MUMBAI: The new stamp duty ready reckoner rates for Nariman Point have been fixed at Rs 43,000 a sq ft when the prevailing market rate ranges between Rs 26,000 and Rs 30,000 a sq ft.
Real estate observers believe this "illogical" increase may kill the office transaction market in the business district and spell trouble for buyers and sellers as they can be accused of deliberately undervaluing property and carrying out black-money transaction.
"The new rates are impractical. No sale transaction will take place. People will instead prefer to lease out their properties in Nariman Point," said Ramesh Ramchandani, one of the biggest landlords in the area. He said a large volume of office space is available though it will slowly get absorbed. Around 10 lakh sq ft of the total 45 lakh sq ft of actual area development in Nariman Point is now vacant.
The Income Tax Act makes it clear that capital gains tax has to be paid according to the RR value even if someone sells an asset at a lower price. So a seller in Nariman Point would have to pay tax at the RR rate of Rs 43,000 per sq ft even if he has sold his office at the market rate of say Rs 30,000 per sq ft. If the asset is a long-term capital asset, then the rate of capital gains tax would be 22.66%. In this case, the difference is Rs 13,000 per sq ft. Moreover, stamp duty would have to be paid with reference to the reckoner value even though the transaction price is less.
Property consultant Ashok Narang said the state increased the RR rates without looking at the ground reality or going through the recent agreements registered with the stamp office for Nariman Point properties. "It will have a serious impact on buyers and sellers when they file their I-T returns," he said.
Narang added the commercial space market in south Mumbai is already slow because many corporates and banks have relocated to the BKC and Andheri-Kurla road. The new RR rates, he said, will bring the commercial market here to a near standstill.
Advocate Anil Harish offered a counter-view and, perhaps, a ray of hope for Nariman Point landlords. According to him, offices in the area built four decades ago enjoy 40% depreciation when their values are calculated. "Many of the buildings at Nariman Point were constructed in the 1970s. If depreciation of 40% is given, the value of offices at Nariman Point would come to about Rs 26,258 per sq ft of built-up area on the lower floors as per the new RR rates. There may be some difference between the actual market price and the reckoner value, but not much," he said.
However, commercial premises at Nariman Point on the ground floor have a basic RR rate of Rs 69,400 a sq ft. "With the 40% depreciation, it comes to about Rs 41,654 per sq ft of built-up area and may be slightly higher than the market value," he added.