CALL TO EXEMPT STAMP DUTY ON AFFORDABLE HOUSING KARNATAKA NOT TO HIKE GUIDANCE VALUES
By: M.S.Yatnatti: Editor and Video Journalist Bangalore: Reportedly with the infrastructure status given to this segment, developers will be able to access long-term funding at cheaper rates. They will also be able to get access to institutional finance and other additional incentives. This will enable lower costs. Further, more developers will be ready to move into this space, thereby ensuring greater supply and competitive prices.A major relief being contemplated by the government now is the abolition of stamp duty payable on affordable homes. Stamp duty is a State subject and is levied by the States. The rates are fixed by the State governments and differ across States. The duty is collected by the states as well. Generally, the rate of stamp duty varies between four and eight percent of the registration value of the property. The central government is working with the State governments to exempt affordable houses from stamp duty.Stamp duty constitutes a significant part of the purchase price. Let's say the registration value of a property is Rs 10 lakhs. If the stamp duty rate is eight percent, the stamp duty to be paid will be Rs 80,000. In case stamp duty is exempted, it will be a substantial relief for property buyers in this segment. This move will reduce the financial burden of buyers and act as an incentive for more to purchase their own home.Affordable housing is exempt from service tax, which is around 5.35 percent of a property's selling price. The housing ministry has already taken it up with the finance ministry to continue the exemption under GST.
According to press reports The Ministry of Housing at the Centre has written to the State governments to exempt affordable housing from stamp duty. This will be a major relief for buyers in this segment .The government is going all out to achieve the goal of `Housing for all by 2022'. The Union Budget for the year 2017-18 has also given a major push to affordable housing. Generally, `affordable housing' refers to homes that have been designed especially for the economically weaker section (EWS) and lower income group (LIG).The Pradhan Mantri Awas Yojana envisages the provision of `Housing for all by 2022'. The mission seeks to provide 20 million housing units and take up slum rehabilitation projects. According to the mission's guidelines, an `affordable housing project' should have a minimum of 35 percent of the houses in it for the EWS segment.The EWS households are those earning an annual income of up to Rs 3 lakhs and have a house with a carpet area of up to 30 square metres. LIG is defined as having an annual income between Rs 3-6 lakhs and a house with a carpet area of up to 60 square metres. Some key measures initiated to promote affordable housing: Size of unit: The size of the residential unit should be measured by taking into ac count the carpet area as de fined in the Real Estate (Regulation and Development) Act 2016 and not the built-up area. Size restriction: The re striction of 30 square metres on the size of the residential unit will not apply to places located within a distance of 25 km from the municipal limits of the metro cities. Deadline for completion of project: The period for com pletion of a project to claim the tax deduction has been increased from the existing three years to five years.Houses for needy: One crore houses are to be built for the homeless and those living in kaccha houses by 2019. Higher allocation: The allocation for the Pradhan Mantri Grameen Awas Yojana has been increased to Rs 23,000 crores for 2017-18 against Rs15,000 crores in 2016-17.Refinancing home loans: The National Housing Bank will be given Rs 20,000 crores to refinance housing loans in the affordable housing sector in 2017-18. Interest subsidy scheme: This scheme is under the Pradhan Mantri Awas Yojana (PMAY). An interest subsidy of three percent will be appli cable to all loans of up to Rs 12 lakhs and four percent on loans of up to Rs 9 lakhs. Tax deduction for developers: Hundred percent tax de duction against profits from an undertaking of a housing project with flats with a car pet area up to 30 square metres in the four metro cities and 60 square metres in other cities, and completed within five years of the approval being received, is available.
After effects of demonetization, drought and a general slump in real estate, Karnataka government reportedly has decided not to revise guidance value for the coming financial year.“As far as revision of guidance value is concerned, it's status quo this year,“ reportedly said by Bhojya Naik, deputy inspector general of registration, the stamps and registration department. According to officials, there has been a 30% downfall in the registration of properties in the state after demonetization. Other factors, too, are at play in the tardy registration of properties .The revenue target from stamps and registration had been fixed at Rs 9,100 crore for 2016-17, but the shortfall could be at least Rs 1,000 crore. To make good the loss in the next year, the government has decided against revision of guidance value. Last year, the government had increased the value by 10-40%.The unchanged guidance values are believed to prevent prices from rising, which might lead to increased interest from otherwise-wary homebuyers. The move has cheered all stakeholders as they anticipate a change in buyer sentiments.“Bengaluru has long been plagued by unsold inventory .It has close to a lakh housing units still unsold. Demonetization, drought and acute water scarcity have resulted in weak consumer sentiments.Hence, a dip in sales. A hike in guidance value would further dampen the market,“ said a builder who did not want to be identified.Bhojya Naik said the draft notification listing out the guidance values of properties in Bengaluru Urban, Bengaluru Rural and Ramanagara districts for the year 2017-18 are ready and may be published . “As many as 15 days will be given to the public to file objections and suggestions. The guidance value in 95% of Bengaluru areas is likely to remain the same. The remaining 5% will be new pockets where guidance value has not been fixed,'' he added.With the government deciding not to change the guidance value, experts are anticipating an improvement in sale volumes. “We had urged the government to reduce the guidance value to boost the realty sector. But not hiking rates is a positive step since a majority of homebuyers are looking for affordable homes.Price stagnancy brought by unchanged guidance value would help instill confidence among investors. This could be a good time to buy property in Bengaluru, especially for end-users,'' reportedly said by Suresh Hari, secretary , Credai.