Understanding the Revised Composite Value Rules for Apartment Buildings in
Tamil Nadu..!
S. Karthikeyan, Founder, https://winworthwealth.com, www.propsaleglobal.com
Tamil Nadu’s
Registration Department has recently revised the rules for determining the composite value of apartment buildings
for registration purposes. Instead of applying the same value to all apartments
located on the same street, the revised approach considers factors such as the category of the apartment project, the
status of the local body, and the income segment for which the housing is
intended.
This change
is particularly important for people purchasing new apartments because any
change in the value used for registration can affect the stamp duty, local body transfer duty
and registration charges payable at the time of registration.
What is Composite Value?
When a
person purchases an apartment, they are not buying only the flat itself. The
purchase generally includes:
·
The
Undivided Share of Land
(UDS) attributable to the apartment; and
·
The
value of the
building/apartment.
The combined
value of these components is referred to as the composite value.
From December 1, 2023, for
the first sale of new apartments, a system was introduced under which the UDS
and the building value are considered together for registration instead of
being registered separately. This system applies to the first sale of a new apartment
and should not be confused with subsequent resale transactions.
Why Has the Rule Been
Changed?
Initially,
efforts were made to determine composite values based on the type of building
and the facilities provided. Subsequently, street-wise composite values were
introduced.
The latest
approach moves away from a uniform street-wise valuation and seeks to determine
the composite value based on the classification
of the apartment project and the status of the local authority.
As a result,
two apartment projects located in the same area could potentially have
different composite values if their quality, classification and facilities are
different.
Composite Value Based on
Income Category
Under the
revised guidelines, separate base values have been prescribed for apartments
intended for lower/middle-income
groups and for high-income,
elite and luxury housing.
|
Housing
Category |
Chennai
& Other Corporations |
Municipalities |
Other
Areas |
|
Lower / Middle Income |
₹2,180
per sq. ft. |
₹1,920 |
₹1,840 |
|
High Income / Elite / Luxury |
₹3,230
per sq. ft. |
₹2,840 |
₹2,710 |
For high-income, elite and luxury
apartments, the base composite value specified for Chennai and
other corporations is ₹3,230
per sq. ft.
Example: Composite Value of
a 1,000 sq. ft. Luxury Apartment
Let us
consider a 1,000 sq. ft.
luxury apartment in Chennai or another corporation area.
The base
composite value is ₹3,230 per sq. ft.
Therefore:
1,000
× ₹3,230 = ₹32,30,000
Thus, based
on this basic calculation, the composite value would be ₹32.30 lakh.
However,
this is only an illustrative calculation. If the value mentioned in the sale
document or the value otherwise applicable for registration purposes is higher,
the applicable higher value may have to be considered.
How Much Would Registration
Cost for a ₹32.30 Lakh Apartment?
There is an
important point to note here.
If this is
the first sale of a new
apartment and the applicable composite value is ₹32.30 lakh,
the concessional rates applicable under the 2023 government order would apply.
For a
composite value below ₹50 lakh, the total government charges are stated as 6%, comprising:
|
Charge |
Rate |
Amount
on ₹32.30 lakh |
|
Stamp Duty |
2.86% |
₹92,378 |
|
Local Body Transfer Duty |
1.144% |
₹36,951 |
|
Registration Fee |
2% |
₹64,600 |
|
Total |
6% |
₹1,93,929 |
Therefore,
if the composite value is ₹32.30 lakh, the estimated government charges would
be approximately ₹1.94
lakh, based on the above rates.
But There Is an Important
Condition
The ₹1.94
lakh calculation assumes that:
·
It
is the first sale of a
new apartment;
·
The
applicable composite value is ₹32.30 lakh; and
·
There
is no higher value in the document or other applicable valuation.
For example,
suppose a builder sells a 1,000 sq. ft. apartment for ₹80 lakh. If the value
applicable for registration is higher than ₹32.30 lakh, the buyer cannot simply
pay registration charges on ₹32.30 lakh. The applicable higher value would have
to be considered.
