The recent order by the Tamil Nadu government for a steep hike in various registration fees and stamp duty has come as a shock to the construction industry, said the Confederation of Real Estate Developers Associations of India (CREDAI), Coimbatore.
The increase in construction agreement registration from 1% to 3% will specifically hit property development, said the CREDAI Coimbatore president Gugan Ilango. The customer and the property developer should register the construction agreement if the customer decides to purchase a villa or apartment that is under construction. The only reason a customer will prefer to purchase an under-construction property is because of the lower rates offered during launch and lower registration charges since the completion of the project will take a minimum of two years. The changes in the registration charges will adversely affect all development projects such as apartments, villas, and gated communities under group development.
The increase in cost for registering Power of Attorney (PoA) to non-family members from ₹10,000 to 1 % of the market value is a setback for those who are unable to carry out a transaction directly. The negotiation and transaction will take place at any time within the validity of the PoA. The market value of the transaction will be registered in the sale document only and the PoA will be carried out much ahead of the registration. “Hence, affixing the value for PoA is practically very difficult. Further in case of joint venture (projects), the value of the property gets fixed much later and it is difficult to fix and pay the entire value upfront,” he said.
The revised rates will make multiple services, including mortgage cancellation receipt registration fees, considerably more expensive.
Even 1% increase in registration fees and stamp duty can result in a substantial rise of at least ₹ 100 per sq. ft in property prices. The property and construction sector is just recovering after a series of challenging issues and several developers are moving away from property development to plot development, he added.
The CREDAI Coimbatore has appealed to the State government to roll back the increase in registration charges.
