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
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