Karnataka passes bill cutting stamp duty to 3% on flats priced below Rs 45 lakhs

[ecis2016.org] The new rate is applicable on properties worth up to Rs 45 lakh.

The Karnataka state assembly, on September 20, 2021, passed an amendment to the Stamp Act, 1957, under which the state has reduced the stamp duty on properties priced between Rs 35 lakhs and Rs 45 lakhs to 3% from the earlier 5%. The reduced rates are applicable only on registrations where the property is changing hands for the first time.

You are reading: Karnataka passes bill cutting stamp duty to 3% on flats priced below Rs 45 lakhs

This means buyers in the secondary market, also known as the resale market, will have to pay 5% stamp duty on property purchases, irrespective of their ticket size.

Karnataka revenue minister R Ashoka said lakhs of flats in Bengaluru and in other cities had remained unsold due to the distress caused by the COVID-19 pandemic and the stamp duty reduction would help both, the real estate sector, which was struggling with a pile of inventory, as well as low-income group families.

In a move to boost sales of affordable properties in the state, the Karnataka cabinet, on July 22, 2021, had reduced the stamp duty on properties worth up to Rs 45 lakhs by two percentage points.

Recall here that the Karnataka government had,  in May 2020, executed a similar reduction in rates, albeit only for properties worth between Rs 21 lakhs and Rs 35 lakhs. It had also reduced the stamp duty on properties valued up to Rs 20 lakhs in the Budget 2020-21. However, providing an impetus to affordable housing – properties worth up to Rs 45 lakhs, if we go by the standard set under the government’s flagship Pradhan Mantri Awas Yojana programme – became crucial amid an overall demand slowdown in India’s housing market.

For the uninitiated, stamp duty is the charge you have to pay to the authorities – land being a state subject in India, they are in-charge of levying stamp duty – to register your property in the government’s records. Rates of stamp duty vary from one state to another.

If the stamp duty in a state is 5%, you pay 5% of the entire value of your asset as the stamp duty to the government. You additionally have to pay registration charges – typically, 1% of the property’s cost – to complete this process.

Real estate developers, however, think the industry needs cuts across all segments, at a time when home sales in the state, especially in the capital Bengaluru, have been adversely affected.

“While we welcome the state government decision, the market requires a flat cut across all segments,” said Suresh Hari, chairman, CREDAI Bengaluru chapter.

Data available with ecis2016.org show that housing sales in India’s IT capital recorded depreciation on both, annual and quarterly basis. Only 1,591 homes were sold in the city during the April-June period of 2021. This amounted to a 43% annual and 79% quarterly fall.

Despite a 6% annual decline, unsold inventory is considerably high in Bengaluru. Developers are currently sitting on an unsold stock consisting of 71,119 units, as on June 30, 2021. It would take an estimated 40 months for the builders to sell off this stock at the current sales velocity.

However, in an indication that there is latent demand for residential property, new supply in Bengaluru increased by 5% during the April-June period when compared to the same period in 2020, data show.

Considering that the average rate of property is on the higher side in Bengaluru – after registering a 4% annual appreciation, average values of property in the city currently stand at Rs 5,495 per sq ft – the benefit on the stamp duty cut would be more prominent in smaller cities of Karnataka like Mysore, Mangalore, Bellary, Gulbarga, etc., real estate developers opine.

Meanwhile, the Karnataka cabinet has also approved construction of five lakh housing units across the state under various government-run housing schemes, at the cost of Rs 8,000 crores.

Karnataka may cut stamp duty on properties priced between Rs 35 lakhs and Rs 45 lakhs

March 8, 2021: In a move that would boost housing sales in the state, especially in the capital, Bengaluru, the Karnataka government has announced a two-percentage-point reduction in stamp duty on property registrations. Announcing the annual budget for the year 2021-22, chief minister BS Yediyurappa said that the stamp duty for houses valued between Rs 35 lakhs and Rs 45 lakhs, would be cut to 3% from 5%.

“To promote affordable housing, the stamp duty for the first registration of apartments valued between Rs 35 lakhs and Rs 45 lakhs, is proposed to be reduced to 3% from 5%. The year 2020-21, due to the COVID-19 pandemic, has caused untold miseries to the general public. I am not willing to put the burden of additional taxes on the common people,” the CM said while presenting the state budget on March 8, 2021.

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For the uninitiated, stamp duty is a specific percentage of the entire property value, which the buyer has to pay to the state authorities, in order to get the asset transferred in their names in the government’s records. Various states charge varying duties, which typically fall in the 3%-8% bracket.

The real estate industry, which has been demanding a cut in taxes to weather the impact of the Coronavirus-induced demand slowdown, has welcomed the state government’s decision.

In a statement issued on the move, Bengaluru-based builder Sobha said, “The state government’s announcement, to reduce stamp duty from 5% to 3% for the first registration of apartments, valued between Rs 35 lakhs and Rs 45 lakhs during the Karnataka state Budget 2021-22, is a welcome step. This will promote affordable housing in the state and bring in more positivity in consumers’ sentiments. This will encourage first-time home buyers and help strengthen the ecosystem of investment in real estate and accelerate purchase decisions. However, it would have been a big push if the state government would have allowed this reduction of the stamp duty across all budget segments of the property buyers. Nevertheless, the step is in the right direction and will help lift up the confidence among builders, as well.”

