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Ready Reckoner rate unchanged: Why it is not enough

Saturday, April 07, 2018

The state government has decided to keep ready reckoner (RR) rates stable for 2018-19. Nilesh Ghadge examines the impact of the move

With the state government deciding to keep ready reckoner (RR) rates stable for 2018-19, effective from April 1 this year, property buyers can expect a partial relief in realty prices. While the real estate sector is still recovering from the effects of Demonetisations, GST, a hike in RR rates at this time would have hampered homebuyer sentiments.

RR is a guide published annually by the state and it determines the rate of the property in a particular area on which the stamp duty and registration charges are levied. Some factors that determine RR rate are stamp duty registrations, sales data, local surveys and major transactions conducted in the year. Increased RR rates are beneficial only when the market prices are high and the market is performing well in terms of sales.

If the market prices are low and the RR rates are high, it will give rise to unfavourable conditions for both builders and buyers. Hence, considering the current macroeconomic scenario, it is ideal to keep the RR rates unchanged until the market recovers and regains its momentum. In a city like Mumbai, ground reality is RR rates are higher than most of the prices at which the properties can be sold. Keeping all this factors in consideration Maharashtra inspector general of registration and controllers of stamps issued an order notifying that the RR value in 2018-19 will continue to be as same as those notified for 2017-18 across all zone in the state. Developers also claim if the RR rates would have increased even marginally, it would have adverse impact on the real estate sector.

Fair move?
Amit Talekar, MD of Bluberry Marketing says, “Government's move to keep RR rates stable was a fair stand taken in the present situation. Real estate sector is facing many problems and lakhs of homes are lying vacant owing to lesser demand in the MMR. Housing rates are not affordable and the house buyer has been burdened with higher stamp duty calculated on the basis of ready reckoner rates so keeping RR rate stable is need of the hour.”

Expressing point of view on Pune real estate market related to unchanged RR rates Anuj Puri, Chairman - ANAROCK Property Consultants says, “The RR rates of Pune were proposed to be hiked by 3% this year, and the final announcement that they will remain unchanged comes as a major relief to Pune's real estate industry.
The proposed hike would have had a negative impact even though it was marginal compared to the previous years (the rates were increased by 13% in 2010, in 2011 by 27%, in 2012 by 17%, in 2013 by 12%, in 2014 by 13%, in 2015 by 15% and in 2016-17 by 7%). As per the governing authority, such hikes are based on detailed surveys undertaken by the town planning department. The rates were decided based on the number of sales and registrations in each zone.”

Anuj Puri adds further,“Factors of benefit and loss should be considered before deciding the RR rates. In 2009-10, the RR rates were unchanged even when property prices declined. Similarly, during 2013-15, RR rates were hiked despite insignificant market appreciation. The Maharashtra Government recently hiked the RR rates, which may cause builders to increase their property prices even if doing so is untenable in the current market environment. A similar trend was observed in Delhi when the state government raised the circle rates by 20% last year. In the case of Karnataka, the guidance values remained unchanged due to a drop in the number of registrations post-Demonetisation.”

Opportunity missed
Even though some people feel unchanged RR rate is fair response to stable residential prices across the cities of Maharashtra, however most real estate experts feels this move is not enough to bring market on positive line.

Advocate Dharmin Sampat of Registration Fee and Stamp Duty payers Association says, “If government is not willing to decrease RR rates it could have at least decide to calculate stamp duty on carpet area for real estate transaction.”

Developers are of the opinion that the sentiments in the realty sector market are already muted at the moment, and this will continue until constructive measures taken from the government. This year(2018-19) real estate players were expecting the reduction in RR rates particularly in Mumbai city because there has been minimum decrease of 5% to 10 % in property price, explains one real estate expert.

All in all, one feels that the government perhaps missed an opportunity to give some relief to the real estate sector, which a reduction in RR rates could have done.

What is Ready Reckoner?
Ready Reckoner (RR) rates indicate the value of land or residential and commercial properties of an area determined by the state government and are published annually. RR rates vary as per the area under consideration and the available infrastructure facilities. They have an impact on the stamp duty on property transactions, and concurrently on the revenue mop-up of the state government.

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