Saturday 12 January 2013

REDUCE THE BURDEN

REDUCE THE BURDEN

While developers have been expecting a revival for the sector in 2013, they are disappointed by the hike in ready reckoner rates, say NISHA SWAMI and NISHA SHROFF

    The Maharashtra government's decision to hike ready reckoner rates from five to 30 per cent from January 1, has left many in the real estate sector disappointed, with developers pointing out that there are already too many taxes impacting the property markets, and directly affecting the home buyer. The ready reckoner rates are used to calculate the market value of a property for stamp duty and registration charges. Therefore, any escalation in them results in higher stamp duty.
    CREDAI, the apex developer body, has strongly opposed the Maharashtra government's decision to hike stamp duty and other taxes related to property. Lalit Kumar Jain, CMD, Kumar Urban Development Ltd and President National - CREDAI says, "The hike in lease rentals, property taxes, fungible premium and now hike in ready reckoner rates despite the market realities of fall in sales bear testimony to the fact that the government adopts a unilateral approach and their mindset to increase revenues by hook or crook." He also appealed to the Chief Minister, Prithviraj Chavan, to take a comprehensive approach and involve all stakeholders before the government takes decisions that impact home buyers and developers.
    Lalit Kumar Jain adds, “We as the developer community can work with the government to increase revenue by volume approach.”
    Bharat Dhuppar, Chief Marketing Officer (CMO), Omkar Realtors and Developers Pvt Ltd observes, “A hike in ready reckoner rates may dent the revival of the market which of late has shown some positive sentiments after a two-year sluggish phase. The industry expects the state to be more supportive in aiding the sector's growth which directly impacts our economy.” Dhuppar also believes that the real estate market can be expected to do well in 2013 if key policy decisions are progressive like reduction in interest rates, land acquisition bill, new housing policy and the much deserved industry status.

    A reduction of stamp duty and taxes helps to bring down overall costs and increases affordable housing. An increase in duty and taxes, which ultimately is passed on to the buyer, will reduce demand and sales, the developers say. Shailesh Puranik, Managing Director, Puranik Builders Pvt. Ltd. believes that the government should slash the taxes rather than increasing them. This would also encourage home buyers and allow maximum transparency which will lessen the tax burden. Puranik adds, “Any rise in taxes always makes an immediate impact on the common man, since it increases the burden on him. The increase in the ready reckoner rates certainly is going to make an adverse impact on the market sentiments as it is the basis to decide charges of stamp duty and registration.”
    Manju Yagnik, Vice- Chairperson, Nahar Group believes that property prices across the city could go up. She says, “The announcement about the increase in the ready reckoner rates came at a time when the market was poised for a revival, which doubled its impact with this setback. Although the increase in these rates is a purely government decision and recognising the upward trend in the realty prices across all areas, it is expected to dampen overall real estate market sentiment.” Yagnik feels that the authorities should bring down the
tax burden in order to encourage transparency in real estate deals. The government should reconsider its decision in order to provide relief to the real estate market, she states.
    Gopal Sharma, General Manager-Marketing, Gundecha, adds: “The market will be affected in two ways. Firstly, property rates will go up. This is because the fungible premium which the developer will have to pay for additional FSI provided by the Municipal Corporation as per the recent rule is based on ready reckoner rates, will go up. Hence the price will increase and this burden will fall on the customer.
    “Secondly the property sales which were sluggish and have started showing little improvement in the last couple of months will again go downwards because of further increase in stamp duty. Customers are paying 5 % stamp duty, 1 % registration, approx. 3.1% Service Tax, and 1 % VAT totaling to more than 10% on the property cost. This is high and an added increase in ready reckoner rates is bound to affect sales.”
    Advocate Vinod Sampat, President, Cooperative Society Residents Users and Welfare Association says, “Stamp duty is the second highest
source of revenue for the government. Every year on January 1, they publish the rates and one has to pay stamp duty on agreement value or market value, whichever is higher. There is no proper system between a multi-storeyed building and a small building of three floors. As a result, small buildings are penalised as rates are very high.”

QUICK BYTE
    THE REAL ESTATE MARKET CAN BE EXPECTED TO DO WELL IN 2013 IF KEY POLICY DECISIONS ARE PROGRESSIVE AND AID THE SECTOR’S GROWTH


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