For the first time in last five years, Maharashtra state government has decided to keep Ready Reckoner (RR) Rates unchanged. Sluggish real estate market where unsold stock of housing units is mounting has left the state government with no option but to continue with the existing RR rate.
However, real estate associations like Maharashtra Chamber of Housing Industry and CREDAI don’t seem to be fully happy with the government decision. These association were demanding a 25% reduction in RR rates since the real estate market has been depressed for the last three to four years.
Many experts in the past had pointed out that high RR rates were not allowing real estate prices achieve their realistic values. Buyers of houses are also often adversely affected by unduly high RR rates. Stamp duty is generally calculated on valuation of asset based on circle rate fixed by State Govts, which are in many cases higher than the market value or the value negotiated between seller and buyer. This makes seller and buyer both liable to pay tax on notional gain / profit under the provisions of sections 43CA, 50C and 56(2)(vii)(b), making the case of double taxation. Therefore, realtors, in their budget memorandum, are demanding that the actual sale value should only be the basis for computing tax on profit and gain from land and building assets and not the notional income.
Initially, the state government had planned to increase RR rate by an average 7%. However, bowing to the public pressure the government decided to keep the rates unchanged. In the last five years, rates were increased by 6-7% annually except in 1995, 1996, 1997 and 2001 when the government, despite there being no amendment, had reduced the RR rates.