Houses to get further expensive by 2-3%: Kolte-Patil

Ready reckoner rates are calculated using the built-up area of a property and are used to determine its market value. Before 2008, it used to be calculated using the carpet area.

On how the sales trajectory has been for the company, Kalele says the sales in December in Pune were far better than November as properties below Rs 1 crore still have robust demand.Below is the edited transcript of Kalele’s interview to CNBC-TV18.

Q: If you could explain the hike in ready reckoner rates, I think it is up to 5-10 percent in Pune if I am not wrong. If you could explain what does that mean and normally we expect the stocks to react negatively but the stocks actually reacted positively, what is your take on that?

A: Given the general economics this will mean 5-10 percent price increase and in some areas in Pune the increase is 15 percent also. This is a kind of setback, not so much from a stamp duty perspective.

As a developer we have to pay to various municipal bodies but more so because in some areas now, the ready reckoner rate is way above the market rate specifically in commercial asset classes. So, in the last budget, the finance ministry introduced the differential taxation where they said that if the market price of the transaction is below the circle rate of that particular zone, then one would have to pay regular income tax on the difference as well. That is something which is a factor and obviously the stamp duty and the premiums will go up by that much percentage points.

Q: Can you just give us a sense on how much of an incremental increase can we see in the prices of property because of the higher ready reckoner rates?

A: This will lead upto about 2-3 percent increase in the property rates primarily because we will have to pay more premium charges to the PMC as well as the town planning bodies.

Q: How is demand looking at this point in time, do you think that there could be any sort of impact on the demand for residential projects at all and how is demand at this point?

A: We were expecting the ready reckoner rates to go up by 5-7 percent but a 10 percent hike was definitely a setback. But because we were expecting it and the customers were also expecting it.

In December we saw more sales and more importantly, more registrations as compared to November timelines. So, going forward, we have seen that every year when the ready reckoner rate increases in January, January customers take time to absorb the new rates, rework their budget calculations. So January again slackens out a bit.

Q: Are you saying that the demand has really come back and if you go by the December anecdotal evidence is the demand really strong enough because we have seen quite a bit of rally in real estate stocks especially the ones which are operating in the Mumbai Pune region, is the demand still robust even at the current high levels?

A: In Pune specifically, the demand in December was far better than what we saw in November so it remains to be seen. For the first three quarters it was a very stable demand as far as FY14 first three quarters go.

In Q3 specifically, we saw that for ticket sizes below Rs 1 crore in Pune continued to sell very robustly, but above Rs 1.5 crore people took more time to decide. So, to put things in perspective, below Rs 1 crore the demand is still very stable. For houses above Rs 1 crore demand is there but people are taking longer to decide. But demand is there at least in Pune specifically.