Tuesday, 20 June 2017

Tamil Nadu cuts property guideline value by 33%

The move could remove hurdles in property transactions in many rural areas, where guideline values were at times higher than market values.



CHENNAI: Hit by low realty transactions for successive years, the Tamil Nadugovernment has decided to effect a 33% reduction in guideline values (the government-fixed minimum value of properties) for registration of properties. The decision was taken in Thursday's cabinet meeting and the revised norms will come into effect on Friday.

The move could remove hurdles in property transactions in many rural areas, where guideline values were at times higher than market values. To compensate for the possible loss of revenue, the government has increased the registration fees for conveyance, exchange, gift and settlement effected in favour of non-family members deeds from 1% to 4%. It will come into effect on Friday .

The developer community has welcomed the reduction in the guideline values. City developer Arun Excello MD P Suresh said, “This will give the much needed fillip to the real estate sector. But owing to the 3% increase in registration fees, the effective reduction in cost of conveyance of property is only marginal. For instance, for a property whose guideline value is Rs3 lakh at present, the resultant reduction in cost of registration is only Rs 2,000. In the case of an apartment buyer registering an undivided share of land worth Rs3 lakh, there is no savings at all even after reducing the guideline value by 33%. Still, there is substantial savings for the seller on account of resultant drop in capital gain tax, which is calculated based on guideline value when the guideline value is higher than the market value“.

N Nandakumar of Devinarayan group said the reduction in guideline value would help the affordable housing segment and spur the real estate growth. “Higher guideline values have the tendency to push the market prices up for properties. The reduction in guideline value will definitely lead to softening of property prices“. “We expect the volume of transactions to go up,“ said T Chitty Babu, MD, Akshaya Homes. TN still has a long way to go in fulfilling the Centre's proposal to introduce uniform stamp duty and registration fees (4+1% respectively) across the country. Only very few states have introduced four per cent stamp duty and one percent registration fees, Babu said.

With goods and services tax round the corner, state governments are left with very few things to levy tax on. Most of the services as well as commodities have been subsumed by 
GST. Only alcohol, fuels, stamp duty and registration fees are available for states to levy tax on.

Tamil Nadu government is in the process of imposing phased prohibition and had closed down 1,000 Tasmac outlets on its own. Another 3,000 shops were closed after the Supreme Court ordered that liquor outlets and bars within 500 metres of national and state highways be shut down.

This leaves little scope for the government to increase its revenue from the liquor sector.

Increasing value added tax on fuels like petrol and diesel will hit all sections of society. This leaves registration revenue as the only other option to increase revenue.

Economists feel the timing of the cabinet is good as only on Wednesday, the Reserve Bank of India gave relief to people purchasing houses above Rs 75 lakh.