Vision of Life; by Sanjay: A Toffee Named Ready Reckoner!

“The one who adapts his policy to the times prospers, and likewise that the one whose policy clashes with the demands of the times does not”… Niccolo Machiavelli.

Niccolò di Bernardo dei Machiavelli was an Italian diplomat, politician, historian, philosopher, humanist, writer, playwright and poet of the Renaissance period. He has often been called the father of modern political science! Well we also do have such intelligent thinking financial as well technical minds but the problem is their fatherly advice often get muffled under the pressure of the system i.e. govt! Has it not been so then the policies which we have wouldn’t end always in chaos & when its real estate or anything related t land then lesser we say is better! As usual come March end & entire real estate is buzzed up with only one thing that is Ready Reckoner rates (RR rates) & Stamp Duty! Well, for the lucky & ignorant souls who don’t know what it is, then ready reckoner rates are rates per sq ft of land as well built up areas in every part of the State (Maharashtra in our case) which are decided as well revised by State Govt every year depending on current ongoing market rates (at least that’s what is expected)! And these are the rates which are considered as bench mark for Stamp Duty which is charged in some % on the amount of such deals. Means in Kothrud area in Pune if the land rate is say Rs.7000/sft as per ready reckoner then even if the deal happens at Rs.6000/sft yet the person buying the land will have to pay stamp duty as per Rs. 7000/sft only! Even the taxation (read Income Tax or any such) will considered the ready reckoner rate only & charge the tax according on every such deal. But if the deal is above ready reckoner rates i.e. Rs 8000/sft then the stamp duty will be charged on the higher rate i.e. as pr Rs 8000/sft! That’s specialty of the govt, it has its cut in both ways when it wants to have a cut which is mostly every time! Now the stamp duty which is a way (big way it is) for the govt to earn revenue via every land or property deal in the State, is also keep changing & govt can add or reduce (well, reduce I said just to give example) the % of stamp duty anytime but read recknoner rates are revised (read increased) on 1^St of April every year which is start of new financial year! And there is a separate department for this purpose & it has two fold jobs; one is to register all the property deals i.e. flat, land or farm, shop, office any such & other task is to keep track of current market trends (read rates) of every property deal so as to set datum line for the rates every year! Though the very registration dept also registers (in a way authenticate) every other document also such as Bank Loan Mortgage, Marriage Certificate, Will of individual person & many such & do charge some amount for the same but major revenue comes via property deals only!

And for this purpose real estate as well govt itself is very much sensitive for the ready reckoner rates & stamp duty percentage as on one side this amount is direct burden on the property deal then on other side its significant income way for the govt’s bank balance (which always is in deficit). Naturally, both sides are conscious & touchy for their own reasons for the ready reckoner rates & needless to say if govt is happy on increasing these rates then real estate (builder’s as well home buyers) definitely get unhappy to see the same increased! No need to say who wins every time when its an argument between govt & real estate industry as our govt is “of the people, by the people & for the people”, but who are these people that nobody really knows; sure they are not from real estate industry, is I all can say! If you have a look at past ten years then barring last year when ready reckoner rates has not been increased, every year there has been significant rise in ready reckoner rates & no wonder real estate was booming (though not for last three years at least for sure) yet the rise in RR rates was always there as govt needs money! But last year due to all well known reasons real estate has slumped to its bottom, (well, is it?) so RR rates has been kept same & this year indeed there hasn’t been any positive movement on real estate horizon & govt still needs money looking at the subsidies & loan wavers its coming with, so it was expected RR rates will be increased but this year also the RR rates hasn’t been increased & everybody (read real estate related people) are celebrating like India has won World Cup! (Off course cricket’s, which else!).

And reason for being happy or excited by this decision for real estate is very simple though the ready reckoner rate increase means added burden on every deal & in case of the flat sale its usually paid by the flat purchaser yet in the current scenario when already real estate’s every per sq ft rate is so burdened that the homes are beyond budget of the purchaser. And in such times any added burden on home prices is driving the remaining home buyers also away from the market & real estate can’t afford it anymore! At the same time every local body’s (PMC/ PCMC) premiums are directly related to RR rates means if you buy paid FSI or load TDR then all these are charged on the basis of RR rates on the land where the project is going on. This means every such increase in RR rates is increase in cost of making of the homes & this also real estate can’t afford! And from the govt’s side RR rate is two edge sword as if increase in RR rates makes govt happy for more revenue but at the same time it has to shell out more money for the acquisition of lands under reservations especially reservations like roads or play grounds as the govt has to pay as per RR rates of such lands! And TDR is FSI given in lieu of the land acquisition is workable only in cities like Pune or Mumbai where real estate is still surviving, rest all places govt has to pay by hard cash (I mean in terms of money)! Now you will understand how RR rates can make many people’s life miserable & why it’s so eagerly awaited in March end!

So this year as I said RR rates has not been increased by the “Mai baap” govt & for that real estate as well prospective home buyers are praising govt; indeed a welcome step but is it all the real estate needs? As in first place the govt hasn’t done this for benefit of real estate; don’t believe me, here is my analysis! With Central assembly elections on face & followed by state assembly ahead no government would have take risk of increasing ready recknoer rates as look at past except last year every time these rates has been hiked like anything & unfortunate is while real estate is on correction mode i.e. rates in most places has been reduced (reasons may be many) the ready reckoner rates may not been increased for year or two but not reduced also is a fact which in way is hidden increase only by me! Because if today if you go to any builder to book a flat do you accept what rate he has quoted, no is the answer! You negotiate till the builder bleeds & get the best rate is scene & in the process at most places flat sale rates are below ready reckoner rates is fact so just not increasing ready reckoner rates isn’t mean government has done some great relief to real estate! Why can’t govt actually check the deals going on in market & reduce the rates of ready reckoner if it really thinks to make the homes affordable. More than that what the common man (read home buyers) is getting by paying this 8% of stamp duty & registration charges on already hiked reckoner rates, is the question I will like to ask!

Another aspect is it’s not just ready reckoner rates but look at stamp duty % also which has gone to nearly 7% & above with all sorts of loading , thanks to Metro sur-charge (for Smart City Pune) & with 1 %registration charges the total is 8% which is huge! Means if a flat is of worth Rs 50 lac then Rs 4 lac govt is getting in the form of stamp duty & registration charges only & in lieu where is water, where if power, where are roads, where is public transport, where are affordable schools as well hospital, the list is unending! By now when the government has already increased stamp duty by 1% for Pune region just last month which is indirect increase in properties deal value of every real estate deal; so, it’s like fooling some small kid by giving him wrapper of toffee under the name of toffee!

As I always say, no one is against paying taxes or govt collecting revenue as for infrastructure we do need it but problem with govt is like the story in Panchatantra in which an old lion appoints a wolf to lure animals in his cave as it can’t kill the prey due to old age. One day the wolf tries to lure a jackal to go & meet the old lion to ask his health, listening to wolf, jackal says do convey my best wishes to the lion as I can see the foot prints of animals entering in the cave but can’t see any foot print coming out of the cave”! I think high time for people (read citizens) to become smart as the jackal in the story of Panchatantra about not just ready reckoner rates or stamp duty but approach of govt towards entire real estate (read homes) because just by getting a tag of Smart City, life doesn’t get Smart; mind it!

Sanjay Deshpande

Sanjeevani Dev.

Please view my sharing about real estate in Pune at U-Tube link below..

https://youtu.be/g3lx1Nq7pBs

Please do visit my blogs to know about our philosophy at Sanjeevani ! (Click the links below)

http://visonoflife.blogspot.com/2018/08/pune-city-no-1.html