Tax coffers hint at green shoots in Karnataka realty market

Bengaluru: Greens shoots of recovery are visible in Karnataka’s main property markets.

Stamp duty and registration fee collections in key cities, including Bengaluru, have shown a clear increase in October from the year-ago period.

The Stamps and Registration Department collected 934 crore last month, which was 32 crore higher than the corresponding period last year.


The department is optimistic about a further pick-up in property transactions in the coming weeks, said KP Mohanraj, inspector general of registration and commissioner of stamps.

Big builders, he added, are doing well. “We have reached about 80 per cent of pre-Covid-19 levels. Some banks are reporting big growth in their home loan portfolios,” said Kishore Jain, president of real estate body Credai Bengaluru.

According to Jain, flats priced between 50 lakh and 70 lakh, and ultra-luxury flats and villas are selling well. Budget housing and flats in the 1 crore to 1.5 crore range have been hit hard though.

“One possible reason for the budget segment not doing well could be a number of potential buyers of properties in this category having lost their jobs due to Covid-19,” he said.

The property market is on an upswing because genuine homebuyers are back in action, said Karnataka Bank chief executive officer MS Mahabaleshwara.

“Banks are seeing good traction in home loan sales. We will see more home-sale transactions in the coming days as many banks have introduced festival offers,” he said.

Two months ago, Karnataka was under pressure to revisit its stamp duty rates after neighbouring Maharashtra cut duties to encourage home buyers.

Maharashtra charges a 3 per cent lower duty than before for transactions up to December 31. For those buying between January 1 and March 31 next year, there is a rebate of 2 per cent.

Karnataka, however, does not have plans to cut the stamp duty, although revenue minister R Ashoka has said that the state would reduce the property guidance value by 15-20 per cent so that the transaction value reflects market trends.

Steep guidance value in many areas, he said, had led to transactions bypassing registration, with people closing deals through mutual agreements and GPA (general power of attorney) to avoid paying duty and registration fee on higher value deals.

The reference market price of a property in a particular area is known as guidance value in Karnataka.

Credai Bengaluru had, in a recent appeal, sought a 30 per cent cut in guidance value.

Credai’s Kishore Jain said the lobby group is looking to the government to cut the guidance value.

“The real estate sector needs a booster dose. We are very much pursuing this demand of ours with the government,” he said.

Due to sluggish market conditions combined with several weeks of lockdown, the stamps and registration department has been able to reach only about 75 per cent of last year’s collections so far.