Ready reckoner rates up in Mumbai, real estate firms unhappy

Realty players fear increase in development cost and additional burden on property buyers

The state government has announced the ready reckoner (RR) rates for land in Greater Mumbai have been raised by seven per cent for the current financial year (though it is up to 20 per cent in some areas). In rural areas, the rates are up by eight per cent, seven per cent each in influential areas and in municipal council and nagar panchayat limits, and five per cent in municipal corporation areas.

The state revenue department says the average rise is up to 10 per cent for the western suburbs, nine per cent for the eastern suburbs and 7.9 per cent for the city.

A revenue department official told Business Standard,'' The land rate in the National Park situated in north Mumbai has been increased. In Powai, in north west Mumbai, the land rate has been hiked by 132 per cent by deleting the existing zone and putting the property in higher zone value.''
 

 

RATES RAISED

• Average hike in the land rate for the western suburb is up to 10%, for eastern suburb 9% and for Mumbai city 7.87%
   
• In Powai, rates increased 132% by putting the property in higher zone value
   
• Between Bandra & Andheri, people may not get benefit of depreciation up to 30%
   
• Home buyers  to face an additional burden of stamp duty and registration charges along with recurring property taxes

The realty players said the government's move to increase the land rate upto 25 per cent will reduce the benefit of depreciation and thereby the property buyers will get benefit of seven per cent instead of 30 per cent depreciation. They fear that the cost of development will rise.

The revenue department official admitted that in the western suburbs between Bandra and Andheri, the people may not get benefit of depreciation up to 30 per cent.

Lalit Kumar Jain, CMD Kumar Urban Development Pvt Ltd said,'' RR has impact on document registration and premium payable for plan approvals and floor space index (FSI). Also if you sell below RR rates both parties have to pay income tax on differential amount. Thus no transactions take place.'' He added most places RR values are higher than transaction value and ultimately the government will lose in terms of revenue.

Manju Yagnik, Vice Chairperson, Nahar Group said the RR rate increase will impact the entire construction sector with end consumers paying more for his dream home.

''This increase has a cascading effect across the sector with increase in land cost and construction expenses - including cost of transfer of development right (TDR) to be purchased and premiums paid to civic authorities for FSI. Stamp duty and registration charges, will also go up which will result in homes getting dearer for the home buyer.The impact will be the most in the Eastern suburbs as the increase is the highest there. Also the redevelopment projects will be worse affected,'' she noted.

Further, Chintan Sheth, Director, Sheth Corp opined that the increase in RR rates could have been avoided considering the current market sentiments in the Mumbai realty market. This increase will have a huge impact on the property prices across segments. With this hike, the home buyers would be facing an additional burden of stamp duty and registration charges along with recurring property taxes, which will result in buyers being more watchful,'' he viewed.