Property undervaluation a rampant menace

Property undervaluation a rampant menace
Major Culprits Are Big Developers; Stringent Action Will Be Taken To Levy Stamp Duty
The Times of India

Bangalore: There is a boom in real estate, property purchase and registration have increased manifold. The down-side: gross undervaluation of property.
Residential properties, especially high-end apartments and villas built by well known developers have come under the scanner of stamps and registration department for undervaluation.
Three-hundred cases of undervaluation were identified in Gandhinagar and Bangalore south range in the last four months wherein the culprits were reputed builders and developers. After initiating legal proceedings, stamp duty up to the tune of Rs 30 lakh was levied from the defaulters.
According to a district registrar, (detection of undervaluation of stamps), undervaluation of property value during registration results in abysmally low stamp duty which is at least 50 per cent lesser than the actual price of the property.
For instance: a villa in Whitefield costs Rs 1 crore but the value declared in the sale deed will be just Rs 45 lakh to Rs 50 lakh, which will be a few lakhs more than the guideline value in the area.
Undervaluation of properties is rampant in areas like Koramangala, Bannerghatta Road, Whitefield, MG Road, Sarjapur Road, Yelahanka and Indiranagar. Sources say the major culprits are big developers who undervalue properties by more than 50 per cent.
“While developers charge a fortune for the extra amenities in the apartment complex like swimming pool, gym and clubhouse, the same facilities are not declared during registration, thus evading stamp duty. Once high-end properties are registered, district registrars will look into the documents. If found violative, proceedings will be initiated to recover the stamp duty,’’ explained a district registrar, who looks into undervaluation cases. Last year, the stamps and registration department netted Rs 8 crore by recovering stamp duty from undervaluation cases. In the south range alone, 900 cases were taken up from which Rs 2.1 crore was recovered.
Another classic case is apartment complexes on Bannerghatta Road. While the guideline value is about Rs 1,200 per sqft, moving rate is Rs 1,800 to Rs 2,000 per sqft. “But the stamp duty paid will be for Rs 1,300 per sqft while the property will be sold for Rs 1,800 per sqft. We are scanning such cases and recovering the stamp duty,’’ officials explained.
As per law, documents like sale deed, gift deed, exchange of properties, settlements, reconstitution of partnership, general power of attorney and lease to right come under the ambit of undervaluation department.
There are two ways of taking up such cases: those cases referred by the sub-registrar and those taken up suo moto. Suo moto cases have to be taken up within two years of the property registration. Notices are issued to the erring property owners and proceedings are initiated to recover the stamp duty.
The stamp duty for properties in BMP limits is 8.4 per cent and for those outside BMP is 8.5 per cent. The registration fee is one per cent of the declared value.