Buying a new house is going to cost you dearly in the new year, for the government has hiked its ready reckoner rates (RR) between 30 per cent and 40 per cent. This move is likely to dash the hope of those potential buyers who were waiting for a correction in real estate prices.
How will buyers be affected?
According to the property experts, developers and buyers will now have to pay more in the form premiums and taxes – fungible FSI, open space deficiency, stamp duty, etc.
"All taxes, including services tax, VAT and TDS will be also increased. Everything about real estate sector is interlinked to the ready reckoner rate. People can't even afford the prevailing prices and the further increase in the rates has reduced the scope of the correction. Potential flat buyers have to brace up to pay more," said Pankaj Kapoor, MD at Liases Foras, a real estate research firm.
What's the industry scene?
Kapoor said new apartments are getting added to the stock even though sales have declined. "As a result, the inventory has increased from 16,600 units in 2009 to 53,856 units in 2014. It shows the ground reality that the RR rate has not helped but the affected the industry very badly."
Why did govt raise RR?
The state government has decided to earn Rs 6000 crore revenue this year by increasing the RR rate. The stamp duty on property deals is based on the RR rate. The government charges 5% stamp duty of the total value of the property.
"There is recurring huge debt over government resulting no adequate fund to run the government and initiate any projects. We had got order to increase the RR rate to add up almost Rs 6000 crore more revenue this year," said senior stamp duty and registration official.
Is the move practical?
Pankaj Kapoor said that it is a myth that by increasing RR, the government will generate more revenue. He said that there is no scope for the developers to correct the property prices because rise in input costs. "Increase in RR will hamper sales as already very few blocks are being sold. It shows that the government wants to be the exploiter rather than making efforts make housing affordable," said Kapoor.
What do builders say?
Paras Gundecha, chairman of the Gundecha Developer, said the rise in RR will be passed to the buyers only. "Prime minister Narendra Modi has promised house to everyone by 2020. With this rise in RR, the dream home for people will be the distance dream. Last year, the Congress-NCP government did not increase RR because of slowdown in property market. This year as well the sentiments are not good," said Gundecha.
Gundecha added that they were expecting 'Ache Din' from the new BJP government but their hopes have been dashed. "We will appeal to the authority to roll back the decision immediately and give relief to the real estate sector and home buyers."
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