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The Maharashtra government's decision to charge 10 per cent stamp duty on all transfer of development rights transactions has been endorsed by the state's pleader. He has upheld the government's definition of TDR being immovable property.
The decision on TDR was announced in the state budget for 2003-04. TDRs are land development rights issued by the civic administration in lieu of land acquired from private land owners under various reservations (land reserved for road widening, gardens and other designated use under the town planning norms). The pleader's opinion was sought in the wake of the housing industry's claim that TDR was a moveable property.
In his report, the pleader said: "The right to develop land is regulated by development control rules. Floor space index is the maximum extent to which a plot can be developed. A TDR allows a land owner to sell part of his rights to develop his land. Once the transaction is complete (between the municipal corporation and the private land owner) he is entitled to build more than the permissible FSI on his land. Hence TDRs are immovable property."
Director general of stamps and registration Nitin Karir added: "The land owner who is compensated with a TDR for the portion of his land acquired by the BMC (in Mumbai) does not have to pay any stamp duty on this transaction. It is the BMC that has to pay the duty. However, if he sells off this TDR to a private developer who intends to use it to build additional FSI on some other plot of land, he (the developer purchasing the TDR) will have to pay the stamp duty on the same."
The levy is expected to result in crores of rupees as stamp duty revenue for the state government. The BMC alone, for instance, has thus far acquired private properties worth Rs 1,600 crore (Rs 16 billion) by issuing TDR certificates to the owners. Properties worth Rs 10, 000 crore (Rs 100 billion) are still to be acquired.
The issue has, however, generated overt and covert protests from the housing industry and the Brihanmumbai Municipal Corporation, respectively.
Maharashtra Chamber of Housing Industry secretary Sunil Mantri said: "Stamp duty at 10 per cent of the valued property on all TDR transactions is too high a sum for the developer to pay. This will be detrimental to the purchaser since he will be liable to pay the duty twice. The state has been extremely inconsiderate to our appeal that, in cases were stamp duty has to be levied, the duty on TDR should be lowered to 1 per cent for the end user or developer".
In a recent meeting organised by the MCHI on the issue, deputy chief engineer II A S Nabar agreed that stamp duty on TDR is a harsh step. He said the end-purchaser will now have to pay 20 per cent duty as the builder will pass on the additional burden (of duty on TDR) to the flat purchasers. This will push up property prices, he added.
"Furthermore, the registration of documents has become compulsory and compared to the previous upper limit of Rs 20,000, the registration fee ceiling has been increased to Rs 30,000," he said.
The concept of TDR was introduced a decade ago to enable the BMC to acquire private properties reserved under the development plan for public purposes such as gardens, playgrounds, schools, hospitals without paying any monetary compensation to the owners.
Against this, the BMC would offer TDR to the land owner wherein the builder would be allowed to construct property anywhere north of the land he has surrendered to the corporation. The TDR beneficiary can also encash it by selling the TDR to a third party. The rates of TDR applicable are diverse depending on the purpose for which it is issued.
For ex, TDR for playgrounds and gardens will range from Rs 400 to Rs 500 per sq ft and the estimated slum TDR will be at Rs 800 to Rs 900 per sq.ft.