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| Real estate market on the downside
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The real estate market in Chennai and many other parts of Tamil Nadu is facing a downswing due to ``unrealistic guideline values'' being fixed by the Registration department.
Property transactions in several prime locations of Chennai are slowing down as the guideline value (GV) for computing stamp duty and registration charges is higher than the real market value, say trade insiders. This results in manipulation of property sale deeds and documents. Some builders, who are asked to pay high duties as per the new GV, construct buildings exceeding the approved plans to break even or attain profits.
Real estate developers say the artificial market boom of the mid-90s led to an over 50 per cent land price hike. The GVs changed radically. But, in the present recession, the GV continues to rise to levels more than the slumping market value.
The Builders Association of India had recently expressed concern at the increasing gap between market value and GV in several locations in the city. Its office bearers say as per the GV, revised recently after April 2002, the market values are 15 to 25 per cent lower than the GV.
In residential areas such as Sarojini Sreet, T.Nagar, the GV per ground is over Rs. 55 lakhs, and on the main roads of south Chennai, is about Rs.1 crore. They certainly do not reflect current market rates.
In Chromepet, a southern suburb, the per ground value along the NH 45, as per the Guideline Register, is over Rs. 35 lakhs, while no developer buys land for more than Rs.20 lakhs, even in the `best location'.
As a builder, N. Kumar says, ``when the only motive for fixing GV is revenue generation or achieving revenue targets, any rational argument for making the GVs realistic and affordable to people will get shot down''.
Another leading builder and hotel owner of South Chennai notes that the high GV does not take into account the nature of the property concerned. A sub-divided property, one under litigation or under distress sale, cannot be equated with a normal piece of real estate. But the Registrars do not listen to such arguments and the systemic deficiency is leading to ``people being fleeced''. Appeals as per the Registration Act are not very transparently dealt with, he regrets.
Three years ago, the Foundation for Fair Practices in Property Development had mooted the creation of a GIS based and online property information system to be developed by the Tata Consultancy Services. Only such unique systems will help everyone know the property value trends.
Real estate developers say the GV fixation is done by going through a series of transactions in a given area. But, this process cannot be driven by a `fancy sale' of a small property. Instead, a committee comprising the Registration department, local body, builders, valuers and NGO representatives will be ideal. Similarly, the guideline value should have `deductions' to provide for contingencies of reduced utility, use and value of a property, says veteran valuer, C.H. Gopinatha Rao.
All sections concede that a less cumbersome process, where every rule is simple and is put in ``black and white'' will make the process faster and more transparent. A higher compliance will lead to more revenues, even if the tax rates are lowered.
Courtesy : The Hindu
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