Ready Reckoner Rates Impact Mumbai Property Prices
The year 2014 was expected to see an improvement in Mumbai’s dull real estate market. However, the hike in ready reckoner (RR) rates will act as a dampener for people who were having hopes of a better market. This will not only affect buyers but also developers who are currently sitting on a huge pile of unsold inventory.
Ready Reckoner rates
Ready reckoner rate is an annual statement of property rates decided by the state government based on which registration and stamp duty charges, to be paid at the time of registering property and projects, are calculated in a particular locality. RR rates are fixed and sales in a particular locality cannot happen below this rate.
Impact on real estate market
The Maharashtra government hiked the RR rates throughout the state on December 31st last year. The rates in Mumbai have gone up by about 20%. Developers have largely criticized this move by the government. For them more funds for stamp duty will be required in deals such as joint ventures and redevelopment. This move will also directly affect the end-users as property buying will become even more expensive.
As a result, it will further impact the already affected property sales in this market. Home buyers are already paying government charges such as sales tax, service tax, VAT and taxes on construction materials, etc. All of these charges will go up due to increase in RR rates. Hence, more home buyers will tend to refrain from buying property. Sales are already down in Mumbai due to high property prices. According to Knight Frank, a real estate and commercial consultancy, the number of under-construction and ready projects is about 1,30,000 in Mumbai which will take about nine quarters to clear.
Possible solution
While there may be an increase in property prices due to increased RR rates, there is a solution for encouraging people to purchase property. The government can lower taxes and duties for property in order to encourage people to register their property. Also, with lowered stamp duties, the government can expect more revenues.
