Keeping in mind the slowdown in the real estate market, the Maharashtra government has recently decided not to alter the Ready Reckoner (RR) rates for the financial year 2019-20. Consequently, this will be the third year in a row when the government has decided to maintain status quo on the RR rates across the State. The RR rates will come into effect from April 1, across Mumbai and the rest of Maharashtra.
The order, which was recently issued by the Inspector General of Registration, has provided respite to the developers and the homebuyers alike. To apprise, the government had earlier increased the Ready Reckoner rates in 2017-18 by 3.9 percent. But, there was no change in the rates during 2018-2019 due to the downturn in the real estate market. As decided, the same rates will apply for the fiscal year 2019-20 as well, which means that the average RR rates in Mumbai for the current fiscal will remain at 5.83 percent.
The realtors have long been urging the government not to increase the rates. As a matter of fact, they were expectant of a price correction in the RR rates post the latest amendment to the Bombay Stamp (Determination of True Market Value of Property, 1st amendment) Rules, 2018. The amendments allowed the Chief Controlling Revenue Authority to either increase or decrease the RR rates, depending upon the market conditions.
Even though the government did not increase the rates this time, it did not decrease them either. Niranjan Hiranandani, President, NAREDCO, in this context avers, “The industry welcomes the government's decision. However, it would have really made a big difference if the State government had considered ‘price correction’ following last year’s amendment to the Bombay Stamp (Determination of True Market Value of Property, 1st amendment) Rules, 2018. In locations, where the rates have fallen or are lower than the prevailing RR rates, both the buyer and seller have to pay tax on the RR rate, which is higher than the rate at which the actual transactions are taking place. This will have an impact on affordable housing. We hope that the anomaly will be dealt with at the earliest, hopefully in the next budget itself.”
Importance of Ready Reckoner rates
Ready Reckoner rates are the market value of the properties assessed by the government for the purpose of calculating stamp duty. It is an estimate of the minimum property values in a particular area across the State. RR rate, also known as circle rate, as decided by the government is considered to be the floor price for a locality and any transaction below the said rates is considered to be an illicit transaction as per the Income Tax Act. For instance, if a person buys a flat from a developer at Rs 60 lakh and the ready reckoner price comes to Rs 80 lakh, both the buyer and the seller will have to pay an additional tax on the difference amount which is Rs 20 lakh. This is an extra burden for both the buyers and the developers alike. As per the real estate experts, a hike in RR rates at this time would have adversely impacted sales, leaving a strong impact on the level of unsold inventory in the city. This would have had a cascading impact on the city’s realty landscape, especially in Mumbai Metropolitan Region (MMR), where the unsold inventory stands at nearly 2.5 lakh units.
Though the decision of the government might impact the earnings of the State, it will definitely boost the home buying sentiment across the real estate market. Moreover, it will also keep a check on the realty transactions and infuse stability in the property prices across the State.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. 99acres does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.