Days after the Maharashtra government decided to temporarily reduce stamp duty on housing units from 5 percent to 2 percent until December 31, 2020, it has now decided to hike the ready reckoner (RR) rates in the state by around 1.74 percent, sources said.
“The ready reckoner rates have been hiked by 1.74 percent,” they said, adding that the new rates will be applicable from September 12.
Ready reckoner rates, also known as circle rates or guidance values, are the minimum values set by a state government below which a property cannot be registered. Each area within a city has its own RR rate on which stamp duty is calculated.
Ready reckoner rates have been increased in the state after over two years.
Real estate experts said increasing the RR rates after reducing the stamp duty in most areas of Maharashtra while Mumbai saw too marginal a decrease comes as a surprise and is expected to have an adverse impact on the realty market.
"While the entire real estate industry was expecting a reduction in the ready reckoner rates, the Maharashtra government has increased them which will lead to a cascading affect of increasing approval costs. Also, property sales in primary as well as secondary markets in the areas where RR rates are higher than market rates will slow down due to income tax levied on both buyers and sellers u/s 43CA. This move is bound to have an adverse impact on the number of new project launches and puts the viability of ongoing projects under question," said Deepak Goradia, president, CREDAI-MCHI.
“It is surprising, that in a scenario where the suggestion, ‘reduce price of residential real estate’ has been covered by media – be it Deepak Parekh, Nitin Gadkari or Piyush Goel – the state government has instead opted to enhance the RR value. Income tax provisions mean a developer cannot sell at a price point lower than the RR rate, as it translates into taxation burden for both, buyer and seller,” said Niranjan Hiranandani, president (national) NAREDCO and Assocham.
In this situation, the expectation was that the state government would reduce the value, instead, it has chosen to increase the same. New projects will be impacted too, as the RR value will govern all levies, duties and taxes payable by a developer. One hopes the authorities will consider this and take necessary steps, he added.
“Bringing down the RR rate considerably at this juncture was something that everybody was looking forward to as it would have given some room to developers to bring down the prices. Today in most of the micro-markets, the RR rate is almost equal to the ongoing sales price and buyers as well as sellers have to pay tax if sales happen below the RR rate. This has been the limitation cited by developers to bring down prices, and an increase of RR rates further limits the room for them to bring down the price while too marginal a reduction makes no difference at all,” said Anuj Puri, chairman, ANAROCK Property Consultants.
To boost the stagnant real estate market hit by the COVID-19 pandemic, the Maharashtra government had on August 26 decided to temporarily reduce stamp duty on housing units from 5 percent to 2 percent until December 31, 2020. Stamp duty from Jan 1, 2021, until March 31, 2021, will be 3 percent, they said.
The Maharashtra government on March 6 had announced that it is reducing stamp duty on properties by 1% for Mumbai, MMRDA Region and Pune for a period of two years.