Around 63 percent of sale transactions entered into in the Mumbai Metropolitan Region (MMR) during FY20 were at a 20 percent premium to ready reckoner rates, says a study by Propstack, a data analytics firm.
The firm analysed ready reckoner premiums in MMR based on 38,000 sale transactions.
The percentage of transactions at a premium of over 20 percent is the lowest in south and central Mumbai and highest in Thane and beyond Thane markets, the study said.
Around 8 percent deals during the year-ended March were below the ready reckoner (RR) rates. The highest percentage of transactions, below the RR rate, were in south and central Mumbai at 23 percent and 16 percent, respectively, according to the data.
RR 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.
To align circle rates with the actual market prices, most state governments previously regularly reviewed and increased the RR rates in cities either year-on-year or in two years. However, market values increased only marginally in the same period.
The major advantage of any reduction in gap is that it discourages 'black money' transactions. The primary sales market in Tier-1 cities today offers limited scope for unaccounted cash infusions because of the minimal gap between the state-notified circle rates and the market value quoted by developers in such regions.
Earlier this month, a report by real estate consultant ANAROCK said the average housing price quoted by developers across major cities are higher by 6-75 percent than the government's circle rates, the value at which stamp duties are paid and properties registered.
The research data comes at a time when ministers and some corporates have suggested developers, especially those who have high bank debt, to reduce their prices and clear unsold units.
From a more than 100 percent difference between the two rates in certain areas in Mumbai, Pune and Gurugram in 2015, some localities presently show a mere 6 percent variation, it added.
In Mumbai, average market prices in Lower Parel are 6 percent higher at Rs 34,660 per sq ft compared with the RR rate of Rs 32,609 per sq ft. In Worli, the market value is Rs 38,560 per sq ft while the RR rate is Rs 35,350 per sq ft, the ANAROCK report stated.
Noida saw a reduction of as much as 10 percent in circle rates in the last two years - a step taken to boost real estate demand. Circle rates on Noida Expressway have reduced to Rs 4,366 per sq ft in 2020 from Rs 4,700 per sq ft in 2016. As a result, the gap between the market values and circle rates has increased in the last four years. The difference between the two rates was 10 percent in 2016 and now stands at 16 percent.
In the same period, average market values in Noida also decreased by 2 percent to nearly Rs 5,075 per sq ft. In Sector-150, the circle rate has remained stagnant at Rs 3,716 per sq ft for the last four years. However, in central Noida, the difference between the circle rate and market price has reduced to 34 percent in 2020 from 47 percent in 2016.
In the last four-to-five years, most state authorities regularly increased circle rates in cities to align them with market values. Dwarka Expressway in Gurugram, for instance, saw circle rates rise by 43 percent in the last four years to nearly Rs 4,133 per sq ft in 2020. However, market values in this period increased only by 10 percent. The gap between the two rates has been narrowing significantly.
Sohna Road, for instance, saw the gap reduce to 35 percent in 2020 as against 38 percent in 2016. On Golf Course Road, the difference has reduced to 75 percent now as against 104 percent in 2016. Average prices have also reduced on Golf Course Road to Rs 13,150 per sq ft in 2020 as against Rs 13,700 per sq ft in 2016, the ANAROCK report stated.