Since December 2023, the registration of new apartments in Chennai has come to a standstill after the state government in March last year brought in a single-document system for the purpose, developers in the city say.
The composite registration format includes the land and building values together.
Data from property consultancy ANAROCK shows this has led to an 11 percent quarter-on-quarter fall in the total number of apartments registered in the third fiscal of 2023 to 4,900, the lowest among the top seven cities in India.
A lack of clarity and certainty about the registration process and a hike in registration fees have also affected homebuyer sentiment, developers said.
The new changes
Sridharan Swaminathan, vice president, South Zone, Confederation of Real Estate Developers' Associations of India (CREDAI), said previously, Tamil Nadu had been following a system necessitating two documents for registration—a construction agreement and one referred to as an undivided share of land (UDS).
UDS is the share of land allocated to an individual when they buy a flat.
However, the state recently decided to combine the registration process into one composite method with a single sale deed. "Thus, with one sale deed registration, the government had to fix the composite value for every area to calculate the registration charges," Swaminathan said.
Lack of clarity
"Currently, in the new composite format of registration, the sale deed cannot be executed to the homebuyer before completion of the construction," said Swaminathan, adding that this means a potential buyer cannot book a flat in a project that is under construction or in the initial stages.
This also means that developers lose access to funds that would otherwise have bankrolled their projects.
“And today the registration of under-construction properties has been halted altogether as the new system has scrapped the sale agreement issue. We only see the previously completed project being registered today,” he added.
Additionally, without an agreement in place, projects cannot be registered under the state real estate regulatory authority (RERA), the body in place to protect homebuyers' rights and ensure the completion of projects.
CREDAI said it is working closely with the state government to bring more clarity around the new property registration system.
Burden of homebuyers
According to the new composite system, the registration fee for properties priced up to Rs 50 lakh is capped at 6 percent, at 7 percent for those between Rs 50 lakh and Rs 3 crore, and properties upwards of Rs 3 crore are tiered at 9 percent.
Developers say the new registration system has hiked the registration charges for homebuyers more than 100 percent between March and December.
For example, in prime areas like Poonamallee, a property worth Rs 44 lakh would have attracted a registration fee of Rs 1.2 lakh (with 11 percent UDS registration which came to Rs 49,302 and 2 percent construction agreement cost that amounted to Rs 79,236) in March 2023. However, the same property would now require a registration charge of Rs 2.9 lakh (with 6 percent composite value charges. And in other places like Teynampet, the registration charges saw a 148 percent increase.
This has led to a marked dip in the number of deals closed.
"We have been requesting the state government to reduce the registration charges and also bring in legal documentation like a sale agreement in place to register the under-construction projects," Swaminathan added.
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