If investing in a home has been one of your New Year resolutions, then there’s bad news in store. The Maharashtra government has hiked the ready reckoner (RR) rates by an average of 15% from January 1, thus making properties costlier.
This hike would mean an increase in stamp duty rates, which the home-buyer has to pay while buying or leasing properties. In addition, all calculations related to real estate is based on RR, whether it is stamp duty, registration, premiums, or tax collection related to the construction sector. Rates for all these charges will go up, as a result of the hike.
According to Dharmesh Jain, president (elect), Maharashtra Chamber of Housing Industry (MCHI), the state government’s move is a bad one, as the market is depressed. “This will have a negative impact on the realty market, which is already in a depressed state,” said Jain. He said MCHI will urge the state government to roll back the hike.
Housing activists called the move a disastrous one. “What is the logic in increasing the rate when the whole market is witnessing a slowdown? The entire burden will be passed on to the people, and affordable housing will suffer a blow, with such hikes,” said Ramesh Prabhu, chairman, Maharashtra Societies Welfare Association (MSWA).
This year, 22.69 lakh property documents have been registered, and Rs 15,948 crore collected as stamp duty.
The RR is a rate card that is published annually. In the RR, the city is divided into 750 units. It is on the basis of RR that stamp duty is determined. Even the premiums charged on Floor Space Index (FSI) and other property-related payments are determined on the basis of the RR. The premium on FSI is in the range of 60-100% of the RR.
The registration and stamp duty department determines the RR, on the basis of several factors. Some of the factors are stamp duty registrations, sales data, local surveys, visits to property exhibitions, as well as major transactions conducted in the year.
A senior stamp duty official defended the hike, saying the rates are less than the prevailing market rates. “The RR rates are lower than the market value, and hence there is no burden,” said the official. “We want to bring it on a par with market rates,” he said.
What is the ready reckoner?
The ready reckoner (RR) is a guide published annually by the state government, which determines the rate of properties in the particular area, on which stamp duty and registration charges are levied.
In the RR, the city is divided into 750 units. It is on the basis of ready reckoner that stamp duty is determined. Even the premiums charged on FSI, and other property-related payments are determined on the basis of the RR. The premium on FSI is in the range of 60-100% of the current RR. Development charges, and the new property tax structure are also linked to the ready reckoner, which works as a ready guide.
The state government has been hiking the ready reckoner rates in the range of 10-30 % annually.
Despite the state government’s directive to builders to charge only on carpet area (actual usable area) of the apartment, stamp duty is charged at about 20% of the ready reckoner rate.
With the realty sector is recession, the ready reckoner rates have come closer to the market rates of the apartments, and in some cases, has become higher than the market rates.