Avoid sale agreement to set-off hike in registration cost in Chennai

Impact of hike in registration cost and guideline values have always been felt in the Chennai property market. Experts believe, since the 2012 rise in guideline values, imposition of 1 per cent additional TDS on properties worth over Rs 50 lakh by the Finance Minister has already raised the price bar in the city. Subsequently announced increase in registration cost, due to inclusion of additional 2 per cent of the construction cost, has further increased the transaction cost.

Earlier in Chennai, buyers had to pay 8 per cent of the cost of UDS (undivided share of property) as registration and stamp duty. Now, the government has made it mandatory to register construction agreement before or along with the registration of the sale deed of UDS, said B Alaguselvan, founder & CEO, Smart Choice Realty, RealtyBizz.com.

Alaguselvan explains with an example: If someone buys a new flat for Rs 1 crore and assuming the cost of UDS is Rs 40 lakh, the construction cost would be approximately Rs 60 lakh (which would exclude taxes such as service tax, VAT). Earlier, a buyer was paying Rs 3.20 lakh (8% of UDS i.e Rs 40 lakh). The buyer needs to shell out an additional Rs 1.20 lakh (2% of construction cost ie Rs 60 lakh), resulting in a total of Rs 4.40 lakh. Normally, the construction cost includes the cost of building the apartment, parking charges, clubhouse fees and charges towards electricity board and water and sewage connection, which in essence is the total consideration value minus the UDS price. These costs vary and are applicable depending upon the project and the developer.

P Sheshadari Puvvada, CEO, Gethomegetloan.com said, the additional 2 per cent charge is definitely a burden on the buyer and does not have an impact on the developers. He further explains that the additional charges are applicable to all type of properties, wherever UDS is applicable. However, when the over-all cost of a property is taken into account, it comes to 1 per cent of the total cost of the property.

He said that there is no possibility of saving these charges. But after imposition of these charges on the registration of the construction agreement by the government, developers have started avoiding sale agreement. Now they register only sale deed and construction agreement to avoid registration cost of the sale agreement. This saves the buyer an almost equivalent amount.

Alaguselvan says that imposition of new taxes has benefited property owners in another way as they now get a proper title deed for their properties, not only for the land share but also for the constructed portion.

Source: Times of India /Rishab Jain, Magicbricks.com Bureau