A hike in ready reckoner (RR) rates by the Maharashtra government is expected to hit sales of properties in the state, as fear of increase in property prices looms, say real estate developers and consultants.
RR rates are rates fixed by the government, below which a property cannot in a given area cannot be sold. The rates are used to calculate the minimum registration and stamp duty charges paid at the time of property registration. The RR rates have touched a maximum of 30%, which means higher stamp duty outgo for home buyers.
The move has been strongly criticised by developers and consultants on grounds that it has come at a time when property market is sluggish and any increase in prices could have a negative impact on sales.
?The hike in lease rentals, property taxes, fungible premium and now hike in ready reckoner rates despite the market realities of fall in sales bear testimony to the fact that the officials adopt a unilateral approach and their mindset is to increase revenue somehow,? says Lalit Kumar Jain, the president of Confederation of Real Estate Developers Associations of India (CREDAI). Last year, developers had asked the government not to increase ready reckoner rates in the current year given the bearish market sentiment in real estate.
?The government is only adding to inefficiencies and ultimately, this will make things difficult for the consumers. It will be a double whammy for home buyers who recently got bogged with service tax and value added tax on property to now brace up for higher stamp duty and registration charges,? says Pankaj Kapoor, the founder and managing director of Liases Foras, a Mumbai-based real estate rating and research firm.
Kapoor said that by increasing RR rates, the government is trying to bring those rates closer to market rates ? fixed by developers. He says given the speculative nature of market rates, it is not justified that RR rates be based on them.
In Mumbai, over the last five years, the RR rates have nearly doubled, according to data sourced from the state government.
The Worli area has seen the maximum increase, with the rates on an average seeing an increase of 120% between 2008 and 2013. During the period, rates in Malabar Hill and Cumballa Hill increased 101%, while 99% in the central Mumbai areas of Parel to Sewri.
Between 2008 and 2012, hike in RR rates in the suburban areas of the financial capital has also been significant. The average rate in the western suburban area of Borivali surged by 160%, while areas of Mulund, Vile Parle and Chembur have risen by around 70%.
