FLATS NOW MORE COSTLY IN MUMBAI BANAM SHANGHAI

The Maharashtra State Government has planned to hike stamp duty by 1% and take it to 6% from October 1. The stamp duty is currently computed at 5% within city limits. The revenue generated from this hike will be passed on to the BMC to support the latter's transition from Octroi to LBT.

The addition of 1% on the value of a flat irrespective of whether a sale or a gift may sound insignificant but in Mumbai, where a 2BHK in the distant suburbs may cost over Rs 1 crore and this additional burden would drill a big hole in the buyer's pocket.

If this hike is imposed by the government, a buyer will have to shell out aggregating 10% in various taxes like value-added tax, service tax on the value of property and this surcharge is in addition to the high property tax proposed by the civic body.

Even as the proposed levy is some four months away, the BMC however, does not want the government to collect the surcharge on its behalf. It pleads that it takes a long time before the government releases funds meant for the BMC. The BMC has already written to the government to allow them to collect the surcharge directly.

The Stamp Duty and Registration Department earns huge amounts on number of documents worth billions registered at each zone per month. Yet, the greed for the government continues to grow. The government runs as per the wishes of the people of India. At the time of introduction of VAT in 2005 the Government of Maharashtra promised that Octroi would be removed and there will not be any additional tax burden on citizens but now they have introduced the LBT.

The government in the year 2010, 2011 and 2012, collected almost 65% of tax from the registration of immovable properties. The income from stamp duty during 2008-09 was Rs 8,384 crore, which increased by 30% to Rs 10,901 crore in 2009-10, then to Rs 13,411 crore in 2010-11 and to Rs 14,800 crore in 2011-12.

The BMC hopes to generate over Rs 1,200 crore from this proposed surcharge. It had already collected property tax bills aggregating Rs 3,657.10 crore in 2012-13 following the transition of the property tax system from ratable value to capital value-based system.

The recent agitations opposing the inflicting of Local Body Tax (LBT) throughout the State proved that the LBT which the government is trying to introduce on developers and builders is otherwise, shall be detrimental to home buyer community.

It means is that home buyers who are already paying various taxes will need to cough up even more in the form of this new tax. The affordable housing is becoming a distant dream with additional new taxes being introduced from time to time. The prime motive of the government is evident to use housing as a source of generating more and more revenue under varied guise while not concerned about the common man.

Developers who are already reeling under the pressure of slow-moving economy shall certainly pass on this new tax to end-users. This will further raise the property prices, thereby hurting the prospects of affordable housing, which is the need of the hour.

As if the BMC also wants to be in RACE with the government is considering a proposal to bring construction activity under the purview of LBT. BMC proposes to extort LBT from builders on per square metre basis.

As per the proposal, for every floor up to four storeys, LBT will be Rs 100 per sq. meter. For a building without an elevator, it will be Rs 150 per sq. meter up to seven floors. Beyond seven floors, LBT will be Rs 200 per sq. meter. The proposal is at an emerging stage.

Mumbai has been witnessing a sharp appreciation of property prices in the last four years. South Mumbai, as compared to other localities has had lower appreciation in Mumbai. The governing reason is the limited supply of open land. The secondary reason is the reduction of new launches. The fast changing construction norms brought in place by the civic body through new Development Control Rules (DCR) has also been attributed as one of the reasons for the price rise giving boost to more and more ZOPADPATTI ZONES in the city of Mumbai banam Shanghai.

**********