Guideline Value Revision

Guideline Value Revision

The New Revision Will Further Dampen the Real Estate Market

The Tamilnadu Government has Slashed the Guideline Values by 33.33%. At the same time the Registration Fee is increased to 4%, from 1%. This means the Duty and Fee for Transfer of a Property, the Stamp Duty + Registration Fee, which hither to remained at 8% (7+1), will now be 11% (7+4)

This increase in Registration Fee to 4%, has offset the savings that would have accrued to the Buyer as a result of Slashing of Guideline Value by 33.33%. In fact in many cases the Cost of Acquisition of Property will be higher than what it was earlier. 

Effect on Property Prices as a Result of the Revision

Instead of helping to revitalise the sloppy markets, the New Revision is likely to further add to the burden of the Buyers. 

The 2012 Guideline Values were so high that in some cases, the Slashed Guideline Value may still be higher than the Market Value. Since the Stamp Duty is to be paid at the higher of the two, Market Value or the Guideline Value, the Revision will not have any impact unless the Guideline Value is brought at par with the Market Value. Even then the high Registration Fee will increase the cost of acquisition much, offsetting the slashing on Guideline Value.

Again, when the Market Value is high, the Registration has to be done at the higher Market Value only. This means  the Stamp Duty will have to be paid for the Market Value only, even though the Guideline Value (after this Slashing) is low. In other words, when the Price concluded between the Buyer and Seller is higher than the Revised Guideline value, this Revision will be of no help to the Buyer. The 4% Registration Fee will make the Cost more than what it would have been, had the old rates prevailed.

Impact on Housing Loan Applicants

Housing Loans are normally sanctioned on the Guideline Value. Unless the Banks revise their norms and sanction Housing Loans on the Market Value, instead of the Guideline Value, many Borrowers may not be in a position to buy Houses by availing the Housing Loan. This is so, because the Margin Money  a borrower has to bring in, will be more and may be difficult for many to manage. In case the Banks agree to calculate eligibility based on Market Value, still, the high Registration Fee will be a huge burden on the middle class borrowers.

Thus, this Revision appears to have the effect of  adding to the negative sentiment, that is already prevailing in the market.

Who will Benefit?

Only in places, where the new Value after this Revision is almost at par with the Market Value, there will be a slight saving.

Also, if the Property is sold at the Revised Guideline Value, the Seller may benefit by way of Long Term Capital Gains, calculated based on Guideline Values only.

The Market will continue to Remain Sloppy

High Cost of Acquisition, Demonetisation, Ban on Unapproved Plots and the associated confusion, have dampened the Real Estate Market .This new announcements have further added to the already depressed sentiments prevailing.

The guideline values are hosted on the website http://www.tnreginet.net

 
 
 
 
 
 
 
 
 
 

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