Residents living in select premium housing segments in the city – including Palm Meadows on the Marathahalli-Whitefield Road and Chaithanya Samarpan on the Whitefield-Hoskote Road have been receiving undervaluation notices from the sub-registrar’s office. What are undervaluation notices? Who sends them out and on what grounds? What should home owners do when they receive such notices? Citizen Matters tried to find the answers.
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The District Registrar of Stamps, under Section 45-A of the Karnataka Stamp Act 1957, is entitled to serve undervaluation notices to those parties found to have registered their property at a value lower than the market value, thus resulting in a loss of revenue for the state government.
In each district, the District Registrar is appointed as Deputy Commissioner of Stamps for detection of undervaluation of properties. There are 224 sub-registry offices in Karnataka.
“Property buyers, at the time of purchase, typically register the property as per the prevailing guidance value fixed by the state government in that area to save on stamp duty,” says Yadwad Suresh, DGM, Legal, Brigade Group, a Bangalore-based real estate developer.
So isn’t the guidance value a good enough indicator?
“The guidance value is just an average price of how much a property in a locality is worth based on the price of raw materials like land, the quality of other construction materials used in building the property, et cetera. However, certain properties built in every locality carries a market value far higher than the guidance value. That becomes obvious with the quality of construction and the scale of the project. Such projects are what we consider undervalued and hence send out notices to such buyers,” says Nayaz Ahmed, Deputy Commissioner at the District Registrar of Societies and Firms, Shivajinagar, Bangalore.
So for starters, why does the registrar’s office even approve such registrations when their undervaluation is evident face down? “In states like Andhra Pradesh, every sales transaction is required to go through a field check and thus the market value is adjudicated right at the time of registration. But in Karnataka such adjudication happens post (after) registration to reduce bureaucratic hurdles at the time of purchase.”
“Suo moto power to issue notices is there with the District Registrar’s office,” confirms Ajit Prakash, Managing Director and CEO of Sana Group, a Koramangala-based realty firm, and a member of the Bangalore Realtors Association-India. “They can send notices if they detect that in a locality, registrations of higher value than guidance value have taken place,” says Prakash.
Shouldn’t the government then consider having different guidance slabs for lower income group, middle income group and higher income group housing segments in each area? “Well the property market in India is highly unregulated. That’s what it all boils down to,” concedes Ahmed.
“The residents however can show cause the notice, if they think it unfair, by presenting their case through a counsel. And if their claim is valid, then the registrar’s office will drop the case,” adds Ahmed.
The legal route
For the undervaluation notices to be valid, they must be issued within two years of the date of registration of the property, as per the law. This fact is not very well known, says Prakash of Sana Group. Prakash received such a notice in 2008 and successfully contested it on those grounds.
Vatsala Dhananjay, Advocate, Estate Law, a city-based firm, says that the residents can contest the notice by presenting facts related to the property on the basis of access to civic amenities and basic infrastructure, and co-relate it with the registered value as opposed to the market value. The newly built residential layouts in the city outskirts do have the advantage of providing larger living spaces, but these areas are not as well connected to hospitals and schools as areas within the Bangalore city.
But she adds that most of these cases end with a deal between the registrar and the home owner wherein they agree on a value in between the guidance and the market value and the owner coughs up the difference amount.
Fellow property lawyer Vijay Bhaskar Reddy agrees with the fact that there are ‘extra legal activities’ (read: bribes) that result in the closure of most such matters. Most of these residents are either out of city or out of country and would like the matter to be dealt with in the fastest possible time.
The central problem appears to be deeper. “Absence of strong regulation on property valuation and existence of a high level of speculation are the primary reasons for such disparity and the resulting confusion and the lack of grounds to even settle such matters,” says Reddy.
Ragu Rao, president of the owners’ association of Chaithanya Samarpan, a gated community in the Kadugodi-Whitefield area of the city, feels that such notices are nothing short of harassment especially aimed at those who have made the effort to set up a decent living in the city fringes. Rao is representing the cases of home owners in Samarpan, and says that once the house is registered and the developer is paid the legal fees, everything should be done and over with.
“Sometime some transactions go through adjudication right at the time of registration, some after,” says Yadwad Suresh, DGM, Legal, Brigade Group. Adds Suresh, “Buyers are made aware of undervaluation circumstances in the sales deed and their subsequent liability to bear the difference amount. However, when our customers approach us with such problems we ensure we help them liase with a legal counsel.”
If you’re a home owner and land such a notice and think it is unfair, you can do two things:
1. Consult a property lawyer on your own and go with him to the registrar’s office to contest the undervaluation. For instance, the Deputy Commissioner for the Shivajinagar Registration District, located out of Banaswadi, is available most weekdays after 3pm in his office. (Ph: 080-25253505)
2. Approach your builder and get routed to their legal tunnel.
Better still, clarify such possibilities with the builder at the time of purchasing the house and read the terms and conditions on the sale deed carefully before signing it.
In a country where the customer is not the king yet, the caveat ‘buyer beware’ is perhaps more valid than ever.