Government postpones hike in Guidance value

The State Government took a decision that it won’t revise the guidance value of properties in Karnataka till the next budget session of the state assembly. Guidance value is the indicative value or the minimum value of the property below which the property cannot be registered. This decision of the state government comes in the wake of the stagnant market conditions. The unsold stock of apartments in Bangalore is more than one lakh units which is an alarming figure. The government exchequer receives more than three fourths of its land and property registration revenue from the urban districts of Bengaluru and the jurisdiction of Bruhat Bangalore Mahanagar Palike (BBMP). 

The registration and the stamp duty department opined that normally the government revises the guidance value each year in the month of November every year and before this period there is a rush of registration of properties to avoid the extra registration cost. But this year the government noted that the rush for registration was not so much compared to the preceding years which is not a good indicator.  

The state government led by the Chief Minister Siddaramaiah set a target for the stamp and registration department for the financial year 2015 - 2016 as Rs. 8, 200 crores but till the date of November 19th 2015 the department was only able to mobilize Rs. 4, 910 crore which is short of the set target by Rs. 30 crores. In the financial year 2014-2015 the department was able to collate a fund of Rs. 7, 070 crores in the way of stamp and registration fee but the set target was Rs. 7, 450 crore. The Inspector General of the registration and Commissioner of stamp Duty Mr. N V Prasad said that his department had earlier proposed a revised rate of guidance value but received a set of objections and comments from various stakeholders. He also reiterated that his department is currently investigating into the reasons of the objections and would take an appropriate action about these later. 

The government on September 14th had issued a notification relating to the proposed increase of guidance value in areas like Jayanagar, Gandhinagar, Rajajinagar, Basanvangudi, Shivajinagar and few other areas. It also included the areas under Bangalore rural districts and the Ramnagara districts along with few others. The revised incremental value ranged from 10 percent of the current guidance value to 200 percent in few of the areas. 

Many of the property consultants opine that the guidance value of the land and properties is not in tandem with the practical measures and values. This has resulted in inhibiting the real estate transactions in Bangalore according to the experts. They feel that higher range of stamp duty charges along with high guidance value of the properties in Bangalore has adversely affected the property market of the area under BBMP and the urban districts of Bengaluru too. This also affects the buying sentiments of the consumers which have been on the lower side during the last six months. This necessarily does not mean that the people are reluctant to buy but the market hasn’t witnessed growth in prices but the cost of raw materials has soared higher. In these circumstances the decision of the government to keep the increment of the guidance value in abeyance is a good decision opines many experts.  

Realty sector is on the high growth path as per the figures

Recent growth in India’s real estate market

Undoubtedly there were setbacks in the realty sector of India and the condition in the last three years was not as prospective as it should have been. Thankfully the political conditions and the government policies helped to revive fresh confidence in the buyers along with a renewed interest of the consumers in the real estate. The purchasing power of the individuals also increased gradually says various surveys and statistical measures too. On top of that various market factors and the policy measures have helped to drop the prices of the commodities along with the prices of land plots and real estate products too. A statistical analysis say that in the second quarter of the year 2015-16 the land plot’s weighted average prices stood at Rs. 6,491 per each square feet. This raised by a meagre one percent both in the whole year and this quarter. On top of that the sudden decrease of the home loan base rates by the reserve bank of India came as a surprise to the real estate sector. Consequent to this most of the banks reduced the home loan rates by 25 basis points. The result of these positive factors on the market already started showing their impact on the realty sector. The figures of the sales of the top eight cities of the country registered signs of marked improvement with each city generating about 17 percent improvement on a year on year basis. The second quarter of the financial year 2015-16 shot up by a significant amount from 57.8 million sq. ft. to 67.9 million sq. ft. The experts opined that this happened due to the promotional offers by the developers in the festive season which might be the reason for this improved sales figures. 

How is the market faring?

As per the data of a research firm the sales figures in the eight top metros of the Indian sub- continent namely Bangalore, Chennai, Ahmedabad, Hyderabad, Kolkata, National Capital Region, Mumbai Metropolitan Region and Pune has improved by 17 percent on a year on year scale. The sales in the second quarter of the current year shot up from 57.8 million sq. ft. to 67.9 million sq. ft. compared to the first quarter of this year. The luxury segment of the major cities accounted for the sale of 22.4 million sq. ft. which are of the cost range of Rs. 50 lakhs to Rs. 1 crore. The next in the sale volume is the sale of the apartments and homes in the range of prices of Rs. 25 lakhs to Rs. 50 lakhs. 

A considerable section of the experts say that there is yet more to come as the FDI norms have already been relaxed and this will have its positive impact on the realty market. The New Real Estate Regulation bill awaiting approval of the parliament is also pending which will surely have its positive impact on the sector bringing more regulation, organization and transparency. So on an overall basis the realty sector and the economy are on the path of progress.