Even as property prices have not gone up much in the past year, total outgo for a new property just increased in Maharashtra. The government has raised the ready reckoner rates by an average of 18 per cent in Mumbai and five to 30 per cent in the state.
Ready reckoner is the rate at which stamp duty for a property is calculated. Higher the ready reckoner rate, higher the stamp duty and higher your property cost. It differs across areas and cities. If in Worli, Mumbai, it is Rs 25,000 a square feet (sq ft), the stamp duty will be Rs 1,250 a sq ft. The stamp duty is fixed at five per cent in Maharashtra.
The ready reckoner rate slightly differs from the area's property price. Says Sunil Mantri, chairman, Sunil Mantri Realty, "If the property prices in Worli are Rs 4,000 a square feet, the rate would be Rs 3,500 or Rs 4,500."
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REALTY RATES: A LOOK | |
|
LAND | |
| 2011 | 3,983.19 |
| 2012 | 4,708.26 |
| Rise (%) | 18.20 |
| RESIDENCE | |
| 2011 | 7,647.63 |
| 2012 | 7,647.63 |
| Rise (%) | 19.51 |
| OFFICE | |
| 2011 | 9,699.16 |
| 2012 | 11,584.21 |
| Rise (%) | 19.44 |
| SHOP | |
| 2011 | 12,314.85 |
| 2012 | 14,663.50 |
| Rise (%) | 29.07 |
| INDUSTRY | |
| 2011 | 7,851.99 |
| 2012 | 9,357.28 |
| Rise (%) | 19.00 |
| Prices in Rs per square feet | |
The rise is highest in Goregaon, Mumbai, at 30 per cent of the 2011 level. In Kurla it has been raised by an average of 15 per cent, compared to 24 per cent last year.
There is also a catch. The stamp duty is calculated as a percentage of either the ready reckoner or the property rate, whichever is higher. If the property rate is Rs 10,000 a sq ft and the ready reckoner one is Rs 15,000, you will pay duty based on the latter. Hence, Mantri calls it 'an indicative rate'.
Experts say property prices have risen and, hence, the rise in the ready reckoner rate. But, if these go down, we aren't sure if it will be revised.
The government's move comes on the back of lower stamp duty collection due to dubious transactions. Many developers would quote a lower property price on paper, in turn, charging a lower stamp duty. If the property price in an area is Rs 10,000 a square feet, the builder would quote only Rs 8,000. As a result, the buyer would pay a lower duty. Experts say these transactions were taking place for premium properties, where the price is very high. Now, with a benchmark rate, dubious transactions could get affected.
This would also lead to higher capital gains when selling property. Under Section 50(c) of the Income Tax Act, capital gains on the sale of the property are computed on notional value, on the basis of the ready reckoner rate. If you bought a property at Rs 5,000 a square feet and sold it at Rs 10,000, the ready reckoner rate will be Rs 13,000.
"The capital gains will be calculated on the difference between the ready reckoner rate and the purchase price instead of selling and buying price." says Pranay Vakil, chairman of Knight Frank.
Experts say property tax is likely to be computed on the capital value, going forward. The capital value will be based on the ready reckoner rate.
Says Sanjay Dutt, CEO of Jones Lang LaSalle, "This will lead to increase in property rates, as the property tax will be paid on the capital value." Presently, property tax is based on a rateable value, which is based on the rent the property is likely to fetch. But, due to the Rent Control Act, the rents are lower, affecting the rateable value.
