In 2014, buying your dream home in Mumbai just got costlier

The Maharashtra government has ushered in a not-so-happy new year for Mumbai real estate developers.

The government has increased the ready reckoner rates for Mumbai by 20 percent effective today, media reports say.

Ready reckoner rates are the prices set by the government and are taken as the value of the property for calculating stamp duty and registration charges. In short, these rates are the minimum price at which deals happen. They are different for different localities.

[caption id=“attachment_410113” align=“alignleft” width=“380”] Representational Image. Reuters[/caption]

According to a report in The Economic Times, Nepean Sea Road, Altamount Road, Worli and Prabhadevi are the areas that are the most affected.

The increase in the rates means the cost of a transaction for a home buyer will go up as stamp duty and registration charges rise proportionately.

The move comes at a time when the prohibitively high real estate prices in the city are already taking a toll on developers as buyers stay away crippling the demand.

The higher stamp duty and registration charges are likely to scare the fence-sitters, pulling down the demand further.

According to a report by real estate consultants Knight Frank published in November, the number of unsold flats in both ready and under-construction projects has reached an all-time high of 130,000 due to weak demand and high prices.

It would require nearly nine quarters to clear this inventory in Mumbai. Bangalore and the National Capital Region are better off as they have lower inventory levels.

The increase in ready reckoner rate will, however, help the government rake in higher tax revenue. It will also help curb the black money component, but only to a small extent.

In 2013 , the government had increased the rates by up to 30 percent.