READY RECKNOR RATES UP AGAIN

What are the Ready Reckoner (RR) rates? To be precise, it is an annual statement of rates on which the Stamps and Registration Department collects stamp duty from property purchasers. These rates have been increased across Maharashtra by an average 25 per cent, in an annual revision by the State Government.

In a wake of earning more and more revenues from the Developers, the Maharashtra government's decision is used as a tool to maximize revenue to increase Ready Reckoner Rates in Mumbai is now expected to render sales volumes which are already at low. This is totally unwarranted as the market is sluggish and there have been no major transactions registered.

The Government’s new Ready Reckoner Rate has thrown up a major anomaly. As per the law, the Government has made the sales mandatory on carpet area basis whereas, the Ready Reckoner Rates are based on built-up area. It is feared that Real Estate Development will be badly impacted as premiums for staircase exemption, Fungible FSI, open space deficiency and development charges payable to the BMC will be considerably increased as the rates of premium are charged as per Ready Reckoner Rates.

The Developers are worried that the hike will result in higher transaction cost for investors, while for end users the government itself has further broadened the existing gap between affordability and market rates.

It is imperceptibly argued that the move of the Government is also expected to reduce the black money component that forms a significant part in realty transactions. Ready Reckoner Rate represents market value of the property. However, the recent hike is not in line with current market scenario at all.

With sales volume steadily declining since last few months due to weighty interest rates and unaffordable property prices, Developers in Mumbai had started offering direct and indirect discounts to attract the buyers.

It is surreptitiously visualized that the increase in Ready Reckoner Rates will increase the scope of correction in a way that if Developers were offering 10% to 15% reduction in cost of property, will now have to offer more to accommodate this hike and boost sentiment.

It is high time that the Stamp Duty Slab of 5% now needs to be brought down. Sensing the possibility of further decline in sales volume in existing weak sales, the Developers are opposing the decision. The Government has admitted that the stamp duty collection had fallen more than 30% last year due to the least property sales.

It is reported that as per the revised government rates, Andheri has a price tag of Rs.13,420/- per sqft as the sales were reported quite high last year while Bandra has now become cheaper at Rs11,350/- per sqft. With the new rates coming into effect, the property prices in city and suburbs, particularly western suburbs, will go up by 5-30% higher than the old ones.

The Ready Recknor Rates are determined by sales, proximity to schools, markets, colleges, hospitals and transport facilities in various areas of the city and suburbs. Last year, the government had earned Rs14,000 crore revenue through stamp duty and has set a target of earning at least 10% more revenue each successive year.

The general opinion of the buyers is that the Developers should not make a hue and cry since the market prices of properties are still higher by 30-50% of the revised Ready Recknor Rate.

The Ready Recknor Rate revision shall provide a relief to the extent of almost 10-20% decrease in stamp duty charges in buildings without lifts and other facilities. Now with Ready Recknor Rates going up, the premiums that the Developers have to pay an increased premium to the BMC for Fungible FSI, leading to an increase in the construction cost of projects. This is because the Developers are not ready to cut corners in their profits As the Government has amended the Development Control Rules to charge for the Fungible FSI such as balcony, flower beds, etc. Earlier, these areas were free of FSI. The ultimate burden of cost shall be passed on to the buyers.

The experts of the realty sector feel that the State Government, while revising Ready Recknor Rate to earn more revenue for itself has resorted by applying artificial methodology which would culminate to further the cost of properties.

**********