outer walls of an apartment and the balcony space.

But senior revenue department officials contest this claim. “Last year’s hike was the lower ever in several years. The average hike for Mumbai in 2017-18 was under 4 per cent. This year we haven’t revised the rates. This shows that the slowdown in the sector has been accounted for,” said an official, requesting anonymity. In 2017-18, the government has hiked the rates on April 1, 2017, but it had subsequently stayed the hike in land rates in the Mumbai Metropolitan Region for four months. The stay was eventually lifted on October 1, 2017.

Justifying the move to collect stamp duty on built-up area, another department official said, “The stamp duty is payable for the entire buildable area of an apartment including the outer walls and the balcony.” Officials also said that a universal decrease in RR rates would have adversely impacted state’s revenue collection. The government has estimated a collection of over Rs 23,000 crore from stamp duty payments and property registrations for 2018-19.

Ironically, a proposal to delink construction permit and charges with RR rates is gathering dust in the state’s secretariat. The Department of Stamps and Registrations had submitted the proposal a few years ago, contending that RR values should be treated as guidance values for stamp duty payments alone.

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First published on: 01-04-2018 at 06:10:51 am

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