After few days of Maharashtra governments decision to temporarily reduce stamp duty on housing units from 5 percent to 2 percent until December 31, 2020, it has now come up with a new judgment to hike the ready reckoner (RR) rates in the state by around 1.74 percent, sources said.
The ready reckoner rates are increased by 1.74 percent, they said, adding that the new rates will be applicable from, September 12, 2020.
Ready reckoner rates, also known as circle rates or guidance value, are minimum values set by a state government, below which the property cannot be registered. Each area within a city has its own RR rate on which the stamp duty is calculated.
Real estate experts said increasing the RR rates in most states of Maharashtra after reducing the stamp duty comes as a surprise and is expected to harm the realty market.
“While the entire real estate industry was expecting a reduction in the ready reckoner rates, the Maharashtra government has increased them, which might lead to a cascading effect of increasing approval costs. Also, property sales in primary as well as secondary markets in the areas where RR rates are higher than market rates will slow down due to income tax levied on both buyers and sellers u/s 43CA. This move is bound to harm the number of new project launches and puts the viability of ongoing projects under question,” said Deepak Goradia, president, CREDAI-MCHI.
“It is surprising that in a scenario where the suggestion to ‘reduce the price of residential real estate’ has been covered by media – be it Deepak Parekh, Nitin Gadkari or Piyush Goel – the state government has instead opted to enhance the RR value. Income tax provisions mean a developer cannot sell at a price point lower than the RR rate, as it translates into taxation burden for both, buyer and seller,” said Niranjan Hiranandani, president (national) NAREDCO and Assocham.
In this situation, the expectation was that the state government would reduce the value, but instead, it has chosen to increase the same. This step will hamper the new projects as well, as the RR value will govern all levies, duties, and taxes payable by a developer. One still hopes the authorities will consider this and take necessary steps, he added.
“Bringing down the RR rate considerably at this juncture was something that everybody was looking forward to as it would have given some room to developers to bring down the prices. Today in most of the micro-markets, the RR rate is almost equal to the ongoing sales price and, both buyers and sellers will have to pay tax if sales happen below the RR rate. This has been the limitation cited by developers to bring down prices, and an increase of RR rates further limits the room for them to bring down the price while a little marginal reduction will make no difference at all”, said Anuj Puri, chairman, ANAROCK Property Consultants.
To boost the stagnant real estate market hit by the COVID-19 pandemic, the Maharashtra government on August 26 decided to temporarily reduce stamp duty on housing units from 5 percent to 2 percent until December 31, 2020. Stamp duty from Jan 1, 2021, until March 31, 2021, will be 3 percent, they said.
The Maharashtra government on March 6 had announced that it is reducing stamp duty on properties by 1% for Mumbai, MMRDA Region, and Pune for a period of two years.