has been a gloomy week for the real estate sector, after the Brihanmumbai Municipal Corporation (BMC) in its budget this week proposed a surcharge of 1% to fund its infrastructure project, while the state government increased the ready reckoner (RR) rates by 3.95%.
The sector had been facing massive recession, with the drastic drop in the sales over the last few months post the currency ban.
While the sector had slowly begun recuperating, the state’s moves have made things dismal again, said builders.
Bhavesh Sanghrajka, chairman and managing director, Shraddha Lifescapes, said that such taxes are burdening the realty market.
“The real estate market already is going through a challenging period. It is unfortunate that we are being saddled with additional taxes,” said Sanghrajka.
According to Samantak Das, chief economist and national director, research, Knight Frank India, a real estate consultancy firm, the hikes are unwarranted.
“These hikes have the potential to play spoilsport especially when there are some signs of recovery in the realty market. Home buyers have been returning, but if these hikes are implemented, it will only have a negative impact on the market,” warned Das.
Both the BMC and the state government have defended the hike, saying they need the money to carry out development related work.
“The RR hike has been minimal at 3.95 %. The collection of the stamp duty and registration was about Rs3,500 crore below our target in 2016-17, and even the current year is expected to be bleak,” said a state government official, who did not wish to be named.
“Keeping this in mind, we have tried to keep the hike as low as possible. The entire realty market was surveyed and transactions were studied in detail in the last one year, and hence a moderate figure was arrived at,” added the state official.
Housing activists warned that the ultimate sufferer is the buyer.
“The builder puts the entire burden on the buyer, who has to shell out the entire cost. The affordability is lost in the process,” said Ramesh Prabhu, chairman, Maharashtra Societies Welfare Association.
What is RR and how it affects the cost of the real estate?
The ready reckoner (RR) is an annually published rate card, which indicates the value of a property.
Any hike would mean an increase in stamp duty rates. The home buyer pays it while buying or leasing properties.
All real estate calculations are based on the RR, whether it is stamp duty, registration, premiums or tax collection.
Even the Income Tax Department calculates the tax on basis of RR.