No blanket hike, but RR rates to go up; properties will be costlier

While property values in several places are already greater than the government-determined RR rates, the move to hike RR rates will also adversely impact the construction cost for builders as several charges collected by the Brihanmumbai Municipal Corporation (BMC) are directly linked to the RR values. Government sources confirmed that the worst hit would be buyers of the properties being redeveloped. Property tax computations are linked to RR rates too.

Though RR rates for Mumbai and the rest of the state have seen an upward revision each year since 2008, the Devendra Fadnavis government had come under immense pressure not to hike it this time due to slowdown in the construction industry.

During the recently-concluded winter session of the state Legislative Assembly, legislators from even the BJP lobbied for non-revision of RR rates, fearing a backlash with polls to the BMC due in 2017. Even the CM-led housing department argued against a hike in rates, forcing the government to announce that there won’t be a blanket increase in rates. Sources said the state’s revenue and finance departments backed a moderate hike. Stamp duty is the second highest revenue earner for the Maharashtra government.

Even as the number of property transactions in Mumbai saw a decline in 2015, sources pointed out that the value of these transaction was an average 10 percent higher than the RR rates determined last January. “RR rates are meant to mirror the market rates of property,” a senior official said.

Sources also conceded that property transactions at rates lower than prevalent RR values were also recorded in several pockets, including in commercial belts such as Colaba, Bhuleshwar, P D’Mello Road, SV Road (Bandra), Chakala and Kurla.

“The demand for commercial properties has been on the decline. This is due to several factors including high land rates and rise of online business platforms,” said a senior official.

Incidentally, despite the slowdown, the average value of property transactions has witnessed an upward spike in prominent residential zones including in the Goregaon-Dahisar belt, a hotspot of redevelopment activity, the Kurla-Ghatkopar belt in the eastern suburbs and in the Bandra-Andheri belt.

As a result, the government has decided not to change RR rates in most commercial belts. In residential belts, the hike will be capped to below 10 per cent in most areas. However, certain preferred zones where property values continue to be way higher than RR rates will witness hikes of RR rate up to 25 percent, sources revealed.

The government had hiked the RR rates in Mumbai by an average 14.63 percent in January, 2015. At that time the hike was capped below 10 per cent for 352 out of 748 pockets, revealed a source.