Valuation of flat under pagdi syatem
Lydon Cooper
(Querist) 10 August 2017
This query is : Resolved
Hi,
I have a simple query. I am tenant of a flat under the pagdi system in Mumbai since the last 40 years. I have decided to sell this property, or rather transfer the tenancy / relinquish my tenancy to a buyer for which I have approached my landlord. My landlord has agreed to the sale and In fact has a few buyers who are ready to pay a fair value for the flat. The landlord also informed me that i should only be interested in the net value of the flat that I will get and the transfer charges of 33% he will adjust with the buyer who is hus friend and whom he has a private understanding.
My query is regarding the Valuation of a Pagdi Flat. Is there a seperate ready reckoner for valuing such properties? The normal ready reckoner does not mention about the sale of a pagdi flat by a tenant. As per the landlord, for a rental / pagdi flat a vlaue of 40% of the ready reckoner value of the flat is to be considered. Is this correct?
Thanks in advance.
Regards,
Lydon
Kishor Mehta
(Expert) 11 August 2017
There is no fixed table for the value of a pagdi flat in Mumbai, you can get an idea of the ruling rate from the local estate brokers. The Landlord usually demands a share of the pagdi amount, this has to be mutually agreed upon.
Good Luck,
Kishor Mehta
Lydon Cooper
(Querist) 11 August 2017
Thank you for the revert but there has to be some way of valuation for taxation purpose. How would I / IT DEPT know whether the selling price is not undervalued.
P. Venu
(Expert) 11 August 2017
In addition to what learned expert Kishore Mehta had suggested, Ready Reckoner is not of much probative value as to valuation of property.
Kishor Mehta
(Expert) 11 August 2017
Sir,
Please understand that there is not a sale of the property, only the tenancy rights are transferred. There is a ready reckoner to value the rental property for the sake of assessment of applicable stamp duty on the new tenancy agreement, and the IT department usually takes this into consideration. You will get the proper idea of the worth of your premises from the local professional estate agent.
Good luck,
Kishor Mehta
Lydon Cooper
(Querist) 11 August 2017
Sir,
Thank you for the revert. The problem with local agents is that they themselves have no idea. They are only interested in the sale and getting their commission. When I asked this almost all of them answered that you let us know what price you are looking for. The landlord does not have much idea about correct valuation because most of his buyers pay in cash so valuation for IT purpose does not arise for them. He said he read somewhere in the ready reckoner book that for rental flats 40% of the ready reckoner value is to be considered. He is not 100% sure hence my dilemma as I am interested in cheque transactions.
Lydon Cooper
(Querist) 11 August 2017
Sir,
Thank you for the revert. I do understand it'll is not a sale but relinquishing my tenancy rights in favour of a new tenant... The so called buyer.
The problem with local agents is that they themselves have no idea. They are only interested in the sale and getting their commission. When I asked this almost all of them answered that you let us know what price you are looking for.
The landlord does not have much idea about correct valuation because most of his buyers pay in cash so valuation for IT purpose does not arise for them. He said he read somewhere in the ready reckoner book that for rental flats 40% of the ready reckoner value is to be considered. He is not 100% sure hence my dilemma as I am interested in cheque transactions.
Guest
(Expert) 11 August 2017
Rental value flat is 40% of ready reckoner.
This statement I will clarify According to valuation rules , Govt release Annual Statement of Rates of each area (as per survey no. etc) this is in meter , for residential commercial shop industrial.
This statement is for new structure then you need to check valuation rules which states depreciation of that structure due to age , for eg 30-40 year old structure depreciation is 60%
Now under the circumstances the Govt. Value will be 60% less as compared to new constrcuted building for building whose age is 30-40 years old. So this is value of title clear flat where owner can hand over to new buyer with title and possession.
Generally, the Market price is 5 to 20% more of Govt value this is present understanding. Additional it has to be also noted some municipal corporation are giving more FSI for old dilapidated building and building is dilapidated and owner /tenant may get new flat , so certainly he can expect more price.
So he need to come to first valuation of flat which is reasonable, expecting too much and too low both are disasters .
Once you come to valuation of the flat that if owner hands over title free as well as possession of flat he get x amount then presume that will be value of the flat
Then share between land lord and tenant , new person who is going to come in that place he can not claim himself to be owner , he will be tenant , additionally he will have stand since he is not owner he can not sell /mortgage or raise funds against the flat in emergency so here the valuation automatically reduces.
So initial Valuation x , subsequent valuation which he comes to he shares with outgoing tenant and land lord.
Law is completely silent how much land lord should take , and how much tenants should take . Law has kept this decision mutual on both the parties and complete ambiguity. If tomorrow land lord state I want 60% nothing can be done the deal can fail or if you say I want 70% deal can fail ,
Rajendra K Goyal
(Expert) 11 August 2017
Under the circumstances may discuss with some broker dealing in such cases and on the basis of his information discuss with local tax consultant for considering the deal with taxation angle.
Kishor Mehta
(Expert) 11 August 2017
Sir,
It is not true that the value of a rental property is 40% or whatever of the ready reckoner value, the market value depends on several aspects like the location, age of the building, area etc, I have come across many rental properties that have fetched much more than ownership property considering the location, area etc. and the monthly outgoings. There are no fixed rates or values of a rental premises, it depends on various factors as also demand and supply. You may take help from premises renting sites.
Good Luck,
Kishor Mehta.
Lydon Cooper
(Querist) 12 August 2017
Thank you all for your valuable time ans information. A lot of things are clearer to me now. I appreciate your responses.
