Ready Reckoner Rates: Cost of buying homes to rise marginally in Maharashtra

Maharashtra state revenue department has hiked the ready reckoner (RR) rates by an average rate of 5.86% with effect from April 1 this year which is likely to increase the cost of buying homes marginally in the state.

Highlights:
1. Maharashtra state revenue department has hiked the ready reckoner (RR) rates by an average rate of 5.86% with effect from April 1 this year

2. In Mumbai, the ready reckoner(RR) rates are increased by 3.95% as opposed to 7% last year

3. In Pune, the rates are increased by 8.5% against 11% last year

The Maharashtra government's recent move of hiking the ready reckoner (RR) rates is likely to result in marginal increase in the cost of buying homes into the state, experts said.

The state revenue department of Maharashtra has hiked the ready reckoner (RR) rates by an average rate of 5.86% across the state with effect from April 1 this year, according to media reports.

The ready reckoner (RR) rate is the minimum rate at which the sale or transfer of a plot, built-up house, apartment, or a commercial property can be registered.

In Mumbai, the ready reckoner(RR) rates are increased by 3.95% this year as opposed to 7% last year while in Pune the rates are increased by 8.5% against 11% last year.

Zeebiz spoke to Colliers International India, which offers commercial property consultancy services to investors, to understand the impact of ready reckoner (RR) rates on the prices of realty market into the state.

"As the market rates in most of the locations are already higher than the ready reckoner rates, we do not foresee any major impact on residential and commercial property prices in the state. Sales are unlikely to impact further as the market is primarily driven by end-users and sale transactions had already reduced to lowest in the past few months. Thus, we do not expect much impact on market sentiment. However, the cost of buying will increase slightly as stamp duty is calculated on the basis of ready reckoner (RR) rates," Colliers International India senior associate director Surabhi Arora told Zeebiz.com in an e-mail interview.

Elaborating further, she said, "Ready reckoner rate is directly tied to the stamp duty and registration charges, the cost for the buyer will increase to some extent."

These rates form the basis of stamp duty and registration charges for a property, so the statutory cost will increase for the buyers, she added.

ALSO READ: 5 key things to look forward in real estate in 2017

On questioned over why the state government hikes the ready reckoner (RR) rates every year, Arora said, "The rationale behind the state revenue department to increase the ready reckoner (RR) rates is to reduce the gap between the ‘going market rate’ at which transactions are happening and the government prescribed minimum value for registration of properties."

Moreover, the ready reckoner (RR) rates are unlikely to have any direct impact on prices of residential properties in the state.

"...There would not be much impact on the direct prices as market rates are already higher than the ready reckoner(RR) rates. Also, ready reckoner (RR) rates are specified zone wise, so in some areas the property prices are higher than the prescribed rate while it is lower at some locations depending on kind of the locality (low-end, mid-end, high-end, luxury)," Arora told Zeebiz.

However, JLL India expects the prices of residential properties to rise by 5 to 8% if ready reckoner (RR) rates are hiked across cities in the state.

"It is important to note that in recent times, we have also seen few state governments reducing the ready reckoner (RR) rates in order to correct market courses and also mitigate negative effects from a slow sale velocity. Therefore, it may be a bit early to comment on the rise in prices. However, we may assume a 5-8% rise in prices if ready reckoner (RR) rates increase across these cities," JLL India managing director-strategic consulting Shubhranshu Pani, told Zeebiz .

As far as impact of ready reckoner (RR) rates on commerical properties in concerned, Colliers India International does not see any significant rise in price of this property segment other than increase in purchasing cost of land.

"As market prices are already higher for commercial properties as well, we do not foresee any major price hike in commercial real estate as well," Arora said.

On the contrary, JLL India believes that the commercial property developers in the state will pass on the rise in ready reckoner (RR) rates to end consumers.

"Given that the pick-up in commercial rentals have already begun since last 12-15 months, we can anticipate a complete pass-through of the ready reckoner (RR) rate hike by all developers," cited Pani.