New ready reckoner rates to be released on March 31

From April 1, ready reckoner (RR) rates for different properties in Mumbai have increased by an average of 7% compared with 15% in the previous year. Considering that the annual hike is usually around 12% to 17%, this is the lowest hike since 2010, according to revenue department sources. The RR rates directly affect property prices as the buyer as well as the seller have to pay a stamp duty based on these rates. The new RR was announced by the state government on March 30.

In the grim market scenario, lack of affordable housing stock and the impending water crisis, the government was expected to go in for a moderate hike this year.

In Navi Mumbai and Mira-Bhayander, the RR rate will increase 4% each while in Thane and Pune, these will rise 6% each. In Kalyan-Dombivli, the hike is 5%.

For the state, the stamp duty on registration of properties is the second highest source of revenue after sales tax. It is calculated on the RR or the market value of the property (the built-up area) and the buyer has to pay whichever is higher. The government earns up to Rs 20,000 crore annually through stamp duty and registration fee.

The RR is the base rate of property decided by the government, which determines the stamp duty and registration charges in course of property transactions. While stamp duty is charged at 5% of the RR or the market value, whichever is more, registration charge is 1% of the total property value since 2015. Earlier, the registration charge used to be fixed at Rs 25,000 per transaction on residential properties. This time, though, there appears to be no change in the registration fees.

Every year, the new RR rates are implemented from January 1. As the real estate market is currently stagnant, though, builders had recently urged the government to postpone the announcement.

The RR value varies from city to city and area to area and the location. For instance, if a property abuts the sea in Bandra West, it would have a higher RR value than the one located in Bandra East. If the RR value is higher than the agreement value of the property deal, then the stamp duty is charged on the RR value. And if the market value is higher than the agreement value and the RR is less than the agreed cost, then the stamp duty is charged on the property's market value. In the current scenario, a 1,000-square-foot flat in Cuffe Parade is priced around Rs 5 crore whereas in Bandra, it would come to about Rs 4 crore. In Borivli, the value is up to Rs 2 crore.

There are 737 RR value zones in Mumbai region and more than 26,277 in the state such zones. Different RR values are derived based on the demand for properties over the past several years in a particular area. The rates, though, are uniform in that particular area or ward demarcated under value zones.

If the property is close to the shore, the RR value is higher. Whereas if the property is close to a garbage dump or a drain or nullah, the RR value is comparatively lower. For instance, for a Rs 2 crore property in Goregaon, the stamp duty would be 5% or around Rs 10 lakh. But as the ready reckoner value goes up in tune with the market demand, the stamp duty value also rises, affecting buyers. Since builders have to pay income tax on a difference between commercial value and the RR value, such a rise affects them too.

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