by THO
With the Maharashtra government considering an increase of almost 10% in the ready reckoned (RR) rates to boost revenue to around ₹70,000 crore, the move is likely to impact homebuyers and also increase prices of commercial office space and retail real estate, developers told HT.com
The Maharashtra government is likely to increase RR rates by 10% for 2025-26 to earn surplus revenue of around ₹55,000 crore from stamp duty collection. It hopes to mop up another ₹15,000 crore owing to increased RR rates of land, according to an HT.com report of January 15.
The last time the Maharashtra government increased RR rates was in 2022-23. In 2022-23, except for Mumbai, the ready RR rates of all municipal corporations increased by 8.8% from April 1, 2022. Before that, RR rates were increased by 1.74% in 2020-2021.
What are ready reckoner rates?
Ready reckoner rates (RR rates) are the minimum rate based on which the government can charge registration fees and stamp duty on a property transaction. They are also used to calculate capital gains for income tax. RR rates are linked to all premiums, charges, and floor space index (FSI) rates payable to municipal corporations by real estate developers. The rates are released at the beginning of the financial year in Maharashtra.
The RR rate, also known as the ‘circle rate’ or ‘guidance value’ in several parts of the country, is the minimum per sq ft rate of a property or land fixed by the state government. The RR rate is deemed to be the minimal market rate. But if one sells his or her house or land at a lower than the RR rate, then the buyer’s stamp duty and other charges get linked to the RR rate. If it is sold for a higher rate than RR rates, the stamp duty is linked to the higher rate, also known as the market rate.
Regarding land, the RR rates determine the project cost for developers. Developers pay premiums and other taxes based on RR rates to get development approvals.
Also Read: Likely increase of 10% in ready reckoner rate to bail out cash-strapped govt
Should homebuyers be concerned about the increase in RR rates?
According to developers, increasing RR rates for land in Maharashtra will ultimately impact sales and homebuyers.
“When RR rates are increased for residential, commercial or retail property, there is not much impact on the buyer. However, when land RR rates are increased, project taxation for developers ultimately increases. The developers ultimately pass on this increased burden to the homebuyers,” a Mumbai-based real estate developer, who did not wish to be named, said.
“In the case of the Mumbai real estate market, if we say there is a healthy supply or oversupply in certain pockets, the impact of the increase in RR rates is likely to be higher. The developer will bear the burden only to a certain level. He or she will ultimately pass on the burden to the homebuyer notwithstanding the housing supply in a particular micro market,” the developer added.
Earlier this month, a 10-member delegation from the apex real estate developers’ body, the National Association of Real Estate Developers Organisation (NAREDCO), met Maharashtra’s revenue minister Chandrashekhar Bawankule and emphasised the need to keep RR rats of land unchanged for the upcoming year.
“We have already submitted a representation to the Maharashtra government requesting not to increase RR rates for land in the upcoming financial year. We hope that the government does not increase the same, considering the ultimate impact of the same will be on the homebuyers and sales of real estate projects,” said Smita Patil, National President of NAREDCOs Womens Wing MAHI and Managing Director of SSPL Group based in Pune.
