Real estate prices across Karnataka are set to ease with the state government planning to reduce guidance value for properties between 5% and 10%. The guidance value had been increased by 5% to 25% in January 2019.
Guidance value – the base price of properties in a particular area, fixed by the government – is the minimum amount at which the sale or transfer of properties takes place. Property registrations cannot be done for an amount lower than the guidance value, and the prices are used to slap stamp duty. It varies from area to area and city to city.
“We’ve received many representations demanding a reduction (in the guidance value). After reviewing them, we have placed a proposal before the government,” said KP Mohan Raj, inspector general of registrations and commissioner of stamps. Revenue minister R Ashoka said the government was “positively considering” the proposal and would make a decision on the quantum of downward revision soon.
Sources privy to the discussion said the reduction will be in the region of 5% to 10% based on trends in the property market. The reduction is not uniform.
Rs 12,000 crore target is a big ask for revenue dept
Puravankara managing director Ashish Puravankara said the reduction of 5-10% in guidance value will not make much of a difference. “It needs to be reduced by a minimum 25%; else it is not material enough to trigger a revival.”
CN Govindaraju, founder and chairman of Vaishnavi Group, said guidance value was already 20% higher than the market price and with market price crashing 20% due to Covid-19, there is a mismatch of 40%. “Reducing it by 10% does not make sense as it will have no impact on prices.”
A revenue officer said the government has set a target of Rs 12,665 crore from stamps and registrations for this financial year and it will be “an achievement to clock a collection of Rs 8,500 crore” after the crisis. Property registrations have seen a steady climb ever since the government opened sub-registrar offices on April
24. Reduction of stamp duty from 5% to 3% for properties between Rs 21 lakh and Rs 35 lakh has helped boost the market sentiments.
“We hope the government reduces guidance value by a decent margin to boost property sales. We’ve apprised the CM of this at a recent review meeting,” he added.
Developers are confident that investor sentiment will improve with the move. “It will help in reducing the approval cost for developers and the registration cost for customers. This will reduce the overall cost as this rate is the basis for tax calculations,’’ Rajendra Joshi, CEO Residential, Brigade.
Kishore Jain, president of Bengaluru chapter of Credai, said: “The proposal will be a win-win situation for homebuyers, developers and the government. The move will rationalise property rates, ensure healthier transactions and offer much-needed boost to the state’s realty market.”
Bengaluru has an inventory of 5 lakh ready-to-move-in properties. “The move bodes well for land acquisitions by investors and the government for infrastructure development and affordable housing projects as the cost of land is linked to guidance value of the area,” said another officer from revenue department.
