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Ready Reckoner (RR) rates indicate the value of land or residential and commercial properties of an area, determined by the state government and are published annually. RR rates vary as per the area under consideration and the available infrastructure facilities. They have an impact on the stamp duty on property transactions and concurrently, on the revenue mop-up of the state government. They also directly impact the market value of the properties. Changes in the RR rates, also influence the real estate construction costs and additional charges towards any transaction.
Ready Reckoner rates in Pune
The RR rates of Pune were proposed to be hiked by three per cent this year and the final announcement that they will remain unchanged, comes as a major relief for Pune’s real estate industry. The proposed hike would have had a negative impact, even though it was marginal compared to the previous years (the rates were increased by 13 per cent in 2010, in 2011 by 27 per cent, in 2012 by 17 per cent, in 2013 by 12 per cent, in 2014 by 13 per cent, in 2015 by 15 per cent and in 2016-17 by seven per cent). As per the governing authority, such hikes are based on detailed surveys undertaken by the town planning department. The rates were decided, based on the number of sales and registrations in each zone.
Impact of Ready Reckoner rates on Pune’s real estate market
While the real estate sector is still recovering from the triple impact of demonetisation and the introduction of the Real Estate (Regulation and Development) Act (RERA) and the Goods and Services Tax (GST), a hike in RR rates in Pune at this time, would have hampered home buyer sentiments. In the current affordable housing-focused era, with low interest rates on home loans and RERA being implemented, increased RR rates would have been a hard blow to Pune’s real estate sector.
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Factors of benefit and loss should be considered, before deciding the RR rates. In 2009-10, the RR rates were unchanged, even when property prices declined. Similarly, during 2013-15, RR rates were hiked despite insignificant market appreciation. A hike in RR rates by the Maharashtra government, may cause builders to increase their property prices, even if doing so is untenable in the current market environment. A similar trend was observed in Delhi, when the state government raised the circle rates by 20 per cent last year. In the case of Karnataka, the guidance values remained unchanged, due to a drop in the number of registrations after demonetisation.
Pune circle rates: Why it makes sense to maintain status quo
As per the market scenario, property prices in Pune are likely to remain stable in the short to medium term. Demand and supply have both reduced in the city after demonetisation and RERA. Keeping the RR rates unchanged, will be beneficial for the city’s real estate sector, benefit end-users and reduce the burden of tax payment on property transactions. It is desirable to make the rateable value sensitive to the present market environment and trends.
Increased RR rates are beneficial, only when the market prices are high and the market is performing well, in terms of sales. If the market prices are low and the RR rates are high, it will give rise to unfavourable conditions for both, builders and buyers. Hence, considering the current macroeconomic scenario, it is ideal to keep the RR rates unchanged, until the market recovers and regains its momentum.
(The writer is chairman, ANAROCK Property Consultants)