Tamilnadu slashes guideline value by 33%
The Tamil Nadu
government has slashed the guideline value of property by 33% with effect from June 9, 2017, according to an official
press release.
The revenue loss due to
the reduction in guideline value will be compensated with a 4% registration fee on conveyance deed, exchange, gift and
in case of settlement deeds to those outside the family, the release said.
The panel’s decision
fulfils the electoral promise made by of the ruling party in the last year’s
Assembly polls that the fixation of guideline values will be restructured, the
release added.
The Tamil Nadu
government has slashed the guideline value of property by 33% with effect from June 9, 2017, according to an official
press release.
The revenue loss due to
the reduction in guideline value will be compensated with a 4 per cent
registration fee on conveyance deed, exchange, gift and in case of settlement
deeds to those outside the family, the release said.
The panel’s decision
fulfils the electoral promise made by of the ruling party in the last year’s
Assembly polls that the fixation of guideline values will be restructured, the
release added.
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%. That is registration fees Increased 300%. It will come into effect on June 9, 2017.
The developer community
has welcomed the reduction in the guideline values. Mr.
P.
Suresh, Arun Excello, MD 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 Rs. 30 lakh at present, the resultant reduction in cost of
registration is only Rs.20,000. In the case of an apartment buyer registering an undivided share of land
worth Rs.
30 lakh, there is no major 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".
Mr. N. Nandakumar, MD, 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 Mr. 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 4 per cent stamp duty and one percent registration fees, Mr. Chitty Babu said.
Guideline value is the
price of property set by the government below which sale of a property cannot
happen. A seller can sell for more than the prescribed value, if the buyer is
willing to pay, but not below that. Usually the actual market value is higher
than the guideline value, and the difference in the actual market value and
guideline value often ends up becoming the 'cash component' in the deal, which
contributes to generation of black money.
Following the move to
ban Rs.500 and Rs.1,000 notes in November, the sale of secondary properties and
real estate saw major setbacks.
In 2016, Chennai alone reportedly saw a
notional revenue loss of Rs.1,100 crore. In addition to this, it was reported
that there was a 46% fall in the sale of residential apartments between October
and December 2016. This move to reduce the guideline value, the government
claims, is in accordance to former Chief Minister MS. J Jayalalithaa's election manifesto.
"This is sure to
bring the value of property crashing down. But the market has been dull anyway,
so perhaps the government wants to increase the pace of sale of properties. But
this also means the cash component in the sale of property will go up now, and
those who have the cash will benefit from the lower prices," said a real
estate businessman not willing to be identified. Simply put, he says that those
who remain flush with cash even after demonetisation could benefit from the
slashing of the guideline value.
This announcement does
not come completely as a surprise. However, people who are currently attempting
to sell their properties, may face a significant loss.
The Hindu had earlier
reported that the state government was contemplating this, and had visited
several other states in the country to enquire about the value of property.
“Finding the guideline
value in Tamil Nadu to be higher, the team had suggested a reduction but had
warned that the revenue from registration of sale deed could also fall correspondingly,
said a source,” The Hindu reported, adding that, “The Tamil Nadu government
increased the guideline value on April 1, 2012, pushing it up by 10 times in
some areas.”
Speaking to The News
Minute, Professor Mr. Srinivasan, Associate Professor, Econometrics, Madras
University, said, "The main reason they have done this is that the number
of property registrations have come down. But, I would say that instead of
reducing the guideline value, that should have reduced the tax rate. This would
incentivise people to declare the true market value of the property and reduce
black money transactions."
TAMILNADU PROPERTY REGISTRATION - Income for government
Year Revenue Rs.Cr No. of regd. documents
2004-05 1,882 17,61,695
2005-06 2,349 20,11,565
2006-07 3,048 24,92,294
2007-08 4,232 26,91,000
2008-09 4,100 28,32,685
2009-10 3,818 27,31,025
2010-11 5,021 32,80,505
2011-12 6,620 35,18,435
2012-13 7,455 26,90,350 *
2013-14 8,056 26,53,290
2014-15 8,280 25,73,930
2015-16 8,562 25,28,560
2016-17** 2,733 8,03,805
* Following the steep increase in the guideline value
across the Tamilnadu State in 2012, the number of documents getting registered
came down sharply in 2012-13 and has followed a downward trend since then. **
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