look news india
The state government has implemented historic reforms to make the process of renting and renting residential houses, flats and commercial shops in Uttar Pradesh simple, transparent and affordable. Under the new rules approved by the Cabinet under the leadership of Chief Minister Yogi Adityanath, there has been a huge reduction in the stamp duty charged on registered rent agreements (Lease Deeds) for a period of up to 10 years. Along with this, the complex system of determining stamp duty on the basis of circle rate during registration of tenancy has been completely abolished.
The direct objective of this policy change is to minimize tenancy disputes in the state, bring informal transactions of properties under formal registered contracts and provide legal protection to both tenants and property owners. Till now, due to the huge stamp duty and circle rate problem, most of the people used to manage only by making a notarized contract for 11 months, which did not have any special legal recognition in the courts. With the new rules, making long-term agreements will now become very cheap and convenient.
As per the rules in force earlier, whenever a person registered a lease deed or rent agreement for a period of 1 year or more, the stamp duty was calculated on the basis of a higher percentage of the property circle rate or annual rent of the concerned area. In case of commercial properties and shops, this fee increased manifold, due to which traders and small shopkeepers had to pay huge amount in the name of registration.
By ending this complex process, the government has completely eliminated the hassle of circle rate. Now the stamp duty will not be calculated on the circle rate of the property but only on the basis of actual monthly and annual rent and security deposit decided between the two parties. This has not only reduced the stamp duty expenditure manifold, but will also curb disputes over valuation and corruption in Sub-Registrar Offices.
The new stamp rules have been made extremely practical by dividing them into residential and non-residential (commercial) categories. Agreements for tenures up to 10 years have been capped at the lowest rates to provide long-term security.
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Residential Property (House/Flat): Only a certain minimum percentage (approximately 2%) of the fixed annual rent and premium for a period ranging from 1 year to 5 years will be charged as stamp duty. This rate has been kept very nominal even for a period of 5 years to 10 years, so that tenants can live peacefully for a long time without the fear of the house being vacant.
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Non-Residential/Commercial Property (Shop/Office): The charges for commercial lease agreements up to 10 years have been rationalized for small businesses and startups. Now businessmen renting shops will not have to bear heavy financial burden and will be able to easily get a long term lease deed made at their business address.
In Uttar Pradesh, like most states in India, landlords and tenants have been executing 11-month notarized contracts on stamp paper worth only Rs 100 or Rs 500 to avoid stamp duty and registration fees. Registration of a contract up to 11 months is not mandatory under the Indian Registration Act, but in case of legal dispute, eviction or default in rent payment, the notarized deed proves to be weak evidence in the court.
Under the Uttar Pradesh Urban Premises Tenancy Regulation Act (UP Tenancy Act), it has now been made mandatory and legally protected to register all tenancy agreements. When stamp duty rates are nominal, both landlords and tenants will be motivated to visit the authorized sub-registrar office and register the agreement for 3 to 10 years. This will give strong legal recognition to the contract and any dispute can be settled within the stipulated time through the Rent Tribunal.
This reform will have a huge economic impact on real estate, retail trade and employment generation in the state.
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Stability to traders: Retail shopkeepers often spend lakhs of rupees in preparing the interior of their shops, but due to the 11-month agreement, the threat of eviction always hangs over them. Due to cheaper 5 to 10 year registered agreements, traders will be able to invest capital in their business without any worries.
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Protection to Landlords: Many times tenants take unauthorized possession of the house or refuse to pay rent. If there is a registered agreement, the property can be vacated on time through the police and rent authority as per law.
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E-Stamping and Digital Registry: The Registration Department is linking this process with the digital portal, through which citizens will be able to register their rent agreement in minimum time by purchasing e-stamp online and booking a slot while sitting at home.
This decision of the Uttar Pradesh government will prove to reduce the burden on the pockets of common citizens as well as give new heights to the ‘Ease of Doing Business’ and ‘Ease of Living’ indices of the state.