Housing to go beyond reach of Mumbaikars?

Homebuyers are worried about the cost of properties increasing. Representation Pic/istock

The house that I was looking to buy cost around Rs 1 crore and now the cost has increased by Rs 5 lakh after the rates have been changed as there is an approximate five per cent rise in property rates in areas around Andheri-Vile Parle according to my financial advisor. He mentioned that with this additional Rs 5 lakh, along with the addition in stamp duty and registration charges and considering that I will do the interiors of the house after a year or so, the house would work out to be Rs 7 lakh-Rs 8 lakh more expensive today," said Sahil Chaphekar, a software engineer working at a private company in the city, who is now re-thinking his decision of buying the house.

The increase in ready reckoner rates (RRR) has raised concerns in the real estate market as homebuyers are concerned about an increase in property prices and developers are concerned about constructing affordable homes. At 51 per cent, Mumbai's affordability has already crossed the threshold of 50 per cent in terms of buying a home, observed JLL India in its recent affordability index study. "The real estate landscape in Mumbai operates within a delicate balance of policy incentives and regulatory adjustments. While initiatives like the Pradhan Mantri Awas Yojana (PMAY) have provided a much-needed push to the affordable housing segment, the recent increase in RRR will naturally lead to a corresponding rise in property prices and stamp duty charges. For developers, especially those operating in the affordable housing segment, this presents an added challenge as margins are already razor-thin due to high construction costs, premium charges, and compliance requirements," said Sandeep Ahuja, Global CEO of Atmosphere Living.

While the developers will be facing more challenges to construct affordable housing, there is some respite as the houses built by the Maharashtra Housing and Area Development Authority (MHADA) will not face the brunt as severely. "The cost-based pricing model adopted by MHADA is distinct from the RRR. MHADA determines the price of its housing units based strictly on the actual cost of development. This includes land acquisition (where applicable), construction, statutory clearances, infrastructure, and administrative costs. The purpose of this model is to ensure that homes remain accessible to economically weaker sections, low-income groups, and middle-income beneficiaries. The RRR, on the other hand, is the government-notified minimum valuation used as a reference for the levy of stamp duty and registration charges across all property transactions. While it is applicable for calculating duties payable during registration, it does not dictate MHADA's pricing, which remains independent and more affordable by design," explained Sanjeev Jaiswal, IAS, vice president and chief executive officer, MHADA.

This apart, irrespective of the size, location and cost of the house, the registration costs for MHADA homes are fixed at R30,000 and the stamp duty is fixed at R1000 for homes under PMAY. Also, "There will be no revision in prices for homes already allotted through MHADA's lottery system. The price declared at the time of the lottery announcement is final and binding. Beneficiaries in the low-income group (LIG) and middle-income group (MIG) categories will not be affected by the revised RRR," added Jaiswal.