KOCHI: The significant cuts in the stamp duty for registering properties proposed by Finance Minister T.M. Thomas Isaac in his budget 2010-11 are unlikely to hit government revenues.
According to a senior Registration Department official, the cuts are ‘revenue-neutral,' meaning they would not significantly decrease or increase revenues. The effective stamp duty for registration of properties in city corporation limits will now be 11 per cent (four percentage point down from the previous 15 per cent); 10 per cent in municipal limits and nine per cent in panchayats.
The increase in the number of new registrations and the decline in the undervaluation expected would compensate for the significant cut in the stamp duty, the official said. The fair-value regime would also see to it that the revenues would not fall much. He hoped that the cuts would give a boost to real estate transactions which had come down drastically after the government took certain strict steps to check speculative deals that had overheated the real estate market. Again, the global economic slowdown that started in the second half of 2008 also hurt the real estate business.
In the past, many top officials in the Registration Department had recommended to the government to drastically cut the stamp duty so that the rates would be affordable to home-buyers. One official had suggested to reduce the rate to as low as five per cent and to offer stiff punishment for undervaluation. It is common knowledge that a huge majority of property buyers resort to undervaluing to buck the unreasonably high stamp duty.
“It is hard to expect a middle-class salary-earner who buys a home with a loan, for which he has to pay 10 per cent interest annually, to be upfront about the correct value of the house and pay 15 per cent stamp duty,” another Registration official said. As of now, it is cheating with everybody's knowledge. With the cuts in the stamp duty, there will be more honesty about land transactions and less undervaluation.