T.N. registration department gives detailed explanation on registration charges

Govt. clarifies flat registration charges not increased; CREDAI Chennai requested rollback; Govt. explains charges, hits out at developers for misusing 2020 instructions; Prevailing rates of 7% stamp duty & 2% registration fee for sale of UDS; 1% stamp duty & 1% registration fee for construction agreement; 2020 instructions misused by registering only construction agreement; Govt. clarifies only earlier procedure to be followed.

Ever since the government announced the introduction of a flat 9% registration charge on the total cost of flats, real estate players have been lamenting that consumers would be hit hard by the move.

The Confederation of Real Estate Developers’ Associations of India (CREDAI), Chennai, requested the government to roll back the hike. In response, Commercial Taxes and Registration Department Secretary B. Jothi Nirmalasamy has come out with a detailed explanation on the charges, and has also hit out at developers, saying they had misused certain directions issued in 2020 for registration of flats.

The department said it was a customary practice for the builders to first purchase the land and plan for the construction of apartments thereon to enter into a construction agreement with those looking to purchase the flats. While registering the documents in the name of the purchaser of the flat in the Sub-Registrar office, the deed of sale of proportionate undivided share (UDS) of the land and the construction agreement were being registered.

As per the prevailing rates, a 7% stamp duty and a 2% registration fee on the market value of the property were levied for the documents relating to the sale of undivided share of land. Before July 2023, for the construction agreement there was a 1% stamp duty and 1% registration fee on the cost of construction. The registration fee alone was increased from 1% to 3% with effect from July 10, 2023.

Such a procedure was applicable only to cases in which the registration takes place even before the construction of the apartment.

The department also pointed out that in 2020, instructions were issued to the Sub-Registrars not to insist on inclusion of super built-up building when these documents were produced for registration. But some builders started misusing this instruction by misinterpreting it. Even in the instances of fully constructed apartments where the possession was to be handed over to the beneficiaries, instead of executing the deed of sale of flats in favour of them, the builders, from 2020, started following the practice of executing only the construction agreement along with the sale deed of undivided share of land, suppressing the fact of completion of construction in the said documents.

Developers were evading the registration charges meant for fully constructed apartments to the extent of 5%, in lieu of executing the sale deed of fully constructed apartments at the rate of 7% stamp duty and 2% registration fee. The instruction issued in 2020 was being misused by merely registering only the construction agreement at the rate of 1% stamp duty and 3% registration fee. The Sub-Registrars were not able to object to this, since the specific instruction issued in 2020 was not to insist on the inclusion of building in the document.