The pandemic has largely affected multiple sectors in the Indian economy over the course of 1.5 years. The Budget Session for 2021 gave Real Estate a minor boost with tax deductions on affordable homes. Though the Budget didn’t seem to impress the new home buyers as well as the real estate industry, the Government advised implementing stamp duty cuts at the state level as a Covid booster to the impacted sector. However, the decision on stamp duty cuts was left at the discretion of the state governments. Some of the states like Maharashtra did slash down their stamp duty rates on properties to revive the real estate sector. The next state to follow suit is Karnataka.
Karnataka’s Real Estate Booster Dose
Karnataka announced a stamp duty cut of 2% for the ‘Affordable Housing’ category. This move comes as a relief to the currently dampened real estate sector and the prospective home buyers waiting for an affordable home. The new Chief Minister Basavaraj Bommai stated in the media on 22nd July about this recent development in Stamp Duty Rates from 5% to 3%. This duty reduction is applicable only on homes costing between ₹35 Lakhs to 45 Lakhs and the discount in Stamp Duty Rates applies to only on the first property in such a category of Affordable Homes. This rate reduction was initially proposed by the then Chief Minister BS Yediyurappa in March 2021 and is now approved in the Cabinet Meet.
Key highlights from the Karnataka State Cabinet Meet
2% Reduction in Stamp Duty Rates for Affordable Homes
Proposal for the increase in Guidance Value or the Circle Rates in the state with a specific committee set up for examination of same.
5 Lakh houses to be constructed for the needy in urban and rural Karnataka. The proposed timeline for the project is at least two years with an approximate cost of ₹8000 Crores.
Out of the above, 4 Lakh houses to be constructed for Rural Karnataka and 1 Lakh house in Urban Karnataka under multiple state schemes like Basava Housing Scheme, Devaraj Urs Housing Scheme, Dr. B R Ambedkar Housing Scheme, and Vajpayee City Scheme.
Approved ₹500 Crores for funding infrastructure to build the 1 Lakh multi-story Apartments previously approved.
Here’s how Stamp Duty Reduction benefits you
The supportive move from the Karnataka Government paves way for many people to realize the dream of buying their first house. Having a permanent roof over your head is essential in today’s times. With stamp duty cuts for affordable housing, a lot can be saved to make your total cost less burdensome. This boost is provided by the Government to encourage first-time home-buyers to enjoy discounts in these financially trying times. With a 2% reduction in the stamp duty cost, you can easily save between ₹70,000 to ₹90,000 on your home purchase having a value of ₹35 Lakhs to ₹45 Lakhs. Moreover, if you are buying a home loan for purchasing the house, the 2% reduction in total cost can save the compounded interest on the total loan value.
Real Estate Sector Revival
The Government aims to revive the real estate sector and put the unsold inventory of this year to productive use. The small aid from the Government as well as from the builders in the form of discounts and stamp duty cuts can push the demand for real estate upwards. Such stimulus can prove extremely beneficial to kick-start pending projects and revive the confidence of real estate investors. Furthermore, the 2021 Budget emphasized a key focus on ‘Affordable Housing’ for all to ensure that the majority of the economically challenged people get their dwelling amidst the pandemic.
With this bracing move from the Karnataka Government, other states will likely be driven to cut down their stamp duty rates and promote the growth of the Real Estate Sector. Real Estate Investors can thus see a growing demand in the latter half of the year. Thus, it is wise for investors and prospective home buyers to take this opportunity of investing in India’s Real Estate now at much cheaper rates and builder discounts.
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Karnataka’s Stamp Duty Rates FAQ's:
Stamp Duty is a tax paid on the purchase of a real estate property.
The current stamp duty rate for affordable housing has been reduced from 5% to 3%. While for property having a value above 45 Lakhs, the stamp duty ranges 5% to 6% of the property value.
Stamp Duty is calculated on the sale value of the property.