Builders are just looking for a reason to increase property prices in Maharashtra and none other than the state government itself has given them one.
The government is set to increase ready reckoner (RR) rates for properties—the government-set prices below which sales are not allowed—by up to 30 percent, according to media reports. This is an annual exercise by the government.
Ideally, the move should not impact the property prices, because the market rates are already much higher the RR prices.
But, builders are already readying themselves for an increase in prices.
“Increase in costs will be passed on to consumers leading to higher property prices and sales volume is expected to take a hit,” Paras Gundecha, president of realtor's body MCHI-CREDAI, has been quoted as saying in a report in the Economic Times.
The builders had asked the government not to increase the RR prices this year as the sales have been sluggish. According to them, an increase in the RR prices will push up the stamp duty and registration charges, which will deter buyers further. This will pull down sales volumes further. To offset this, builders have no option but to raise prices, they had told the government.
Isn’t the sector entering a vicious circle? The contention also puts a question mark on builders’ intention. Do they want genuine buyers to come in or just the investors who will ruin the market? If they wanted the genuine buyers to come in, they should cut the prices to open up points of entry for genuine buyers. Otherwise, they will surely kill the proverbial goose, if it is not already dead.
Additionally, the government’s move is definitely not in the best of buyers’ interests. Why is the government increasing the burden for buyers at a time when the high prices are already keeping them away? The move seems to be aimed at increasing the government’s revenue from stamp duty. But, considering the unreal situation in the real estate sector, the government should refrain from taking steps that would further reduce buyers’ confidence.
Especially, since the builders had already cautioned against any increase in the RR rates.
The government, instead of increasing the RR rates, should have cut the stamp duty and registration charges, to encourage the public to disclose the real deal value.
As more deals happen above board, the government will be able to offset the revenue loss on account of the stamp duty cut. This will also help reduce the black money component in real estate deals.
However, all these are indirect measures. The direct way to deal with the sorry state of affairs in the real estate sector is to clamp down on the builder-politician-bureaucrat nexus. But there is no reason to believe that the government will in the near future take any step in this direction.