KNOW YOUR DEALS
Streamline guideline value
R. BALAJI
Not too long ago, the market value of property in the city figured way above the guideline value set for it by the government. At one point of time, the gap was so large that it bore no relation to the prevailing market prices.
Cut to the present and the scene is totally different, with property prices hitting an all-time low. Some property are selling at a discount of over 30 per cent. This has tilted the balance adversely for the customer, with the guideline value faring way above market prices. This means the stamp duty at the time of registration is paid on an overvalued property, increasing the tax burden for the customer, something the real estate sector can ill afford at prevailing market conditions.
This gap between guideline and market value prompted the National Housing Bank to come up with an index on residential prices called the Residex. The intent was to streamline values marked in different locations and bring about a transparency in market prices.
However, the Residex, introduced about three years ago, has so far not served as a benchmark for computing the guideline value in the city. While this did not impact the market during the boom period, the present sluggish trends certainly calls for remedial action to boost the flagging real estate sector.
Thus, it would be a good idea to correct the prevailing guideline value to reflect correct market trends and the formula used in computing the Residex would act as good beginning.
Further, to ensure the price variation of property units within the same locality does not exceed 10 per cent, reflecting differences in their respective premium nature, a panel could be made responsible for fixing this guideline value.
This panel could comprise developers, legal experts, banks as well as representatives from government bodies such as the BDA.
The prices computed by this panel should be scientific, reflecting true market conditions and subject to review on a yearly basis.
The benefits
Such a move is bound to not only bring in transparency in dealings in the real estate sector, but also create a more mature market that is not swayed by speculation and underhand dealings.
While speculative content would see a significant downside, the black economy which is rampant in large land dealings will be extensively checked.
The upside, of course, would be an increase in revenue realised by the government, complementing the recent move to digitalise land documents.
(The author is CEO, Propmart, an end-to-end property solutions provider)
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