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 Home > City Resources > Construction > The Real Scene

Model agreement to push real estate prices up in Mumbai

The Maharashtra Apartment and Ownership Act, 2000, is expected to push real estate rates further up, in Mumbai and other towns and cities in the state. Last month, the Maharashtra government enacted a Model Agreement for real estate investors and flat buyers in the state, to enhance the revenue earnings from Stamp Duty and registration charges.While the state government stands to gain from this Model Agreement, flat buyers, investors and small scale industries entrepreneurs, are likely to be financially hit by the government's move.

According to the Model Agreement, henceforth it is mandatory to mention in the sale agreement the carpet area and not the built up area. In the past, in the sale deed there was only a mention of the total built up area, which was generally fudged, in connivance with the seller and buyer.

Even though, the carpet area is mentioned in the sale agreement, the Stamp Duty will be levied on the built up area which is calculated by the Revenue Department authorities. Vernon Pereira, a real estate consultant claimed that real estate brokers in Mumbai are also earning a bigger profit margin in the wake of the Model Agreement coming into force.

The sellers of flats and property in Mumbai, have all along been mentioning the built up area in the sale deed. Generally, the ratio of built up to carpet area should not exceed more than 22 percent as per the thumb rule (standard limit) of construction. However, the Model Agreement has enhanced the ratio by around 50 percent. In other words, if the seller diposes off his property of carpet area admeasuring 700 square feet, the buyer will be charged a Stamp Duty on the built up area which is estimated by the Stamp Duty authority to be 1000 square feet.

In the bargain, the buyer will be actually occupying only 700 square feet, but will be charged Stamp Duty and registration fee on an estimated occupation of 1000 square feet. For example if the rate of Stamp Duty is Rs 1000 per square foot and the 700 square feet carpet area of flat is sold for Rs 10 lakh, then the collective cost of the flat including Stamp Duty and registration charges, will be around Rs 1, 600 per square foot.

Pereira opines that in commercial projects the built up and carpet area ratio is sligthly more than 60 percent. This upswing in the prices will especially hit the small-scale industries entrepreneurs who are launching maiden ventures in Mumbai and other places in Maharashtra.

Though the Model Agreement has come into force in the last month, state government funded housing agencies like Maharashtra Housing and Area Development Authority (MHADA) continue to mentioni the built- up area instead of carpet area in the sale deed.

J Shenoy, an Income Tax consultant, claims that there is even a general fear in the minds of flat purchasers and businessmen that this Model Agreement will also add a further financial burden on the buyers as well as sellers, as the income tax payment will be structured on the built up area and not carpet area as estimated by the Stamp Duty authority.

Author: Mani D'Mello

Photographer : Uma Kadam

 

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A Square Foot of Mumbai

Marine DriveThe Mumbai skyline offers a multitude of shelters, right from posh pent houses, bungalows and apartments to chawls (small one room tenements with common toilets) and jopadas (hutments). Even jopadas in this business hub cost quite a pocketful, depending on its location. They come under the protection of slumlords. In Mumbai, unlike other cities, both the posh bungalow and well-designed apartment blocks rub shoulders with hutments.

Surprisingly, even prime localities like Colaba, with a market price of Rs. 8,500 - 13,500 per sq. ft. for a residential property, house middle echelons of the society. These old settlers of Mumbai have a family history to tell. They live back-to-back with celebrities like the Chief of Western Naval Command, top Army officers, etc. Yehi Hai Mumbai Meri Jaan!  

Mumbai's eligible and not so eligible bachelors cannot find suitors without an address to their name. Marry in Mumbai only if you have a flat of your own, most mother-in-laws would say. Only if you have your pocket full and a strong heart, look into the property prices listed below, I would say.

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Neo-Buyers

GetawayThe Mumbai property market in the new millennium has lured a band of new buyers – those waiting for long to make the ‘Big Buy.’ Unlike traditional investors, these buyers are long-term players investing in commercial property, particularly office space. Residential property has likewise lured the real buyer, who has ‘Investment’ at the top of his mind.  With this, the market has experienced a noticeable increase in demand for residential and good quality commercial space. The fall in the lease rentals in the residential sector has been arrested with increase in demand from large enterprises.

Positive trends

  • The retail and entertainment sector has given rise to new projects like Hakone Entertainment Centre by Hiranandani Builders in Powai, Bowling Alley at Phoenix Mills in Lower Parel, the mega shopping mall - Crossroads by the Piramal Group, Haji Ali; Mc Donalds at Bandra, Andheri, etc. Fast food chains and international brands have exploited the potential of areas like Linking Road, Bandra and Churchgate
  • Shift in demand for commercial space from Nariman Point to the suburbs (the perfectly located Bandra-Kurla complex, MIDC area in Andheri East, etc.)
  • Corporate demand for leased properties in suburbs has increased resulting in some firming up of lease rentals in secondary areas.  

Real EstateThe buying trend has not resulted in the increase in prices of real estate, but has aided in stabilising the otherwise shaky market. After months of falling prices, the real estate scenario in Mumbai seems to have hit stable ground.  This positive trend could have a cascading effect on real estate prices elsewhere in the country, Mumbai being the business capital of India.


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