Maharashtra government plans to increase ready reckoner rates (RR) by 25-30 per cent from January 1. Mumbai’s realty sector, which is moving quite rapidly, is expected to hit turbulence due to the state government’s move.
The ready reckoner is primarily used to calculate market value of flats for the stamp duty and registration charges, which are major sources of revenue for the state government after sales tax and value added tax. Realty sector experts feel the proposed hike of 25-30% would not have any major impact on the transactions of new flats but it would certainly affect sales and purchases of old flats in Mumbai.
Moreover, industry sources said the ready reckoner value is considered by Brihanmumbai Municipal Corporation (BMC) and other planning authorities for various premiums and penalties such as staircase premium, premium for the newly cleared 33% additional floor space index (FSI) and premiums for additional FSI for hospitals, hotels and educational institutions. The proposed rise would lead to increase in these premiums and penalties.
A senior state government official, who did not want to be quoted, told Business Standard, “Prior to 2005, the RR value was marginally increased every year. The government realised the folly and increased the same by 36-45% in 2007 and subsequently due to recession in 2008-09, adopted the same RR value of 2007 for 2009. In 2010, there was a marginal increase since the real estate market had not paced up at the end of 2009. However, in 2010, the market rates have increased dramatically and even surpassed all previous records. Thus, the government plans to increase RR value by 25-30% in 2011.”
Rajesh Mehta, director of Raha Realtors said the revision in RR rates would hit the purchasers of old and resale flats but not the new ones in Mumbai. Yomesh Rao, director of YMS Consultants Ltd said the developers are lining up to pay the premiums before December 31 as from January 1, the increased RR would be applicable.
“The RR values are still not near to the market rates considering the boom in 2010 in the realty sector. The RR increase of 25-30 % will again increase the cost of real estate and though the market is slow and sales are sluggish, it will be fun to see the impact.”
Sunit Jain, a leading valuer said for the purchasers of new flats, the prices would continue to be higher than the RR rates. So, stamp duty payable would be higher than RR value for such new flat.
“However, in case of resale or old apartments, the RR value will be marginally higher than the product of the agreement value. Due to this, burden of additional stamp duty will have to be borne by the purchaser of old and resale flats. Besides, there will be impact on capital gains tax calculations under section 50 (c) of the Income Tax Act,” he added.
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