Land deals to turn costlier in Bengaluru

The State Government has changed the way it taxes transactions involving large plots of urban land. The new methods of levying stamp duty apply to parcels of land converted for non-agriculture use such as housing, industrial or commercial.

The new rule has come into effect from April 1 and is expected to push up the cost of transactions in places such as Bengaluru where land prices are steep. The rule, however, is not applicable to transactions in rural areas. Until March end, the Department of Stamps and Registration used to calculate stamp duty in square feet (based on plot price) for plots up to 10 guntas but levied duty on undeveloped plots above 10 guntas at rates applicable to agriculture lands regardless of the status of the land.

This was beneficial to real estate developers, companies and businessmen buying land from aggregators. Private businesses, unlike government projects, buy from aggregators who purchase converted land in small parcels from many landowners and accumulate them.

The way urban land transactions are being taxed came under attack from auditors who illustrated with example how the government was losing revenue in cases involving sale of converted land in urban areas. The government levies a stamp duty of 5.6% and a registration charge of 1% in urban areas.

Manoj Kumar Meena, Inspector General of Registration and Commissioner of Stamps, clarified that it is not a new rule but is already there in the Karnataka Stamp Rules.“We have not done this not as any revenue mobilisation measure but to comply with our own rule as pointed out by the auditors,“ he said.

The government has now come up with five slabs, fixing different rates.The value of plots measuring between five and 7.5 guntas will now be assessed at 70% of the prevailing market rate for sites or of farmlands in the area, whichever is higher.

The registration authorities will assess the value based on the nature of the plot -residential, industrial or commercial -and calculate the stamp duty. The percentage will drop as the area increases: 7.5 and 10 guntas (60%), 10-20 guntas (40%), 2040 guntas (35%) and one acre & above (30%), which, according to Bhojya Naik, Deputy Inspector General, will soften transaction costs.

The real estate market in Bengaluru witnessed a slump in 2016-17 and the government had to scale down the revenue target from land transactions for the year from Rs 9,100 crore to Rs 7,750 crore. Factors such as drought followed by demonetisation dampened buying sentiments in Bengaluru and other cities, say government officials. The government has set a target of Rs 9,000 crore from stamp duty and registration fee this year.

Courtsey: K R Balasubramanyam  |  ET Bureau  |  April 10, 2017

Sharing our posts!

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top