The
government order also provides for different rates for higher-value first-sale
apartments. For apartments with a value between ₹50 lakh and ₹3 crore, the overall
registration-related rate is stated as 7%,
while a value above ₹3
crore attracts 9%,
subject to the applicable rules and conditions.
Does the Same Calculation
Apply to Resale Apartments?
No.
This is a very important distinction.
The
composite-value-based concessional system introduced in 2023 applies to the first sale of a new apartment.
It should
not be assumed that the same concession applies when an existing apartment is
subsequently sold by one owner to another.
For a normal
sale deed in Tamil Nadu, the commonly applicable structure is 7% stamp duty plus 4% registration fee,
or 11% in total,
subject to the specific nature and circumstances of the transaction.
Therefore,
buyers should clearly distinguish between:
First
sale of a new apartment and resale
of an existing apartment.
Depreciation of the Building
The revised
guidelines also provide for consideration of depreciation in the value of the building,
with depreciation of 1%
per year being mentioned.
The purpose
is to recognise the reduction in the value of a building as it becomes older.
Therefore,
the age of the apartment building can become an important factor when
determining the composite value of an older apartment project.
Role of the District
Registrar
Under the
revised guidelines, District
Registrars can determine composite values by following the
directions issued by the central/competent committee.
If a party
is not satisfied with the value determined, an appeal can be made to the Deputy Inspector General/Deputy
Registrar-level authority as applicable under the order.
Existing
appeals relating to composite values already determined by the competent
authority are also proposed to be dealt with under the revised mechanism.
What Should Apartment Buyers
Check?
Before
purchasing a new apartment, buyers should not calculate registration expenses
merely by looking at the advertised sale price.
They should
specifically check:
1. Whether the apartment
is a first sale or
resale.
2. The composite value applicable to the
particular apartment project.
3. How the apartment's area has been calculated.
4. Whether the value
mentioned in the sale document is higher than the applicable registration
value.
5. The applicable stamp duty, local body transfer duty
and registration fee separately.
6. For older apartments,
whether building
depreciation is applicable.
7. The latest
instructions issued by the Registration Department before executing the sale
deed.
Conclusion
The latest
revision to the composite value rules represents an important change in the way
apartment values may be determined in Tamil Nadu. Instead of applying a uniform
value to apartments merely because they are located on the same street, the
revised approach seeks to take into account the nature and category of the apartment project, local-body
classification and income segment.
For example,
if a 1,000 sq. ft.
luxury apartment in Chennai or another corporation area
attracts a base composite value of ₹3,230 per sq. ft., the resulting composite
value would be ₹32.30
lakh. If it is a qualifying first sale and no higher applicable
value exists, the estimated government charges at 6% would be around ₹1.94 lakh.
However,
this is only an illustrative calculation. The actual registration cost can vary
depending on the specific
apartment project, applicable composite value, document value, whether the
transaction is a first sale or resale, the local authority and the latest
Registration Department orders.
Therefore,
before purchasing an apartment, buyers should verify the latest composite value applicable to
that particular project and the exact registration charges payable
using the official records of the Tamil Nadu Registration Department.
About
the Author..!
Mr. S. Karthikeyan has been working as
a Financial
Advisor, Loan Advisor, Property Advisor, and Insurance Advisor for the past 35
years. Through Winworth
Wealth (https://winworthwealth.com), he provides
integrated financial services to clients.
With the
objective of imparting knowledge on Personal Finance Management, S. Karthikeyan, along
with Child
Psychologist Swapna Babu, runs Weal Academy (https://wealacademy.com/).
In addition,
he runs PropSaleGlobal
(www.propsaleglobal.com), a company that
provides real
estate property buying, selling and investment advisory services across India
and international markets.
S. Karthikeyan, Founder - Mentor
WINWORTH, https://winworthwealth.com/
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