MUMBAI, March 20: Even as property values are heading south, the Maharashtra government has pushed up property-valuation rates to rake in more revenues through stamp duty. The state government has set itself a hefty target of Rs 1,550 crore as collections from stamp duty and registration charges for the financial year ending, March 31, 1998.According to reliable sources in the revenue department, stamp-duty collections have touched Rs l,445 crore as on the last day of February. The average collection for the past 11 months have been about 130 crore every month. The stamp-duty authorities are confident of collecting the remaining 105 crore by this financial year, ending on March 31. To meet this target -- which is close to being achieved -- the state government hiked the notional values of properties older than six years but less than 10 years. This has been done by reducing the depreciation rate allowed for valuing properties in this range.
The depreciation percentage has been reduced from the previous20 per cent for buildings between six and 30 years, and to 5 per cent for buildings that are six-to-10 years old. The rate of depreciation for buildings between 11 and 20 years has been fixed at 10 per cent, and for buildings older than 21 years but less than 30 years at 20 per cent.
The rate of depreciation for buildings between 31 and 40 years is 30 per cent (Vs 35 per cent earlier), and 45 per cent for those between 41 and 50 years. For buildings between 50 and 60 years, the depreciation will be 60 per cent (the same as before) and for buildings above 60 years the rate has been cut sharply from 90 per cent to 75 per cent.
According to government sources, the office of the Inspector General of Registration was forced to reduce depreciation rates for valuation purposes because of the huge target of Rs 1,550 crore set for revenue collections this year. Of this, Mumbai alone has been given a target of Rs 900 crore -- more than half the amount targeted for the entire state. As a palliative, the governmenthas announced a 5 per cent reduction in the valuation of new properties in suburban areas beyond Mumbai city limits. According to stamp-duty authorities, the suburban areas include regions extending from Bandra to Dahisar in the West, Kurla to Mulund along the main central railway line and from Kurla to Mankhurd in the harbour line.
Builder Niranjan Hiranandani is critical of the government decision to keep valuation rates high. "This is ridiculous. Instead of bringing down property (valuation) rates by at least 40 per cent, they have given a minimal reduction of 5 per cent (for new property in the suburbs). By these measures, housing will become unaffordable to the middle-class. It is wrong on the part of the government to keep their rates of valuation high."
The Registration Fee and Stamp Duty Payers' Association secretary Vinod C Sampat says the government's move forces flat-buyers to pay higher stamp duties even if the actual prices at which they may have been bought were lower. "Because of thegranting of lower depreciation, the flat purchaser will be forced to pay stamp duty on a higher value. And fixing a target of Rs 1,800 crore is too hefty. Till a few years back, the same department had a target of only a few crores. Today stamp duty has become the second highest revenue earner for the state." This is how the stamp-duty valuation scheme works. Let's say a buyer, Mukesh Anand, buys a six-year-old flat for Rs 13,800 per square foot at Mumbai's southern residential enclave of Cuffe Parade. The ratable value for stamp duty purposed at the old depreciation rate of 20 per cent would have been Rs 11,040 per square feet. But now, with the depreciation rate down to 5 per cent, the valuation would be Rs 13,110.
Result: instead of paying stamp duty on Rs 11,040, the value of the property will be reckoned at Rs 13,110 per square feet even though Anand may have bought the flat at a lower rate.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
