Monday, 28 November 2011

Revision of Guide Line Values & What it means for you.

A government deeply in debt has finally decided to rationalize the guideline values in the state of Tamil Nadu. Here is what is planned and how it will affect EVERYONE in the state:

Guideline values will match Market Values in the cities

Major metros like Chennai, Coimbatore and Madurai, where guideline values of land is 60% to even as low as 45% will see sharp rise matching or even exceeding , yes exceeding market values. In certain prime localities like Boat Club, Besant Nagar & MRC Nagar, some large business houses have recently concluded large transactions. Due to stiff competition for those particular pieces , these corporates paid higher than market price & registered the property for the full value. These values will now be taken as the benchmark, though in reality the plots in that neighborhood will not command such prices.

Rural Areas will continue to have guideline values lower than market

Many acres of land along ECR near Mahabalipuram , Poonthndalam, Pudupattinam, Vadapattinam, Mugaiyur, Odhiyur, Marakanam, Koonimedu among others have been converted to prime gated layouts. The market value here exceeds Rs 300 per Sft. Yet the adjoining villages continue to ply their agriculture in rich wetlands. The government would loath to offend the villagers by summarily extending the higher guidelines to these large swaths. Instead we can expect the guideline values to increase from Rs 1.5 lakh per acre to about Rs 4 lakhs per acre, still far below the market price of Rs 18 to Rs 60 lakh per acre.

Black money & Land Mafia
The gangs which are already on the run due to stringent action being applied on them by the government will furthermore shun urban land where there is little scope for undervaluing & registering land. The modus operandi so far has been to arm twist the innocent sellers to accepting the low guideline value as white money, viz cheque and demand draft, then cheating them of the balance payment by making them register the property by coercion. Now with the revised values, the unscrupulous elements will have to show a legal transfer of far higher money. This won't be possible in most cases and related crime will come down.

Loan Disbursal will be easier
With land values reflecting realistic figures, project reports will reflect true costs . Industrial projects, hospitality and mass housing sectors will greatly benefit. Even individuals who pledge their property for a loan can negotiate higher disbursal.

Better Practices at the Registrar office

As you are aware the registration charges in TN are 9 percent. Of this 6% goes to the TN Govt kitty, 2 % to the local body, and 1% to the registrar. With higher receipts the land offices in the state can expedite digital surveying and computerizing the data. Currently TN has not implemented the GIS system like n Bangalore or even the matching of patta & registration as in AP. Many of our registrar offices continue to manually register the photos & thumb prints of the buyers and sellers, leading to possibility of fraud. These are likely to change for the better rapidly.

Market reaction

Currently there is a rush to register properties before the Dec 15 announcement and the Jan 15 rollout of the new policy. Soon after than, we can expect a 25 % drop in number and value of registrations. Black money will struggle to find avenues and the money market may ease. Informal cash loans will be easier and land speculators will take a break. Yet genuine registrations will thrive and within the year prices in urban areas will go up by at least 20%. The seller will now demand 20% to 40% MORE for his property . Here I mean more than the guideline value. The logic would be, if he is going to be inconvenienced by being saddled with huge white money & taxes, he might as well be compensated for his troubles.

Overall this impending change in guideline value augurs well for the market.


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