Property prices in new housing projects in Maharashtra may rise by over 15% due to the sharp hike in ready reckoner (RR) rates announced by the state government last week. This, along with the rise in prices of key commodities like steel and cement, will lead to higher costs for developers, some of which are certain to be passed on to consumers.
The average ready reckoner (RR) rates in municipal areas with effect from April 1 have been increased by 8.8% – except in the city of Mumbai where the increase is very low – after remaining virtually unchanged for the past four years.
Developers have already said last month that they want to increase prices by 10-15% in new launches due to sharp rise in construction cost by Rs 400-600 per sq ft along with rising inflation in key commodities like steel, cement . , In the last one year, the prices of raw materials have gone up by about 40 per cent.
Whereas at the overall level, the rates have been increased by 0.84% for Mumbai city and 3.83% for Mumbai suburban. There has been an increase of 48% in the municipal areas of Thane, 9.24% in Panvel, 8.90% in Navi-Mumbai and 8.30% for Mira Bhayendra. Similarly, there has been an increase of 12.15% for Nashik, 6.12% for Pune and 12.36% for Pimpri-Chinchwad municipal areas.
According to industry experts, increase in input prices, increase in RR rates and proposed Metro cess of 1%, if levied, will add to the burden on home buyers. The impact of RR rates is expected to be greater in the case of central and affordable sectors as the rate hike has been higher for suburban municipal areas, which account for a major share of residential sales and launches in the Mumbai Metropolitan Region (MMR).
Ready reckoner rates are the benchmark valuation of real estate. It is used both for computing capital gains under income tax and for payment of stamp duty to the state government. Also, premium, Transfer of Development Rights (TDR), Floor Space Index (FSI) rates are linked to RR rates, which will also increase the cost of houses and increase prices.
Samantak Das, Head Research & REIS, JLL India said, “The hike in RR rates has come at the most inopportune time when the residential market is witnessing green shoots of recovery due to the affordable synergy of lowest mortgage rates, realistic pricing and developer incentives. has been Das said these hikes are likely to dampen the sentiment of homebuyers which will prolong the recovery period, especially in prime locations of MMR and Pune.
The impact of the RR rate on the stamp duty paid by home buyers will vary, and in cases where the RR rates are higher than the prevailing purchase price, there will be a higher payment of stamp duty. Stamp duty is paid on the actual purchase price or over and above the prevailing RR rates. After the current revision, if the purchase price is still higher than the revised RR rate, there will be no impact on the home buyer in terms of stamp duty payment. However, in areas where RR rates are higher, the payment for home buyers will increase.
While stamp duty may increase on a case-by-case basis, FSI premiums are linked to RR rates, and upward revision will result in premiums increasing, affecting the overall project cost of developers. “With the burden of input cost falling heavily on the developers, the home buyers are also expected to. The net effect of higher FSI premium and rising cost of living could result in an upward movement of house prices,” Das said.
Anil Farande, President, CREDAI Pune said, “There has not been an increase in the sale price of houses in the last 5-6 years, so the increase in RR rates is completely unnecessary. Premium, TDR, FSI rates will increase, thereby increasing our inputs. The cost will increase and this will have a direct impact on the buyer.