Property Tax To Be Valued Differently

Property Tax To Be Valued Differently 20 Jan 2009, 0000 hrs IST, Prafulla Marpakwar MUMBAI: The age-old system of charging stamp duty based on the ready reckoner will be obsolete in a matter of months. The inspector-general of stamps and registration has submitted a report to the state government recommending that the value of property be henceforth calculated on the basis of several tangible locational advantages and disadvantages that actually contribute to its value in the real estate market. Ramrao Shingare, who prepared his draft with the help of the Geographic Information System, said, “No scientific methodology was available so farto decide a property’s real value. We felt the value of a piece of property should be based on the availability of amenities, its distance from the railway station, the scope for further development, status of title and floor-space index, among other factors. If we take all these aspects into consideration and modify the rules accordingly, we can mobilise an additional Rs 2,000 crore from stamp duty.’’ Shingare has identified more than a dozen issues which will decide the real value of property. It has been proposed that its real value be based on its distance from facilities (like railway stations, bus depots, markets, schools and gardens), its distance from the seashore or the coastline, its worth in the market (whether it’s ownership or leasehold property, its FSI and the scope for further development) and the availability of infrastructure (water, power and better approach roads). Properties near crematoria or cemeteries and away from railway stations but near the tracks will attract less stamp duty. “Our present ready reckoner does not take into consideration all these aspects,’’ Shingare said. “When we decide the real or market value of property, we need to take into consideration the fact that the metropolis has witnessed exponential growth in the last ten years. In urban areas, besides huge malls and multiplexes, new business centres and Special Economic Zones have also come up. The existing system does not take these aspects into consideration while deciding the real value of property, the present system is not fool-proof,’’ he added. For decades, there were no specific rules for recovery of stamp duty on real estate transactions. As a result, buyers and sellers found themselves at the mercy of revenue officials. Then, stamp duty used to be charged on the basis of sale value in the agreement. Taking cognisance of large-scale irregularities in the system of charging stamp duty, the revenue department introduced the concept of "ready reckoner" in 1989. The value of a property was based on transactions conducted in the previous year. The city was divided into several zones and prices in the previous year formed the base for deciding the stamp duty in the next year. The government used to follow the practice of declaring stamp duty rates on January 1 every year. A senior revenue department official said as it was not a foolproof system, real estate transactions in the entire zone were charged the same duty irrespective of the real value of the property. "For instance, whether a property was located near a five-star hotel or a slum in the south Mumbai zone, the stamp duty was identical,'' the official added. It was felt that with rapid urbanisation and setting up of special economic zones, business townships and irrigation projects, besides the proliferation of malls and multiplexes, the real value of properties varied according to the area. "The system of deciding stamp duty on the basis of the ready reckoner appeared faulty as it did not take into consideration these factors,'' the official said. Further, the official pointed out that if an area was developed or granted non-agriculture status for development, then the rate of stamp duty in the entire zone was identical, irrespective of the fact that the entire zone had been developed. "In such cases, it was found that for undeveloped zones, the buyer had to pay stamp duty on a par with the developed zone,'' he added. Under such circumstances, the official said it was felt that the system of deciding the value of a property should be foolproof. "If we are able to decide the real market value of the property, it will help add revenue to the state exchequer. With this aim in view, we have drafted the new microplanning project to ensure that all properties are valued properly and stamp duty charged accordingly,'' he said.

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