Karnataka under pressure to follow Maharashtra in stamp duty cuts

BENGALURU: Karnataka has come under pressure from the real estate sector to cut stamp duty on property transactions, taking a cue from the neighbouring Maharashtra which has temporarily slashed the duty since September 1 to revive the sluggish property market.Maharashtra levies a duty of 5% in urban areas and 4% in rural areas. It has cut the same by 3% for transactions up to December 31, and by 2% for transactions between January 1 and March 31 next year, to encourage homebuyers to close deals fast, taking benefits of duty cuts.Karnataka collects a duty of 5.65% including a cess and surcharge on transaction value, and a separate 1% registration fee.Revenue minister R Ashoka told ET that Karnataka has no plans to cut stamp duty, but will reduce the guidance value by 15-20% soon. The government, he said, will study what Maharashtra has done, and insisted that a cut in guidance value will automatically result in a lower stamp duty for property buyers. The government, he said, has already cut stamp duty to 2% for budget homes valued at Rs 20 lakh and below.“We will give the relief for a longer time, probably six months,” said Ashoka. Transactions have declined owing to sedate market conditions, he said. The revenue collections, he said, have further slipped after the government stopped registration of revenue plots.The reference market price of a property in a particular area is called guidance value in Karnataka, while Maharashtra and other states call it ready reckoner rates or circle rates.Steep guidance value at many places has led to transactions bypassing the registration, with people closing deals through mutual agreements and GPA (general power of attorney) to avoid paying duty and registration fee on a higher value, said Ashoka.Due to sluggish market conditions combined with several weeks of lockdown, the Stamps and Registration department has been able to reach only about 60% of last year’s collections. The Bengaluru chapter of the Confederation of Real Estate Developers' Association of India (Credai), in a recent appeal to the government, had sought a 30% reduction in guidance value.The Credai has been exerting pressure on all states to cut both stamp duty and circle rates to lift buying sentiment. “We are discussing the subject with Karnataka, Uttar Pradesh and Maharashtra. We are requesting the states to follow Maharashtra and incentivise homebuyers,” the Credai’s national president Satish Magar told ET.Magar said the lobby has been pushing for reduction of both stamp duty and guidance value. “Maharashtra has been proactive, and it has not increased the circle rates in the last two years. We urge other states also to support the sector,” he said.The Credai, he said, has also requested the governments reduce the fee payable by real estate projects to local bodies.Stamps & Registration Revenues2019-202020-21Month registeredNo of documents registeredRevenue (In Rs crore)No of documents registeredRevenue (In Rs crore)April128,9126803,73430May171,1051,05891,168398June176,2101,009176,305746July181,530964155,524634August170,644940180,137946(Source: Official figures)

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