Data available with ecis2016.org show that the state’s capital Bengaluru has an unsold stock consisting of 71,198 units, as on December 31, 2020, a majority of which are affordable units. Owing to the demand slowdown, the estimated time to sell off this stock is pegged at 36 months. However, with the announcement of the stamp duty cut, this inventory overhang might decline significantly.

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The demand showdown has also kept home sales and new supply in the IT capital of India in check. During the three-month period between October and December in 2020, only 6,140 units were launched in Bengaluru, while only 7,660 units were sold during this period. The stamp duty cut might positively impact these numbers, as well.

Karnataka cuts stamp duty on properties priced up to Rs 35 lakhs

Karnataka has lowered the stamp duty on properties worth Rs 21 lakhs to Rs 35 lakhs to 3% from the previous 5%. Similarly, properties that cost less than Rs 20 lakhs, will now attract 2% stamp duty

December 10, 2020: At a time when the residential market in the country has taken a severe beating, because of the Coronavirus pandemic, the Karnataka state assembly has approved lowering of the stamp duty rates on affordable homes. The Karnataka assembly, on December 9, 2020, passed the changes to a bill moved by the revenue minister. The bill would need further approval from the state legislative assembly.

In a bid to boost buyer sentiment at a time when revenue collections are expected to hit a record low amid a nationwide lockdown, chief minister BS Yediyurappa lowered the stamp duty on properties worth between Rs 21 lakhs and Rs 35 lakhs to 3%, from the previous 5%. Similarly, buyers will have to pay only 2% as stamp duty on purchase of properties that cost less than Rs 20 lakhs, as against the previous 5%.

Stamp duty is the amount that a home buyer has to pay to the revenue department, at the time of registering a property. They also have to pay a 1% registration charge, along with the stamp duty, to complete the registration process.

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A state levy, stamp duty is revised from time to time by state governments, in order to increase revenue through an upward revision or to boost market sentiment by way of a cut.

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This is the biggest source of revenue generation for the state government and a reduction of this scale is expected to cost the Karnataka exchequer Rs 300 crores, annually.

The reduction in stamp duty would primarily help home buyers in tier-2 and tier-3 cities, including Belgaum, Mysuru, Mangalore, Hubli, etc., where property prices are comparatively low. According to an official estimate, a buyer purchasing a property worth Rs 35 lakhs, would save nearly Rs 3 lakhs after the reduction in stamp duty. The reduction in stamp duty would not impact home sales in Bengaluru, where the average property price currently stands at Rs 5,275 per sq ft and where buyers will continue to pay 5% as stamp duty, because of the average ticket size of the property.

Data available with PropTiger.com show only 8,197 units were sold in this market during the January-March quarter of 2020. As on March 31, 2020, builders in Bengaluru had an unsold stock consisting of 75,001 homes. A quarter of this stock belonged to the affordable homes segment, i.e., units priced up to Rs 45 lakhs. Housing sales in Bengaluru are likely to fall further in the ongoing quarter, because of the Coronavirus-induced lockdown that is now running its fourth phase.

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“The lockdown, which has virtually brought to a standstill all economic activity in the country, has been detrimental to all sectors, including real estate. While there is no questioning the merit of the lockdown, its adverse impact is visible on housing sales and launches in the last quarter of last fiscal and would be reflected in demand and supply in the coming quarters,” says Dhruv Agarwala, Group CEO, Elara Technologies.

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Demonetisation hit stamps and registration revenue: Karnataka CM

Questioning the need for demonetisation, Karnataka chief minister Siddaramaiah, has said that the state suffered a loss of Rs 1,350 crores in revenues from stamps and registration, during 2016-17, as a result of the drive

March 16, 2017: The demonetisation exercise caused “great” distress to people and hit Karnataka’s revenues from stamps and registration, causing a shortfall of Rs 1,350 crores during 2016-17, chief minister Siddaramaiah said, on March 15, 2017. Questioning the need and rationale of demonetisation, Siddaramaiah, who also holds the finance ministry portfolio, in his budget speech for 2017-18, said that banks were simply not geared up for this step and the manner of its implementation exposed the union government’s lack of preparedness.

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The chief minister added that the RBI should have foreseen the people’s hardships due to the demonetisation of Rs 500 and Rs 1,000 currency notes and taken steps to mitigate them.

“The entire cooperative sector, crucial for serving farmers and rural folk, came to a stop,” he added. The revenue target for 2016-17 took a major hit due to demonetisation, with registration of various documents like sale deeds, etc., decreasing by 25%. “As a result, we expect a shortfall of almost Rs 1,350 crores and expect to achieve Rs 7,750 crores by March end.

“The revenue collection target for 2017-18 is fixed at Rs 9,000 crores, compared to Rs 9,100 crores fixed for the year 2016-17,” Siddaramaiah said.

The government has decided to rationalise Article 37 in the schedule of the Karnataka Stamp Act 1957, to boost tax collection and also tweak Article 20 (4) of the Companies Act, in respect of amalgamation of companies, Siddaramaiah added.

(With inputs from PTI)

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