Hike in RR Rates Increase Property Prices

Bangalore: With the economic slowdown and pricey property, the Island city is facing the axe once again after state government of Mumbai increased the Ready Reckoner (RR) rates by 18 percent in the city and 30 percent in other areas like Versova, Prabhadevi, Cuffe Parade and Dadar.

Ready Reckoner is all about the rate at which stamp duty for a property’s market value is calculated, through which the government earns revenue after sales tax and Value-Added Tax (VAT). The hike in Ready Reckoner rates increases the price of the property for an instance; hike in Ready Reckoner rates increases the stamp duty rate which further increases the cost of the property. Ready Reckoner rate differs from place to place.  

Sunil Mantri, chairman, Sunil Mantri Realty, stated that, the rate of Ready Reckoner differs faintly from the area’s property price. He quoted that "If the property price in Worli is Rs 4,000 square feet, the rate would be Rs 3,500 or Rs 4,500."

Interestingly, the stamp duty revenue collection’s higher percentage either comes from the property rate or the Ready Reckoner. For an example, if the rate of a property is 10000 a square feet and the rate of Ready Reckoner is 15000, then the Ready Reckoner rate is collected.

Government has taken this step of increasing RR rates because of lower stamp duty collection happening because of manipulated transactions. Developers may put lower property price on paper which inturn will charge a lower stamp duty for buyers. If the price of the property in an area is 10000 a square feet, the developer puts only 8000 as a result the buyer would pay lower stamp duty. According to experts, these kinds of transaction took place for quality properties, where the property price is high.

As per a report by business Standard, Pranay Vakil, chairman of Knight Frank cited that "The capital gains will be calculated on the difference between the Ready Reckoner rate and the purchase price instead of selling and buying price”.

Experts say that the property tax is expected to be calculated on the capital value. Sanjay Dutt, CEO of Jones Lang LaSalle, quoted that “this will lead to increase in property rates, as the property tax will be paid on the capital value”, reports Business Standard.

Moreover, expert says that the hike in Ready Reckoner rates will not affect much on dealings of new properties as the rate estimated by developers is anyway nearly 40-80percent higher than that mentioned in the RR. However, the hike would affect in buying and selling of old inventories as the cost of construction has increased by 16 percent under the new calculus.

Rajesh Mehta, director of Raha Realtors cited that "In cases of resale of old apartments, the RR value will be marginally higher than the agreement value. Due to this, the burden of the additional stamp duty will have to be borne by the buyer of the flat. Besides, there will be an impact on the capital gains tax calculations. Under section 50 (c) of the Income Tax Act for the developer”, reports TOI.