The Maharashtra government on March 31 decided to increase the ready reckoner (RR) rates in the state by an average of 8.80 percent.
Except Mumbai, the ready reckoner rates of all municipal corporations will be increased by 8.8 percent from April 1 onwards, said a government press note, a copy of which is with Moneycontrol.
In Thane, the rates have been increased by 9.48 percent, Navi Mumbai by 8.90 percent, Ulas Nagar by 9.81 percent, Vasai-Virar by 9 percent, Panvel by 9.24 percent, Pune by 6.12 percent, Pimpri Chinchwad by 12.36 percent, Sholapur by 8.08 percent, Nasik by 12.15 percent, Ahmadnagar by 7.72 percent, Latur by 11.93 percent, Aurangabad by 12.38 percent among others.
The last increase was just before the onset of the COVID-19 pandemic. These were increased by 5.86 percent in 2017-2018, they were stable for two years and in 2020-2021 they were increased by 1.74 percent.
Ready reckoner rates are the benchmark values of real estate. It is used for both, calculation of capital gains under income tax and payment of stamp duty to the state government, and is linked to all premiums and charges, floor space index (FSI) rates payable to municipal corporations. The rates are released at the beginning of the financial year in Maharashtra.
The ready reckoner rate, also known as the 'circle rate' or 'guidance value' in other parts of the country is the minimum rate fixed per square feet or per square metre of a property by the state government. Even if you sell a house below this rate – because the person is your relative or some close acquaintance – the buyer still has to pay stamp duty and all other administration charges as per the ready reckoner rate.
You cannot sell a house at a rate below this rate, at least on paper. The ready reckoner rate is deemed to be the minimal market rate. But if you sell your house at a rate higher than the ready reckoner rate, then the buyer’s stamp duty and other charges get linked to that rate.
These rates differ based on various factors: whether it’s a residential or commercial property or agricultural land, does it fall in urban area or rural zone, location and so on. The state government revises the rates based on the movement in market rates so that the scope of using illicit money in real estate transactions is reduced and also that the government is able to collect appropriate stamp duty.
The real estate sector expressed its displeasure over the hike in the RR rates.
“The real estate industry is going through tough and challenging times due to input material price hike by about 40 percent. Many developers especially in the affordable category are unable to buy at these exorbitant rates. This may lead to temporary closure of work. In these tough times a hike in the RR rates was uncalled for,” said Anil Pharande, president, Credai Pune.
“The RR rates in Pune, Pune extended and PCMC have increased by 6.12 percent, 10.15 percent and 12.36 percent respectively. This was uncalled for. At many places, there was a mismatch in the RR rates and we had appealed for correction,” he said.
The government didn’t hike the rates for the last two years due to the pandemic and that’s the reason it considered hiking it this time. They should have noted that the industry is still grappling with various problems in spite of increased traction. The increase in premiums, TDR, and FSI rates will further increase input costs and directly impact the buyers, he said.
Shantilal Kataria, VP, Credai National is of the view that the government had record-breaking revenue collection during COVID-19 due to sops such as reduced stamp duty and stable ASR rates. They should have continued giving sops and not increased the rates.
Niranjan Hiranandani, National Vice Chairman- NAREDCO, said, “Maharashtra has been proactive in terms of fiscal boosters like stamp duty and premium reduction. Levying of Metro cess, hiked stamp duty along with increased ready reckoner rates simultaneously will hurt the optimistic sentiments of prospective homebuyers.”
Some deferment especially in the wake of rise in input cost and fuel prices affecting project viability would have acted as a financial cushion. Government support to cap soaring input costs will help the real estate sector survive these challenging times, he added.