Now, higher stamp duty on luxury flats

Now, higher stamp duty on luxury flats

Rajshri Mehta,TNN | Jan 2, 2014, 06.54 AM IST

 Buyers of superluxury flats with ceilings higher than nine feet, amenities like in-house swimming pools and helipads will have to pay up to 50% higher stamp duty than regular flats. Buyers of flats in luxury properties that exceed 4,000 square metre, or one acre of plot with a common gymnasium, club house and swimming pool, would have to shell out an additional 15%. This figure is over and above the up to 20% increase in the ready reckoner (RR) rates with effect from January 2014. 

An RR rate is an annual statement of rates based on which stamp duty is collected from property buyers. 

An illustration for a Rs 10 crore flat in Worli Stamp duty in 2013: Rs 50L In 2014: Flat price up to Rs 12cr (with 20% hike in RR rate) Stamp duty payable: Rs 60L If complex has swimming pool and gym: Flat price Rs 13.8cr; stamp duty Rs 69L. 

'Why hike flat rates in complexes with gyms?' 

Real estate watchers say the government has "cleverly" doubled ready reckoner (RR) rates for super-luxury residential projects and bungalows. The fine print of the stamp duty and registration department's guidelines to sub-registrars on computing a property's value shows substantial variation, they add. 

For example, the 2014 RR rate for a residential property at Worli may have risen to, say, Rs 25,000 a square foot after a 20% hike. Now, for a luxury building, the property value will be hiked by an additional 15% over and above the average 20%. In other words, the RR rate will work out to Rs 28,750 a sq ft. The stamp duty must now be paid on the property value of Rs 28,750 a sq ft. 

A developer, who now plans to launch a project minus a common swimming pool at Andheri in May, said, "Does the stamp duty department have the manpower to verify whether a flat has an attached swimming pool? Why has the government hiked property rates in complexes that provide a gymnasium, which is a basic health necessity?'' 

The new RR rates will also have a bearing on redevelopment of housing societies. Construction cost for RCC buildings has already risen by 32% in the city to Rs 25,500 a square metre in 2014 from Rs 19,600 a square metre in 2013. It has risen by 36% in the suburbs to Rs 24,000 a square metre in 2014 from Rs 17,800 a square metre in 2013. 

Developers have been asked to shell out stamp duty on the refundable deposit given to tenants for redeveloping a plot. Also, if the property value falls below the RR rate, the stamp duty will be computed as per the land plus construction cost (LCC) method. 

"When the stamp duty is computed by this method, tenants of 20-year-plus buildings will not get the benefit of even 5% depreciation of the property's value when they file their income-tax returns. Why would tenants be willing to renegotiate their agreement when a developer cites high construction cost and stamp duty in a redevelopment project?" said Rajesh Mehta of Raha Realtors, a property consultant . 

"If renegotiation fails, the developer will try to recover his cost by hiking property rates in the free-sale component. If one analyzes the registration data, flat sales have dropped drastically. Hope the government realizes its decision will only stall redevelopment schemes." 

Senior town planning officials, though, justified the hike. "This is the first time since 2003 that we have increased RR rates for high-value residential projects. The hike is further limited to luxury projects, which are few in numbers. As the developer pays all the charges, we do not think redevelopment schemes will be affected as the hike in construction cost and stamp duty is not much," said one. 

Ramesh Prabhu, chairman of Maharashtra Societies Welfare Association, though, said the government has confirmed that the cost of buying a home has become unaffordable . 

"The increase in RR rates has multiple effects. One, because of the 5% stamp duty; two, registration fee of 1%; three, service tax of 3%; four, local body tax of 1%; and five MVAT of 1%. Thus, a flat buyer has to pay a total of 11% to the government. For instance, for a flat of Rs 10,000 per sq ft, the buyer shells out nearly Rs 11,009 to the government. This is clear injustice to the common man."

 

Stamp Duty - Latest happenings
PROPERTY TAX GETS REAL

NEW SYSTEM: Need For Foolproof, Accurate Assessment Behind Recommendations

Prafulla Marpakwar | Times of india | 20th January 2009 

The age-old system of charging stamp duty based on the ready reckoner will be obsolete in a matter of months. 

The inspector-general of stamps and registration has submitted a report to the state government recommending that the value of property be henceforth calculated on the basis of several tangible locational advantages and disadvantages that actually contribute to its value in the real estate market. 

Ramrao Shingare, who prepared his draft with the help of the Geographic Information System, said, “No scientific methodology was available so farto decide a property’s real value. We felt the value of a piece of property should be based on the availability of amenities, its distance from the railway station, the scope for further development, status of title and floor-space index, among other factors. If we take all these aspects into consideration and modify the rules accordingly, we can mobilise an additional Rs 2,000 crore from stamp duty.’’ Shingare has identified more than a dozen issues which will decide the real value of property.


For decades, there were no specific rules for recovery of stamp duty on real estate transactions. As a result, buyers and sellers found themselves at the mercy of revenue officials.


