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Guideline value revision annuls gain of registration fee cut

The halving of property registration charges from 4% to 2%, while restoring the pre-2017 guideline value for properties, will result in several spinoff benefits though immediate home-buyers will have to pay more.

Finance minister Palanivel Thiaga Rajan announced on Monday that registration fee for the deeds of sale, gift, exchange and non-family member settlements, has been slashed from the existing 4% to 2%. He also restored the pre 2017 guideline value for properties.

The halving of property registration charges from 4% to 2%, while restoring the pre-2017 guideline value for properties, will result in several spinoff benefits though immediate home-buyers will have to pay more.

On June 8, 2017, the then government had cut the guideline value of properties by one-third across the board, but increased the registration charges by about 2%. Now that both the values have been tweaked again, what will it mean for a home-buyer?

Now, for example, if guideline value of a plot in Kodambakkam is ₹10,000/ sqft, a 1,000sqft plot would be valued for ₹1 crore. Before this budget announcement, the buyer would have paid another 11% (7% stamp duty and 4% registration charge) which would have been ₹11 lakh in addition to the plot cost.

Now, however, the restoration of the pre-2017 guideline value has pushed the plot cost to ₹1. 33 crore. Therefore, even though registration charge has been cut by 2%, the buyer will end up paying ₹11. 97 lakh – an increase of ₹97,000 – as charges besides the plot cost.

“Tamil Nadu has one of the highest registration charges in the country and after repeated requests from variousstakeholders, the government has finally reduced the registration charges. But they should not have increased the guideline value,” said S Ramaprabhu, Committee Chairman, Municipal and DTCP, Builders Association of India.

The finance minister, however, said it would greatly benefit the poor and middle class, especially those who avail bank loan to buy homes. The restoration of the old guideline value will not affect a property-buyer in cities, as in the guideline is always lower than the market value in cities. In 2017 it was slashed by one-third mainly because in some of the outlying areas guideline value was more than the market value itself. In such areas, property transaction will not happen now, say realtors.

The revision, however, will help those losing their land for acquisition, as compensation is always calculated on the basis of guideline value. Sanjay Chugh, city head-Chennai, Anarock Group, welcomed the move saying only buyers be in suburban areas would have to shell out more, as the guideline value and the market value are on par in such areas.

“Guideline value is the minimum value of a property in any location. However, properties are bought and sold as per the market value in every micro market. For them the two percent reduction will be of great help,” he explained.

A Mohamed Ali, president elect, CREDAI Chennai, said home buyers would greatly benefit from the 2% cut in registration charges. “Although home interest loan rates have been rising, this reduction will encourage more people to buy homes,” he explained.

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