The Karnataka government, on July 7, proposed to revise the guidance values of real estate properties in the state, Chief Minister Siddaramaiah said while presenting Budget 2023–24 with an outlay of over Rs 3.27 lakh crore.
"The guidance value of all immovable properties across the state was revised during 2018-19 and came into effect in January 2019. Due to the outbreak of the COVID-19 pandemic, the guidance value of immovable properties has not been revised to date," he said.
Several changes over time have caused anomalies in the guidance values of all immovable properties, he added.
"To rectify these anomalies, the state government will revise the guidance values for all immovable properties across the state this year," he added.
The guidance value is the minimum value at which the sale of a property can be registered with the state government. It is also known as the circle rate in some states.
In May, Moneycontrol had first reported that the state government was likely to hike the property guidance value. Sources in the Stamps and Registration Department confirmed that a hike of 10-30 percent was likely.
A scientific approach to guidance value
Additionally, a scientific and rational guidance value system for the Stamps and Registration Department will be developed using the Geographic Information System (GIS) as a base, and guidance values will be assigned to properties adjoining all roads and streets.
"This system will make the guidance value for each property available online for residents to know the stamp duty for any property exactly. A pilot project will be taken up in one district, and then it will be rolled out for the entire state," the chief minister added.
To speed up decision-making and have better inter-departmental coordination in major projects on services requiring multiple approvals, Siddaramaiah said a GIS-based decision support system will be developed for all the decisions, approvals, or no objection certificates (NOCs) that require inter-departmental coordination.
Additionally, the Budget speech added that the revenue collection target for the Stamps and Registration Department for the year 2023–24 is fixed at Rs 25,000 crore.
According to experts, real estate prices are soaring in the central business districts. "And even in the peripheral real estate pockets, the prices have gone up in the last one-and-a-half years. The gap between the market value of a property and the guidance value has gone up to 40-50 percent today, up from 25-30 percent a few years ago," according to property consultant ANAROCK.
Thus, experts say, an immediate hike in guidance value will start hurting affordability about one to two years down the line.
The increase in the guidance value will impact developers’ costs, particularly approval expenses, as the guideline value directly influences government payments, Abhishek Kapoor, Chief Executive Officer (CEO) of Bengaluru-based Puravankara told Moneycontrol.
“As a result, property prices in Bengaluru are expected to inch up. However, considering the robust demand from end-users, we don’t see this hike dampening homebuyers’ sentiments,” he added.
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