Joint development fee cut to benefit developers and consumers
The state government is planning to cut the cost of formalizing joint development agreement to a mere Rs 200, which is expected to benefit consumers as developers will pass on the cost benefits to them.
In order to keep builders happy, the government has removed the one percent fee clause imposed on joint development agreement and related power of attorney between the land owner and developer in the state budget, last week. Earlier, developers used to pass on the burden of one percent registration fee to the home buyers but now an amount of Rs 1.5 lakh has been proposed in the budget.
Recently, the government has slashed the fee to Rs 200 for housing projects but Rs 1.5 lakh will remain for commercial and other projects. The slashing of price is seen as an attempt to woo big realtors.
A real estate expert said, in a joint development agreement, developers get development rights and not the titles. The cost of entering joint development has many variables leading to cost overruns,which the government has corrected.
Few years ago, joint development agreements were treated like sale agreements attracting 6% stamp duty levy and 1% registration fee, both on joint development agreement and related power of attorney. However, in 2012 budget, the stamp duty was reduced from 6 percent to 1 percent on the market value of the property by the state government.
The latest move will bring back joint development agreements that would make more real stock available in the market. Earlier, the land owners and developers would never enter a written agreement, resulting in losses to the exchequer because of high cost.
However, some developers did circumvent the transaction costs by entering into MoUs (memorandum of understanding) or floating special purpose vehicles to develop land parcels. While the rationalizing of stamp duty has encouraged joint development agreement.
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