Last week, the Karnataka government slashed the stamp duty on new apartments costing up to Rs 35 Lakh. For properties costing less than Rs 20 Lakh, the existing 5% was reduced to 2%, while for properties costing between Rs 21-35 Lakh, the rate was reduced to 3%.
Reduction in the stamp duty rate will bring down the transaction cost significantly. For instance, a decrease of 3% in stamp duty can help a homebuyer save about Rs 60,000 on an apartment priced Rs 20 Lakh.
In early March 2020, Maharashtra also proposed a concession in stamp duty rate for property registration to promote the state’s real estate sector in the wake of a slowdown. For the next two years, the state government proposed to give 1% concession from existing 5-6%.
Understanding stamp duty
Stamp duty is a charge payable on the sale agreement, on or before the date of registration of the agreement. It is one of the most crucial documents as it provides legal status to the property transaction.
The impact
“The Karnataka government’s decision to reduce stamp duty on apartments and flats that cost upto Rs 35 Lakh is a real booster for the affordable housing segment in the state. A breather for lower and mid-income homebuyers, it will enhance the sales volume and registrations of affordable homes. The move will also greatly benefit developers, who have affordable and mid-income housing projects, in terms of increase in their sales volume,” explains Murali Malayappan – Chairman & Managing Director, Shriram Properties Ltd.
The reduction in stamp duty, coupled with low-interest rates, is expected to boost consumer sentiment in the coming months.
“To bring the sector back on the growth track, the repo rate has been cut consistently for the last nine months. This has made home loans cheaper. Reduced stamp duty along with other benefits under PMAY, will definitely help first-time homebuyers in realising their home buying dreams,” believes Rohit Poddar, Managing Director, Poddar Housing and Development Ltd.
Additionally, the reduction in stamp duty would primarily help homebuyers in tier II and tier III cities, where property values are comparatively lower. These include Mysore, Belgaum, Mangalore, Hubli, Belagavi, among others.
When it comes to Bangalore, the impact is likely to be less as very few properties match the criteria. According to RoofandFloor data, about 11% properties in Bangalore fall under the price bracket of Rs 40 Lakh.
Another booster shot for affordable housing
In the second tranche of INR 20 lakh crore economic package, the government announced the one-year extension of the CLSS scheme up to March 2021. This will help push demand for affordable housing.
“Ever since its implementation in 2017, the CLSS scheme has already benefitted over 3.3 lakh families and the extension will further aid many more families to avail housing under this scheme. As a ripple effect of increased demand for affordable housing, it will positively push demand for raw materials like cement, steel, transport and other construction materials,” explains Anuj Puri, Chairman, ANAROCK Property Consultants.