If you thought buying a house in Mumbai city was tough, things took a turn for a worse on Saturday when the government decided to increase ready reckoner rates by 3.95% for the city. Suraj Uchil does a realty check
Ready Reckoner is the benchmark that is to be used while making all property deals. It is a rate card published annually. It indicates the value of a property. Any hike would mean an increase in stamp duty rates the home-buyer pays while buying properties. As all real estate calculations are based on the Ready Reckoner, whether it is stamp duty, registration, premiums or tax collection, the rates given in the ready reckoner needs to be followed for registration and stamp duty of any property being purchased.
Though the average rate increased across the state is given to be 5% and it is also the lease increase seen in the rates in the past several years, the move hasn’t gone down well with either the developers of the buyers.
Anuj Saxena, a working professional from Mahim says, "Coming from a middle class family, planning to buy a house in Mumbai is in itself a pretty bold move these days. Now, if we are to be told that there is going to be an almost 4% increase in the property rates just because the government felt the need to do so, it’s going to make us think twice about our decision. A 4% increase is a big increase for people from our segment."
The notion is almost the same amongst the developers as well. Many believe that this move will have a more harmful effect on the sales. "On one hand, the government keeps talking about trying to give more affordable housing options to the people while on the other hand they go ahead and increase the property rates by 3.95%. The market is already on a slump since quite a few months and the demonetisation had only added on to that. With this move, the public is going to be even more skeptical about investing or buying new properties", cites Rajan Bandelkar, Raunak group MD and Vice President, NAREDCO.
Bane for buyers and builders
Though the average rate of increase across Mumbai is pegged at 3.95%, some places in the city have seen rises by at least 7-11%. Arun Jadhwani, CEO at Aayush Developers, explains, "We would be forced to pass on the increased development charges, premiums to use floor space index, open space deficiency premiums, property tax by the MCGM as they are directly linked to the ready reckoner rates, on to the buyers. Hence, the steep rise in the ready reckoner rates (i.e. ranging from 7% to 11%) in all prime locations of the eastern suburbs is set to hit the consumers hard. further deteriorating the already sluggish real estate market."
"Since the ready reckoner is a government based list, every builder and developer will have to bind by it. Also, it will be an offence to sell the property at rates below the ones stated in the ready reckoner. So even though the housing prices have gone down by a good margin due to the demonetisation move, the developers will have to again increase the rates as per the new RR rates, which will be a cause of worry for the home buyers", adds Rajan.
So while the government feels that the rates as studied by the registration and stamp duty department, based on sales data, surveys, visits to property exhibitions and major transactions of the year are justified, the common public and the developers are both unhappy about the move and are expecting the government to take due note of this situation and bring out a possible solution.
We would be forced to pass on the increased development charges, premiums to use floor space index, open space deficiency premiums, property tax by the MCGM as they are directly linked to the ready reckoner rates, on to the buyers. Hence, the steep rise in the ready reckoner rates (i.e. ranging from 7% to 11%) in all prime locations of the eastern suburbs is set to hit the consumers hard. further deteriorating the already sluggish real estate market.
—Arun Jadhwani, CEO - Aayush Developers