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Saturday, June 10, 2017

Tamilnadu slashes guideline value by 33%, Registration Fees Increased 300%

Tamilnadu slashes guideline value by 33%

The Tamil Nadu government has slashed the guideline value of property by 33% with effect from June 9, 2017, according to an official press release.

The revenue loss due to the reduction in guideline value will be compensated with a 4% registration fee on conveyance deed, exchange, gift and in case of settlement deeds to those outside the family, the release said.

The panel’s decision fulfils the electoral promise made by of the ruling party in the last year’s Assembly polls that the fixation of guideline values will be restructured, the release added.

The Tamil Nadu government has slashed the guideline value of property by 33% with effect from June 9, 2017, according to an official press release.

The revenue loss due to the reduction in guideline value will be compensated with a 4 per cent registration fee on conveyance deed, exchange, gift and in case of settlement deeds to those outside the family, the release said.

The panel’s decision fulfils the electoral promise made by of the ruling party in the last year’s Assembly polls that the fixation of guideline values will be restructured, the release added.

The move could remove hurdles in property transactions in many rural areas, where guideline values were at times higher than market values. To compensate for the possible loss of revenue, the government has increased the registration fees for conveyance, exchange, gift and settlement effected in favour of non-family members deeds from 1% to 4%. That is registration fees Increased 300%. It will come into effect on June 9, 2017.

The developer community has welcomed the reduction in the guideline values. Mr. P. Suresh, Arun Excello, MD said, "This will give the much needed fillip to the real estate sector. But owing to the 3% increase in registration fees, the effective reduction in cost of conveyance of property is only marginal. For instance, for a property whose guideline value is Rs. 30 lakh at present, the resultant reduction in cost of registration is only Rs.20,000. In the case of an apartment buyer registering an undivided share of land worth Rs. 30 lakh, there is no  major savings at all even after reducing the guideline value by 33%. Still, there is substantial savings for the seller on account of resultant drop in capital gain tax, which is calculated based on guideline value when the guideline value is higher than the market value".

Mr. N. Nandakumar, MD, Devinarayan group said the reduction in guideline value would help the affordable housing segment and spur the real estate growth. "Higher guideline values have the tendency to push the market prices up for properties. The reduction in guideline value will definitely lead to softening of property prices".

"We expect the volume of transactions to go up," said Mr. T. Chitty Babu, MD, Akshaya Homes. TN still has a long way to go in fulfilling the Centre's proposal to introduce uniform stamp duty and registration fees (4+1% respectively) across the country. Only very few states have introduced 4 per cent stamp duty and one percent registration fees, Mr. Chitty Babu said.


Guideline value is the price of property set by the government below which sale of a property cannot happen. A seller can sell for more than the prescribed value, if the buyer is willing to pay, but not below that. Usually the actual market value is higher than the guideline value, and the difference in the actual market value and guideline value often ends up becoming the 'cash component' in the deal, which contributes to generation of black money.

Following the move to ban Rs.500 and Rs.1,000 notes in November, the sale of secondary properties and real estate saw major setbacks.

 In 2016, Chennai alone reportedly saw a notional revenue loss of Rs.1,100 crore. In addition to this, it was reported that there was a 46% fall in the sale of residential apartments between October and December 2016. This move to reduce the guideline value, the government claims, is in accordance to former Chief Minister MS.  J Jayalalithaa's election manifesto.

"This is sure to bring the value of property crashing down. But the market has been dull anyway, so perhaps the government wants to increase the pace of sale of properties. But this also means the cash component in the sale of property will go up now, and those who have the cash will benefit from the lower prices," said a real estate businessman not willing to be identified. Simply put, he says that those who remain flush with cash even after demonetisation could benefit from the slashing of the guideline value.

This announcement does not come completely as a surprise. However, people who are currently attempting to sell their properties, may face a significant loss.
The Hindu had earlier reported that the state government was contemplating this, and had visited several other states in the country to enquire about the value of property.
“Finding the guideline value in Tamil Nadu to be higher, the team had suggested a reduction but had warned that the revenue from registration of sale deed could also fall correspondingly, said a source,” The Hindu reported, adding that, “The Tamil Nadu government increased the guideline value on April 1, 2012, pushing it up by 10 times in some areas.”


Speaking to The News Minute, Professor Mr. Srinivasan, Associate Professor, Econometrics, Madras University, said, "The main reason they have done this is that the number of property registrations have come down. But, I would say that instead of reducing the guideline value, that should have reduced the tax rate. This would incentivise people to declare the true market value of the property and reduce black money transactions."


TAMILNADU PROPERTY REGISTRATION - Income for government

                    Year      Revenue Rs.Cr       No. of regd. documents
2004-05           1,882   17,61,695
2005-06           2,349   20,11,565
2006-07           3,048   24,92,294
2007-08           4,232   26,91,000
2008-09           4,100   28,32,685
2009-10           3,818   27,31,025
2010-11           5,021   32,80,505
2011-12           6,620   35,18,435
    2012-13          7,455    26,90,350 *
2013-14           8,056   26,53,290
2014-15           8,280   25,73,930
2015-16           8,562   25,28,560 
 2016-17**        2,733     8,03,805


* Following the steep increase in the guideline value across the Tamilnadu State in 2012, the number of documents getting registered came down sharply in 2012-13 and has followed a downward trend since then. **  Up to July 2016
Tamilnadu slashes guideline value by 33%, Registration Fees Increased 300% Reviewed by S. Chitra on June 10, 2017 Rating: 5 T amilnadu  slashes guideline value by 33% The Tamil Nadu government has slashed the guideline value of property by 33 % with effect f...

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