AMARAVATI: The beleaguered realty sector in the state received a rude jolt after the Centre withdrew Rs 500 and Rs 1,000 currency notes. It hit a rock bottom in the capital city area as hundreds of sale deeds were put on hold within hours after Prime Minister Narendra Modi’s announcement.
Panic spread in the realty market as both the buyers and sellers are now worried as to how to account for huge money to be transacted on the sale of land. It is an open secret that most of the land transactions are done with undervaluation which helps both buyers and sellers make decent returns. While cancellation of old notes put the realtors in a fix, the news of introduction of chip-based higher denomination currency has left the farmers worried.
“Although it is a welcome move, the realty sector is the biggest victim. The market is going to witness worst days from the current slump,” observed realtor and representative of Confederation of Real Estate Developers Association of India (CREDAI) Ch Sudhakar. He said that it might take long for the recovery.
In fact, the land rates in the capital city area zoomed to the sky soon after the announcement of the capital city two years ago when the farmers sold the lands at nearly Rs 2-3 crore per acre. Surprisingly, the land prices started falling after CRDA setting stringent norms on developers in the area in an attempt to make the capital city a planned global city. With the transactions coming to almost standstill, the prices touched rock bottom leaving the farmers in a quandary.
However, the situation started easing in the last couple of months. The realty sector in the capital city villages, which was going through a rough phase for the last one year, started looking up as the buyers started returning to the region. The distribution of plots by the Capital Region Development Authority (CRDA) in 10-12 villages has helped pumping life into the markets.
The state government’s decision to construct a few important roads and bring prestigious institutions like VIT has changed the situation as the farmers started looking forward for premium rates.
“Enquiries began for purchase of land only few days ago and it got changed by Tuesday night as the buyers informed that they will wait,” said D Seetharamaiah, a farmer of Thullur. Experts in the realty sector said that it might take more time to revive the markets as business proportions needed to be reworked. In the last, the developers used to offer 40-45 per cent stake to the land owner and take 55-60 per cent, including the cost of construction. “Since everything has to be white money from now onwards, the equations might be required to change,” said a developer.
When it comes to the direct sale of land, the government fixed the land value in the capital city area around Rs 25 lakh per acre. Interestingly, the selling price is anywhere around Rs 2-4 crore. While the buyers pay taxes and government fees only on Rs 25 lakh, most of the sellers are not showing the returns even in the income tax. Remaining amount ranging between Rs 1.75 crore and Rs 3.75 crore which changes hands is completely black money.
“In fact, there is no tax on sale proceeds of agriculture land. Capital city farmers are facing a tricky situation due to the ban on agriculture,” said auditor K Srinivasa Rao. The Centre is yet to respond to the plea of the state government and farmers to exempt the land pooling scheme (LPS) farmers from paying capital gains tax for one time.
Credits ET Realty