MUMBAI: Buyers of Super luxury 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.”