Increase in market value A major blow to realty sector

The government should think of all possible ways before making any new decisions. People rejoice when the government makes the right decision at the right time. Under normal circumstances, no one would have worried too much about an increase in any charges when the market remained positive. But the construction organizations are worried that it would not make sense to increase the market value of land in times of Covid-19 crisis. They are objecting to the government’s unilateral decision without consulting all the stakeholders, especially people. Therefore, the CREDAI Telangana, TREDA and CREDAI Hyderabad and other construction associations want the government to postpone its decision for some more time.

The Department of Stamps and Registrations has increased the stamp duty on conveyance deeds by 37.5% from July 22, 2021 onwards. It has been increased to 5.5 per cent from 4 per cent in the past and thereby, increased the burden of registration fees by 25%. The registration charges, which were six per cent in the past, have been enhanced to 7.5 per cent. In the same order, the market value of agricultural lands and all properties increased from 30% to 100%. NALA charges were increased from 2 per cent to 3 percent i.e a 50 per cent increase under GHMC. In other areas, it increased by 67 percent. Moreover, it is true that the real estate sector has been dull for the past four and a half months. Pre-launch /discount sales have had a negative impact on the realty sector. If market values are enhanced under these circumstances, there will be new challenges and the real estate sector will be badly damaged.

At present, the Covid-19 variant Omicron is spreading rapidly. As a result, a large percentage of offices are working with limited staff and curfew is likely to be imposed in the near future. At this point, many home buyers are postponing or delaying the home loan process and registrations are on decline. A high percentage of people in Telangana consider the months of December and January to be bad for home transactions. Due to this, most of the registrations are stalled before the Sankranthi festival. Moreover, the 2022 financial year ends in 2 months. At this point, there will be more pressure about tax payments. Without giving enough time for the builders associations, citizens and other stakeholders to express their views, the State government has unilaterally decided to increase market values from February 1.

Increase must be rational

The government raised market values just six months ago. But the builders associations did not object as the government increased them after nearly seven years. But the government decision to increase the market values again within six months, has become a major cause of concern for the construction sector. Just six months ago the market value of land was increased by 30 to 100 per cent. The upper floors of commercial buildings increased by about 167 per cent. The stamp duty on transfer deeds was hiked by 37.5%. The market value for structure as well as construction has been increased by 45 per cent, i.e from Rs 760 per sq.ft to Rs 1,100 per sq.ft. Betterment / user charges have been enhanced in selected areas. Prices of cement, steel and other building materials also rose significantly in recent times. What is the point of raising market values in such situations?

* Currently, the real estate market in Telangana is very fragile as the market sentiment was adversely affected due to UDS and prelaunch sales. This has led to a decline in transactions and buyers are hesitating to take a step forward.

Challenges in implementation

With regard to the Dharani portal, there are issues that have been pending for a long time regarding missing survey numbers, double numbers and lakhs of properties which were wrongly entered including those recorded under Prohibited Lands Register and wrongly assigned titles to ancestral legal heirs among others. Lack of suitable modules for some transactions was also observed. After the government held several consultations with various stakeholders, some of these issues are now resolved and a few properties were released from the Prohibited Lands Register. Some properties with respect to agreements made in the past, are yet to be released.

Under the present circumstances, it would be unfair to increase market values without giving all the stakeholders adequate time to conclude the respective transactions. If market values increase suddenly, new problems will arise with regard to capital gains and income tax where people might be forced to pay more taxes for no fault of theirs. All these issues should be taken into consideration.

* To promote transactions above market value, builders associations are urging the government to levy only 1% of marginal stamp duty on the difference between card market value and sales.

* By levying lower taxes and charges, the Telangana State is constantly attracting investment. If the market must receive a similar response, the developers’ organizations are suggesting that the stamp duty and NALA charges should remain the same and compete with other States. Whenever the market values are revised, the citizens are unable to get slots for registration even after paying the stamp duty/challan. Moreover, the officials are insisting that buyers pay for the revised market rate as well and hence, there is a need to change this rule wherever possible.

Requests from the builders associations!

Revising market values again shortly after raising stamp duty, NALA charges, structure rates, and betterment charges is not a right decision. Therefore, the construction associations feel that raising market values cannot be justified without reducing the hiked stamp duty charges and NALA charges. They requested an appropriate decision to this extent.

* Although there is some possibility to increase the market value, it should be done only after the specified deadline. For this, it is best to consult with the construction community as well as the public and make a decision in a transparent manner.

* The decision to increase market values by 25 to 50 percent should be postponed. The market value should be enhanced in a way that is acceptable to all.

* Only 50-60 per cent of the open market value should be taken into account, depending on the demand-supply situation and market forces in the realty sector.