The Vidhana Soudha complex in Bengaluru, Karnataka
In an attempt to revive the real estate sector that has been negatively impacted by the COVID-19 pandemic, Karnataka government has decided to slash stamp duty on registration of apartments that cost Rs 35-45 lakh from 5 percent to 3 percent.
In March, the state government had proposed a 2 percent stamp duty reduction for homes valued between Rs 35 lakh and Rs 45 lakh.
Karnataka's Law and Parliamentary Affairs Minister Basavaraj Bommai told reporters on July 22 after a Cabinet meeting that the stamp duty reduction would provide relief to home buyers.
"This will be applicable for the first registration of these apartments. There is also a proposal for upward revision of guidance value. This will be examined by the specific committee constituted for it," Bommai said.
The state Cabinet has also given a go ahead to the construction of five lakh houses for both urban and rural poor in the state in next two years at an estimated project cost of Rs 8,000 crore.
In March, Karnataka Chief Minister BS Yediyurappa had proposed a 2 percent cut in stamp duty for apartments valued between Rs 35-45 lakh in the state Budget for 2021-22. "To promote affordable housing, the stamp duty for the first registration of apartments valued between Rs 35 and Rs 45 lakh is proposed to be reduced to 3 percent from 5 percent," Yediyurappa had said on March 8.
Experts suggest the state government’s move will strike the right sentiment.
“With the Karnataka Cabinet's decision to reduce stamp duty on the registration of housing prices between Rs 35-45 lakh from 5 percent to 3 percent, Karnataka joins the bandwagon of states which understand that this is by far the single-biggest housing demand booster. However, while the move is definitely welcome, it is not likely to give a significant boost to housing sales in Bengaluru similar to what was seen in Maharashtra, where the state cut stamp duty for homes across all budget segments and not just one category,” said Anuj Puri, chairman - ANAROCK Property Consultants.
The fact is that housing demand in state capital Bengaluru is largely skewed towards the mid-segment – properties priced within Rs 50 lakh to Rs 1 crore. For these properties, the stamp duty charges, unfortunately, remain unchanged at around 5 percent. The positive impact would be more visible in cheaper cities like Dharwad, Mysuru, Hubli and Belagavi.
In Maharashtra, the stamp duty cut made a massive positive difference to sales while it lasted, and this state is still feeling negative after effects in terms of slower sales after the stamp duty reduction period expired and was not revived. West Bengal recently followed suit with a 2 percent stamp duty cut coupled with a 10 percent reduction in circle rates, which will work wonders for Kolkata's housing market, Puri said.
The Karnataka government’s decision to slash stamp duty from 5 percent to 3 percent on registration of apartments below Rs 45 lakh will strike the right sentiment chord with affordable homebuyers, reduce their financial stress and foster demand creation for low- and mid-income housing. This welcome move will encourage first-time homebuyers to foray into home ownership, said Rahul Purohit, National Sales Head, Square Yards.
On August 26, the Maharashtra government decided to temporarily reduce stamp duty on housing units from 5 percent to 2 percent until December 31, 2020 to boost the stagnant real estate market, which had been hit hard by COVID-19. Stamp duty from January 1 until March 31 will be 3 percent.