Property market heats up despite costly home loans

PUNE: Home loans have become a lot more expensive. But the fizz in Mahrashtra’s property market remains, going by the stamp duty revenues of the state government. Collections from stamp duty grew by 28% to Rs 2,030 crore up to July compared to Rs 1,580 crore in the same period last fiscal. Of the total revenues, around 60% is from property transactions. Going by the trends so far, revenues are expected to top Rs 6,000 crore by the end of this fiscal.

Of course, leading lenders hiked home loan rates this month to cool the housing loan growth. Analysts reckon that 0.5% increase in the interest rate may not impact purchases by genuine buyers. In April this year, the RBI raised the provisioning requirements for banks on home loans above Rs 20 lakh. The central bank’s discomfort over the build-up of an asset price bubble also prompted it to raise the risk-weight on exposures to commercial real estate.

“The trend in registrations and stamp duty revenues show that there has been no slow-down in demand. There has been some price correction, though, in the rates for residential property in a few prime locations”, said Om Prakash Gupta, Inspector General of Registration, Controller of Stamps and Chief Controlling Revenue Authority, Maharashtra. Total registrations stood at 6.21 lakh in the first four months — which is one third of the total registrations in FY 06. There’s been a spurt in property deals valued at over Rs 30 lakh.

According to him, the buoyancy in stamp duty revenues comes on the back of a huge spurt in legal transactions in property, This has happened after the rationalisation of the structure of stamp duty payments on Investors Agreements last year. An investor who buys one or more units from a developer and sells it within three years gets a stamp-duty rebate.

The amount of stamp duty payable on the re-sale price can be lowered by claiming a set-off on the duty paid at the time of purchase. To bolster revenues, the government brought new categories of instruments under the stamp duty net — instruments relating to advertisement and mass media, telecasting and broadcasting.

It also levied stamp duty on record of transaction effected by a trading member through a stock exchange (within Mahrashtra). Mr Gupta reckons that these amendments carried out in the Bombay Stamp Act in ‘05 have started yielding results.Maharashtra has budgeted revenue receipts from stamp duty and registration fees at Rs 5,600 crore for FY07. The budget estimate is likely to be surpassed.