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Karnataka’s Real Estate Booster- Stamp Duty Rates cut down by 2%
Over the period of 1.5 years, the pandemic has substantially impacted several sectors of the Indian economy. Real estate received a little lift from tax discounts on affordable dwellings during the 2021 budget session. The Government recommended adopting stamp duty reductions at the state level as a covid booster to the impacted sector, even if the Budget didn't seem to impress new house purchasers or the real estate business.
The outbreak of the pandemic affected the real estate sector to a large extent. The realty market in all the prominent cities suffered as the workers migrated back to their hometowns and the buyers hesitated to buy. The lockdown imposed put the construction of on-going projects to a halt as well. To revive the realty market, the Karnataka government has taken initiative by reducing the stamp duty imposed on the properties in the price range of INR 35 Lakhs to INR 45 Lakhs. The stamp duty reduction of 5% to 3%, for properties in the price bracket of INR 35-45 lakhs was announced in the Budget. This method of reduced stamp duty was followed by many cities in 2020. The Pune realty market is an example of the successful implementation of this model. Pune was one of the worst-hit markets of 2020. The realty market dipped lower than other prominent realty markets and the government reduced the stamp duty imposed to revive the market. This had a great impact on the ready-to-move-in properties as they were sold out. The same is expected in Karnataka.
The Karnataka Realty Market
The Karnataka realty market was also negatively impacted by the pandemic as the sales fell and the unsold stock increased. By the end of 2020, the real estate market of Bangalore, recorded an unsold inventory of nearly 59,350 units across all budget segments. This has led the government to reduce the stamp duty for properties in the affordable housing segments (INR 35-45 Lakhs). This reduction has been granted due to several pleas raised by the real estate players in Karnataka to revive their sales. However, the actual question is whether the reduction of stamp duty from 5% to 3% will have a major impact as it has in Mumbai and Pune. The major difference in the initiative taken by both the governments is that the Maharashtra government reduced stamp duty in all sectors while the Karnataka government has reduced stamp duty for just the affordable housing units. Several industrial experts believe that the reduction in the stamp duty may not have a major impact on the realty market as it had in Mumbai and Pune. The main reason for this is that only 24% of the unsold inventories belonged to the INR 45 Lakh bracket. The major percentage of unsold inventories was in the INR 45- INR 1.5 Crore budget range. 64% of the unsold inventory in this bracket has been quoted by several industry experts to explain why the reduction in the stamp duty may not have an impact as large as it had in Maharashtra. The real estate players of Bangalore are expecting the 2% reduction granted to invoke consumer sentiments and increase the sale of affordable housing units. However, it is recommended that the reduction be granted for 3-5 years as it would provide the builders time to modify their product mix and the consumers with the time to regain their buying capacity.
Also Read: Bangalore Commercial Real Estate Market
Karnataka’s Real Estate Booster Dose
Karnataka announced a stamp duty cut of 2% for the ‘Affordable Housing’ category. This move comes as a relief to the currently dampened real estate sector and the prospective home buyers waiting for an affordable home. The new Chief Minister Basavaraj Bommai stated in the media on 22nd July about this recent development in Stamp Duty Rates from 5% to 3%. This duty reduction is applicable only on homes costing between ₹35 Lakhs to 45 Lakhs and the discount in Stamp Duty Rates applies to only on the first property in such a category of Affordable Homes. This rate reduction was initially proposed by the then Chief Minister BS Yediyurappa in March 2021 and is now approved in the Cabinet Meet.
Also Read: Bangalore Stamp Duty & Registration Charges
Key highlights from the Karnataka State Cabinet Meet
- 2% Reduction in Stamp Duty Rates for Affordable Homes
- Proposal for the increase in Guidance Value or the Circle Rates in the state with a specific committee set up for examination of same.
- 5 Lakh houses to be constructed for the needy in urban and rural Karnataka. The proposed timeline for the project is at least two years with an approximate cost of ₹8000 Crores.
- Out of the above, 4 Lakh houses to be constructed for Rural Karnataka and 1 Lakh house in Urban Karnataka under multiple state schemes like Basava Housing Scheme, Devaraj Urs Housing Scheme, Dr. B R Ambedkar Housing Scheme, and Vajpayee City Scheme.
- Approved ₹500 Crores for funding infrastructure to build the 1 Lakh multi-story Apartments previously approved.
Here’s how Stamp Duty Reduction benefits you
The supportive move from the Karnataka Government paves way for many people to realize the dream of buying their first house. Having a permanent roof over your head is essential in today’s times. With stamp duty cuts for affordable housing, a lot can be saved to make your total cost less burdensome. This boost is provided by the Government to encourage first-time home-buyers to enjoy discounts in these financially trying times. With a 2% reduction in the stamp duty cost, you can easily save between ₹70,000 to ₹90,000 on your home purchase having a value of ₹35 Lakhs to ₹45 Lakhs. Moreover, if you are buying a home loan for purchasing the house, the 2% reduction in total cost can save the compounded interest on the total loan value.
Real Estate Sector Revival
The Government aims to revive the real estate sector and put the unsold inventory of this year to productive use. The small aid from the Government as well as from the builders in the form of discounts and stamp duty cuts can push the demand for real estate upwards. Such stimulus can prove extremely beneficial to kick-start pending projects and revive the confidence of real estate investors. Furthermore, the 2021 Budget emphasized a key focus on ‘Affordable Housing’ for all to ensure that the majority of the economically challenged people get their dwelling amidst the pandemic.
Stamp duty and the registration charges imposed are revenue for the government and an added-on expenditure to the real estate investors. The initiative taken by the government to reduce or tackle the loss brought in by the pandemic by reducing the stamp duty has mixed reactions. Some believe that this will help the builders to alter their product mix and increase sales as the reduction will invoke consumer’s sentiments. Assetmonk is a smart investment platform offering products in domestic markets with global standards such as Bangalore, Hyderabad, and Chennai. Some of the projects offered by Assetmonk in Bangalore offer projects with high return and capital appreciation. CHB Series I and II are some of the projects of Assetmonk. Visit the website to know more about investment opportunities.
Stamp Duty reduced in Karnataka FAQs:
The stamp duty imposed by the Karnataka government earlier was 5% for all the properties. However, the budget of 2021-2022 provided for the reduction of stamp duty by 2% for properties in the budget bracket of INR 35-45 Lakhs. The stamp duty for properties above INR 45 Lakhs remains at 5%.
The registration charges in Bangalore are 1% of the market value. The budget of 2021-22 does not provide for any reduction in the registration charges.
The property type is considered while calculating the registration and stamp duty charges. Then the percentage (5% in case of property above INR 45 Lakhs and 3% in case of property ranging between INR 35-45 Lakhs) is applied to the market value or the agreement value, whichever is highest. The registration charges are imposed at a rate of 1% for all properties irrespective of the budget bracket. The registration charges are charged on the market value or the agreement value whichever is higher.