Then, stamp duty used to be charged on the basis of sale value in the agreement. Taking cognisance of large-scale irregularities in the system of charging stamp duty, the revenue department introduced the concept of “ready reckoner” in 1989.


The value of a property was based on transactions conducted in the previous year. The city was divided into several zones and prices in the previous year formed the base for deciding the stamp duty in the next year. The government used to follow the practice of declaring stamp duty rates on January 1 every year.


A senior revenue department official said as it was not a foolproof system, real estate transactions in the entire zone were charged the same duty irrespective of the real value of the property. “For instance, whether a property was located near a five-star hotel or a slum in the south Mumbai zone, the stamp duty was identical,’’ the official added.


It was felt that with rapid urbanisation and setting up of special economic zones, business townships and irrigation projects, besides the proliferation of malls and multiplexes, the real value of properties varied according to the area.


“The system of deciding stamp duty on the basis of the ready reckoner appeared faulty as it did not take into consideration these factors,’’ the official said.


Further, the official pointed out that if an area was developed or granted non-agriculture status for development, then the rate of stamp duty in the entire zone was identical, irrespective of the fact that the entire zone had been developed. “In such cases, it was found that for undeveloped zones, the buyer had to pay stamp duty on a par with the developed zone,’’ he added.


Under such circumstances, the official said it was felt that the system of deciding the value of a property should be foolproof. “If we are able to decide the real market value of the property, it will help add revenue to the state exchequer. With this aim in view, we have drafted the new microplanning project to ensure that all properties are valued properly and stamp duty charged accordingly,’’ he said.


THE FIFTEEN PARAMETERS THAT WILL DECIDE STAMP DUTY
The government is gearing up to put in place new parameters for evaluation of property. The stamp duty that you pay during sale or transfer of property will be determined by these new rules. The inspector-general of stamps and registration has submitted his report to the state government and here are 15 important new parameters his office has recommended for evaluation of property


DISTANCE FROM CONVENIENCES
Your property may be deemed more valuable if it is close to a railway station, a bus stop, a market or a multiplex; conversely, its value may go down if it is located more than 3 km from any of these


DISTANCE FROM THE SEA
Be ready to pay more during transfer of a property if it is close to the seashore/coastline


DISTANCE FROM CREMATORIA, POLLUTING UNITS
The closer you are to the cemetery, crematorium, polluting units and railway tracks, the lesser you may have to pay as stamp duty


NATURE OF TITLE
The value of the property goes up if its title is clear; if the title is disputed, then its value may be less


DISTANCE FROM SCHOOLS, GARDENS
Be prepared to pay more as stamp duty if the property is next to a school or a garden


AVAILABILITY OF AMENITIES
Uninterrupted supply of power and water and proper sewerage facilities may mean your property has greater value than a property that lacks any of these facilities


FSI
The value of your property, in all probability, will depend on the floor-space index you enjoy; be ready to shell out more stamp duty if the FSI is more

LEVEL LAND
Your property may be more valuable in the government’s eyes if it is on level land instead of being located in a hilly area

DEBT
If the property is free of any debt, it may attract more stamp duty

APPROACH ROADS
Be ready to shell out more stamp duty if the property has proper approach roads leading to it

CLEAR VIEW
Even view matters; property may be deemed more valuable if it gives you a clear view of surroundings

NATURE OF PROPERTY
An ownership property may attract more stamp duty during transfer or sale; a leasehold property’s value may be less

REGULAR SHAPE
A property may attract more stamp duty if its length and breadth are similar; its value may be less if it has an irregular shape (for instance, triangular)

AGRICULTURAL PROPERTY
The value of a property may be deemed to be more if it is on non-agricultural land

SIZE OF THE PROPERTY
A property standing on a smaller plot may be deemed to be more valuable than a property on a bigger plot

Dip in Realty Prices has no effect on Stamp Duty

Rajshri Mehta
 / Thursday, January 1, 2009 3:43 IST / DNA

Taking into account the recession and a drop in demand for property, the state government has not revised Stamp Duty Ready Reckoner rates for 2009. The government has fixed the 2009 market rates of different properties as they were in 2008.

The Ready Reckoner contains the average market rate of the property fixed by the government in different areas, which forms the basis of calculating stamp duty.

With property prices having reduced by almost 30%, the government's decision not to revise market rates does not augur well for property buyers. Already, property brokers are saying the government's decision will create problems, as buyers will have to shell out stamp duty at the high rates that existed in 2008, though they may have purchased the property at a reduced rate.

"I do not see how the government's decision will boost the housing market,"' said Ram Prasad Padhi of Pinnacle Realty. "Buyers definitely will not benefit. My client recently purchased a flat in Oberoi Woods, Goregaon, for Rs1.1 crore, against the market rate of Rs1.5 crore. This means a price reduction of 25%. My client, like hundreds of other buyers, will have to shell out a high stamp duty, nullifying the price benefit he got," said Padhi.

R Shingare, inspector general of registration, claimed the government's decision would give a boost to the housing market. "By continuing with the same rates, the government is giving a benefit to buyers at the time of recession,"' said Shingare, who expects to collect over Rs 8,500 crore by way of revenue through stamp duty and registration fees.

