The Maharashtra government’s decision to raise ready reckoner rates(RRR) in Mumbai and other parts of the State has been met with considerable dismay by the real estate sector which apprehends an adverse impact on housing demand, as property costs are expected to escalate.
On Monday the State government raised RRR by an average 3.89 per cent across the State and 3.39 per cent in Mumbai, the financial capital that also accounts for around half of the housing demand in the country by value.
RRR are minimum rates fixed by the State government, based on which it charges registration fees and stamp duties on property transactions. Development expenses, additional floor space index and municipal charges are also linked to the RRR. The rates have been increased after two years.
Against hike
Real estate organisations have come out strongly against the hikes, saying that it will affect affordability in the housing sector while also putting a spanner in redevelopment activities.
“These hikes could pose a challenge, particularly in the affordable and mid-income housing segments, which are already feeling the strain of rising input costs and financing challenges,” said Domnic Romell, President, CREDAI-MCHI, the apex body for real estate developers in the Mumbai Metropolitan Region. ”At this critical juncture, the increased RR rates may impact housing affordability, especially for first-time homebuyers who are already grappling with tight budgets.”
The organisation pointed out that the hike in rates translates into a direct rise in stamp duty outgo for homebuyers and escalated costs for premiums, FSI charges, and fungible components, all of which are calculated on RR values. This would constrain the viability of affordable housing projects and even some mid-income housing projects.
Slow down momentum
“The timing of this hike, just when we were beginning to see signs of a recovery in the residential sector, could slow down the momentum and impact both supply and demand. In an already challenging economic climate, this additional pressure may deter potential homebuyers,” said Dhaval Ajmera, Secretary, CREDAI-MCHI.
The head of one of the biggest real estate players in the city, Niranjan Hiranandani, also added his voice to the dissent saying that the hike will drive up construction costs and “indeed hurt affordable housing segment.” He urged policymakers to adopt a balanced approach to sustain growth momentum while ensuring housing affordability in the real estate market.
While industry players fear the worst, property consultants feel that the market will be able to absorb the hike.
Observing that the previous revision in rates in 2022 had been absorbed by the market smoothly, Ritesh Mehta, Senior Director and Head-North, West & East, Residential Services, India, JLL said, “Given Mumbai’s rapid price appreciation in recent years, this adjustment is unlikely to disrupt momentum. While there may be a short-term impact, historically, such revisions have been smoothly integrated into the market. Mumbai’s real estate sector continues to demonstrate resilience, driven by strong demand and long-term growth prospects.”
“It is a reasonable hike, given that in the last two years, market prices for residential real estate have gone up by 8-10 per cent in Mumbai, 15-18 per cent in Thane, 14-23 per cent in Navi Mumbai and 13 per cent each of last two years in Pune,” said Ashutosh Limaye, Regional Director-Strategic Advisory & Valuations, ANAROCK Group.
“This means that the hike is acceptable as most transactions were taking place at a higher market rate. The impact would be felt only in lower-priced markets where buyers are more sensitive to total cash outflow,” he added.
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