Undervalued realty deals hit revenues

Several realty projects in the state, including upmarket ones in Bengaluru, have been sold below the market value for at least three consecutive years, with authorities even forgoing or short-levying stamp duty and registration fees, leading to huge losses to the state.

This was revealed in a Comptroller & Auditor General of India (CAG) report tabled in the Assembly on Thursday. The audit pegged the losses to be at least Rs 409 crore. While the amount is limited to cases covered in the report, the actual losses may be higher, the report stated.

Guidance market value (GMV) is the minimum rate at which a property can be registered. This needs to be revised annually to ensure that it reflects the market value.

Not only was there a delay in revision of the GMV, but indicators of market value such as sale agreements, deposit of title deeds and the base price quoted by developers were not considered suitably during price assessment.

Among other discrepancies, the report has identified 3,237 apartments in 57 projects, which were registered at a rate lower than the base price quoted by developers. This undervaluation by Rs 735.78 crore resulted in a revenue loss Rs 48.56 crore.

The report gives specific instances: In the case of Sobha Habitech, in Pattandur Agrahara, the rate per square foot quoted by the developer is Rs 6,674 while the department has fixed GMV at Rs 4,526. In another instance, the rate quoted by Prestige Tranquility is Rs 5,195 sq/ft in contrast with the GMV of Rs 3,476.

Further, errors in estimation of GMV led to developed lands getting valued lower than underdeveloped land in the same village (adding to forgone stamp duty and registration fee of Rs 189.82 crore).

The CAG notes that the problem was a domino effect from 2011-12. It was noticed that the values proposed for the year 2015-16 were implemented only in 2016-17 and the same continued for the next two consecutive years, 2016-17 and 2017-18, adversely impacting the revenue of the government.

The GMVs were found to be underestimated by anywhere between 12 and 91% than even the conservative values ascertained by the audit team.