MUMBAI: Home buyers in Mumbai will pay more for their dream home after a cash-strapped Maharashtra government sharply increased government rates used to calculate taxes paid by consumers when purchasing property.
Ready reckoner rates, as they are called, have been increased by 30-40% in case of some fastest growing, popular suburbs in the city triggering protests by builders, consumers and unease among the members of the ruling BJP-Sena alliance which captured power in the state after a 15-year break. The hike, which is effective from January 1, could make property expensive and will most likely dampen hopes of home buyers waiting for a fall in property prices after years of dizzying climb. It will also make it difficult for builders who are eager to draw buyers and get rid off an increasingly bloated inventory
Posh residential localities such as Worli, Bandra-Kurla complex, the city's fastest-growing commercial complex and home to some of the country's biggest financial institutions, are among the places where rates have been increased by 30-40%. Rates in popular suburbs such as Goregaon, Borivali, Malad, Chembur, Ghatkopar, Vikhroli have also been increased by a similar percentage. These localities are home to the city's burgeoning middle-class and upper middle-class families. Many of them voted heavily for the BJP in the October assembly election.
While the average hike across the city is between 15-20% for 2015, the highest increase is about 40%. The average hike in the past two years has been 13%.
"We will again approach the state government to stay this hike because it will hurt sales. The move will not result in higher revenue for the state as the sales itself will remain subdued due to the hike," said Dharmesh Jain MD of Nirmal Lifestyle. Jain added that the developers' body will seek to meet the revenue minister in the next few days.
The ready reckoner is used to calculate the market value of properties for paying stamp duty and registration charges at the time of registering the transaction. The rates are different from market rates. Taxes such as stamp duty, value added tax, sales tax and the registration charges are based on such government provided ready reckoner rates. Rate changes were made for all of Maharashtra on Wednesday and it is customary for the government to announce such changes on the new year. The city BJP chief Ashish Shelar admitted that he was surprised by the extent of the hike but explained it away by saying that the government needs revenue. "It's a welfare state and if needed the government will take a call on these rates for the benefit of common man," he added.
"The buyers' outgo will increase now and will impact the sales absorption further. For a realty developer it's a double whammy as he will have to pay higher stamp duty for land transactions and will also have to convince the buyer to shell out more to buy the finished product," said Ramesh Nair, COO &International Director, property consultancy JLL India.
For instance, if you want to buy property in E Moses Road in Worli, your taxes will be based on a new rate of Rs 23,959 per square feet, which is a 40% increase from the 2014 figure. In Napean Sea Road, the taxes will be based on Rs 79,005 sq feet, a 15% increase. Cuffe Parade has seen the rates going up by 15% to Rs 57,713 a sq ft, while rates in Cumbala Hill have been hiked to Rs 39,117 per sq ft, up 15%.