Maharashtra hikes realty prices in reckoner

BS Reporter / Mumbai January 1, 2008
Business Standard

Sharp rise in Ready Reckoner values for 2008.

 

Property buyers in Maharashtra will now have to pay much more for registration as the state government has hiked the market value of real estate in its Ready Reckoner-2008.

 

The market prices mentioned in the reckoner are used to charge stamp duty and registration fee on purchase and sale of properties.

 

The new reckoner will come into force from tomorrow. On an average, the government has increased the rates by 35-50 per cent. 
 

AVERAGE PERCENTAGE INCREASE IN MARKET RATES FOR 2008
Division/Taluka Land 
rates		 Residential 
rates		 Office 
rates		 Shop 
rates		 Industrial 
rates
Mumbai City
(Colaba to Sion & Mahim)

34.30

26.50

27.13

29.96

24.21

Andheri Taluka
(Bandra to Jogeshwari)

51.44

42.22

41.56

30.71

36.56

Borivali Taluka
(Goregaon to Dahisar)

55.67

38.98

54.35

35.99

38.55

Kurla Taluka
(Kurla to Mulund)

62.66

44.23

44.59

41.21

43.01

TOTAL AVERAGE

51.02

37.98

44.41

34.47

35.58

 

However, the prices for land in places like Kurla in Mumbai have seen an increase of 300 per cent. This means the sellers have to pay more tax on sale of these properties and buyers have to pay more stamp duty and registration charges.

 

Industry sources say the increase has been prompted by the sharp rise in property prices in Mumbai and other cities of the state.

 

“As market transactions take place at a much higher price than the ready reckoner value, the move seems an attempt to bring the reckoner closer to market prices so that the state government can earn more revenue,” said an industry source.

 

A Mumbai-based property consultant said though the government used to effect an annual increase of 10-20 per cent in the reckoner rates, this year, the increase was higher as property prices had doubled in parts of Mumbai and other cities during the last couple of years.

 

“According to Section 50C of the Income Tax Act, if the ready reckoner value of a property is higher than the price at which the transaction has taken place, the ready reckoner value is used to assess tax. After the new reckoner, the assessee has to pay higher capital gains tax,” said a tax expert said.

 

The market value rates are prepared by the deputy director of the Town Planning and Valuation Department by gathering information from builders, real estate consultants, market sources, submission made by the joint director of Town Planning and Valuation and from the documents received from the offices of the sub-registrar.

Govt hikes rates for Mumbai flats
DNA - Rajshri Mehta
Tuesday, January 01, 2008  11:36 IST

MUMBAI: High property prices may have dampened flat sales and, in turn, affected stamp duty registrations in Mumbai.

In a move that will, therefore, not go down well with prospective flat purchasers, the cash-strapped Maharashtra government is learnt to have hiked residential property rates by an average 38 per cent as per the ready reckoner for 2008.

Commercial property rates have also increased by an average 45 per cent in the city. Published every year, the ready reckoner estimates the market value of a property to enable authorities to calculate stamp duty and registration fee on property transactions.

At the micro level, rates for flats in the eastern suburbs from Bandra to Jogeshwari and Kurla to Mulund have been hiked by 43% and those between Colaba and Sion and Mahim by 27%.

In a clear disparity with rates quoted by private developers, the residential rates fixed by the stamp duty and registration department at Malabar Hill is about Rs25,000 per sq ft (psf) from about Rs11,000 in 2007.

Flat rates at Worli have increased to about Rs7,200 psf from around Rs3,000 in 2007 and at Matunga to around Rs9,000 psf from about Rs4,000 in 2007. (see box).

The disparity is pronounced in the eastern suburbs. The government has marginally hiked flat rates at Powai vis-à-vis other areas such as Ghatkopar and Chembur. At Powai, flat rates are fixed at Rs6,500 psf as against Rs4,000 quoted in 2007.

At Kurla where flats currently sell at over Rs5,000 psf, rates are quoted at Rs4,000 as against Rs2,000 in 2007. In Western suburbs such as Kandivali, the government has fixed a rate of about Rs4,500 psf against Rs2,600 quoted in 2007. The hike is the highest in Goregaon with Rs6,200 psf against Rs2,800 quoted in 2007 followed by Borivli at Rs5,500 psf as against Rs2,600  in 2007.

A real estate consultant who did not want to be named said: “As such there are not many flats being sold. With the government increasing property rates, affordable housing may still elude prospective flat purchasers. A lot may  depend on whether housing loan rates reduce and the government decides to reduce stamp duty rates, currently at 0.4%.”

Unlike earlier, purchasing a flat in old buildings may not be profitable. The government has increased the construction cost by 25%, which, in turn, has reduced the concession in rates (maximum up to 70%)  while calculating stamp duty for such buildings. While construction cost has increased from Rs.900 to Rs1200 psf in the island city, in suburbs it is hiked from Rs800 to Rs1000 psf.