Jump in registration income in TN may be unsustainable

Driven by worries of an expected increase in guideline values in the State, developers and property buyers appear to have speeded up document registrations during the last couple of months, leading to a spurt in revenue to the State Government.

But developers believe that the high stamp duty rate of 9 per cent is unsustainable, and will have to be brought down, in line with that prevailing in some other States.

This would also be in line with the Government's commitment to the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Bringing down registration costs will help increase revenue in the long run by greater compliance, they say.

According to sources, Tamil Nadu's revenue from registrations and stamp duty have jumped by approximately 35-40 per cent in November and December, as compared with what is considered the normal monthly revenue of approximately Rs 450 crore.

However, this steep jump in revenue isn't likely to sustain, as the increase is due to buyers in the final stages of transactions speeding up registrations to beat the guideline value hike and the increase in costs. The numbers for January have indicated this slowdown in the offing, say the sources.

In November 2011, the registrations and stamp duty yielded the Government Rs 714 crore, and in December, Rs 779 crore. However, in January, this growth has tapered off, and is closer to normal levels.

The State Government has set a target of approximately Rs 6,493 crore from the Registration Department, which will be achieved, particularly if the guideline values are revised.

DEVELOPERS' CONCERNS

While the steep increase in registration income may be good news for the Government, the real estate developers believe this would be counterproductive in the long run.

At a total of 9 per cent of the transaction value, the registration costs are among the highest in any State Government. The Government has to bring it down, in line with its commitment to access JNNURM funding, which means the registration costs have to come down to approximately 4-5 per cent. This would actually help increase revenue to the Government, as more transactions would be transparent.

Today, large transactions are through the ‘Power of Attorney' route, which helps to get around the cost. This is particularly true in the case of large land parcels, say representatives of the Confederation of Real Estate Developers Association of India.

Following the draft of the proposed hikes in guideline value being published a couple of months ago, the developers' representatives have submitted their suggestions on guideline value revisions, which, they say, are closer to the market conditions.

A SPIN-OFF BENEFIT

According to sources, a related income stream has also emerged a major revenue generator for the State Government.

At least for locked up and disputed funds in the registration process, the Samadhan scheme, a conciliation effort, announced by the Registrations Department to settle disputes in market value, which is the basis of registration and stamp duty.

In November, the State Government announced the fifth such scheme since the first one in 1999. It is set to contribute more than Rs 100 crore, and the scheme has helped the State Government to bag approximately Rs 88 crore, as on date. The scheme is set to close on January 31, and no extensions are likely, say the sources.

The income from the latest scheme is set to triple, compared to that generated in the first such scheme in 1999, when dispute settlement freed more than Rs 34.50 crore; in 2002, Rs 95.55 crore; in 2004, Rs 88.30 crore; and in 2007, Rs 76.92 crore.

SETTLEMENT

The expected settlement of approximately Rs 100 crore is a significant move, as compared with the total disputed value.

For instance, there are more than 39,812 documents pending under such dispute, representing a potential revenue of Rs 541.31 crore. Under the Scheme, the State Government has waived one-third of the Registration and Stamp Duty to be paid, to enable the revenue to be freed, and the public to get their documents.

This means the full potential revenue would be approximately Rs 348 crore, but of this, approximately Rs 87 crore is categorised as ‘non-collectable' under the scheme — cases where the buyers will choose to take legal recourse.

An added benefit to the Registration Department authorities is that more than 14,500 property documents have been cleared through dispute settlement in the form of the ‘Samadhan' scheme, which by March could reach approximately 20,000. This means, in the last three months of the scheme's working, nearly a year's work has been cleared.

Documents and related registrations and revenue to the Government is locked up when there is a dispute relating to the Stamp duty that has to be paid on the market value of the property that is being transacted.

When the property is undervalued or when the stamp duty isn't paid, the Act provides for the issue to be referred to the District Revenue Officer (Stamps) or Special Deputy Collector (Stamps).

According to official figures, Tamil Nadu's revenue through stamp duty and registrations has jumped more than 29 per cent between April-December 2011, to Rs 4,744 crore, as compared with the corresponding period last year when it was Rs 3,670 crore.