State Revenue Minister hints at 20-30 per cent hike in ready reckoner rates that may inflate stamp duty in the New Year; industry insiders condemn move, say it will put off property buyers in an already passive market
Come New Year and it is going to be even more expensive for you to get yourself a house or an office space in the city. The state government is keen to increase the stamp duty rates on its ready reckoner in order to meet revenue targets.
State Revenue Minister Balasaheb Thorat hinted that the ready reckoner rates may be hiked by as much as 20 to 30 per cent.
"Our revenue officers are working out the finer details and the new ready reckoner rates would be implemented from January 1, 2012. The officials have visited real estate exhibitions and have taken into consideration prevailing market rates of property, location wise, before working out their calculations."
Right on target? Justifying the government's stand to hike the rate, Thorat said, "The Stamp and Registration department is a major revenue generator for the state government. Last year the department had collected approximately Rs 14,000 crore from all over Maharashtra. But it is finding it difficult to achieve the target for the fiscal ending March 2012."
For 2011-12, the target for Mumbai (city and suburbs) is approximately Rs 8,000 crore, and for the entire state, it is around Rs 16,000 crore. Senior revenue officials admitted that the target set for this financial year is very high and they are struggling even to reach anywhere close to it.
Thorat added, "People who feel that the ready reckoner rates quoted are exorbitantly high are free to submit their documents/instruments to the stamp office under the adjudication process by paying a nominal adjudication fees, wherein either the market or ready reckoner rates, whichever is lesser, will be charged. "
'Unjustified' After learning of the impending hike, Advocate Vinod Sampat, president, Stamp Duty and Registration Payers Association, said, "The hike is unjustified, particularly when property rates are chasing away buyers and eroding our revenues."
He continued, "In the olden days, the king was advised to collect taxes just as the bee collects honey from the flower without affecting its fragrance. But the stamp duty being collected by the authorities is like a sting of the bee, which hurts taxpayers immensely."
Sampat added that projections show that the demand for houses may fall in the coming year and the new stamp duty rates will pinch buyers. "The impact of ready reckoner rates is also felt by flat sellers, as they have to pay capital gain tax on the ready reckoner rates at the time of sale," he said.
Said Chartered Accountant Ajay Pansari, "Already the real estate market has no property buyers because of the unaffordable prices. The likely rise in ready reckoner rates, which is already high in Maharashtra as compared to other states, will further have an adverse impact."
Real estate expert Ajay Chaturvedi said, "Actual consumers are sure to be affected. The real estate industry is a stagnant market right now. Rather than increasing them, the government should have reduced the prices in the read reckoner."
How the hike affects you Advocate Vinod Sampat elaborated the impact of a likely hike on buyers thus: The stamp duty levied on commercial property is 5 per cent of the property value. Say, a commercial property in 2011 costs around Rs 1 crore. So the stamp duty payable on it is Rs 5 lakh. In 2012, after the ready reckoner rate is increased, say by 20 per cent, the same property would cost Rs 1.20 crore, and the stamp duty payable on it would be around Rs 6,00,000. Similarly, if the value of a residential property is Rs 1 crore in 2011, the stamp duty is calculated as follows: For the first Rs 5,00,000 of the property value, the stamp duty is Rs 7,600. For the balance, it is calculated at 5 per cent. In this case, 5 per cent of the balance of Rs 95,00,000 is Rs 4,75,000. Therefore, total stamp duty: 7,600 + 4,75,00 = Rs 4,82,600. In the year 2012, after the ready reckoner rate is increased, say, by 20 per cent, the same property would approximately cost Rs 1.20 crore, and the stamp duty payable would be around Rs 5,82,600 (Rs 7,600 stamp duty for first Rs 5,00,000 + Rs 5,75,000 stamp duty on the balance of Rs 1,15,00,000).