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Transfer fee on property likely to go


Transfer fee on property likely to go

Last updated: September 7 2007
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  • Transfer fee on property likely to go

    The government is planning to abolish transfer fee charged by the developers from buyers at the time of sale. The fees varies for different properties located in different locations and ranges from Rs 100-700 per sq ft in the Capital.

    One of the prime objectives of the move is to bring down the real estate prices for the end user. Abolishing the transfer fee will not be difficult for the state governments because it does not have any implications for the state exchequer. At present, the transfer fee is just another way of generating revenues for a property developer.

    The Maharashtra government has already banned the transfer fee. The department of consumer affairs, which has mooted the proposal, is of the view that this charge often leads to artificial escalation in property prices. The proposal will now be examined by the law ministry. After the rule is passed, a deal involving transfer charge would be treated as ultra vires. Till about last year, transfer fee charged in Delhi was 5% of the total value of a property. In certain premium localities, this component was as high as Rs 1,000-1,500 per sq. ft. Subsequently, with the intervention of the state government in 2005, it was capped at Rs 700 per sq. ft. The proposal to completely abolish this fee is part of a series of government measures to put a check on the ever-increasing property prices.

    The only way to reduce property prices for consumers is by cutting down on additional expenses that is incurred. All other factors, such as price of land and cost of construction cannot be regulated. Transfer fees charged by developers is just to discourage speculation in property market. Till last year, a flat used to change hands at least five times before landing with the real buyer. Now that prices have stabilised and correction has happened in the market, transfer fees can be done away with.

    The government is working on a series of initiatives which will ensure that only overheads which can be diverted towards developing neighbourhood urban infrastructure be allowed. As part of this exercise, the urban development ministry had asked state governments to bring down stamp duty in their respective states to 5%. This criterion was made mandatory for states to avail of funding under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).

    News Source: Economic Times
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