Karnataka Considers 1% Stamp Duty Hike to Boost Property Revenue

Bengaluru: Revenue shortfall from property registration in the first quarter of this fiscal year has prompted the Karnataka government to actively consider increasing the stamp duty by 1%. The last revision in stamp duty was in 2013.

At present, the government levies 5% stamp duty on the guidance value (minimum selling price of property fixed by the government), 1% registration fee, 0.5% cess, and 0.1% surcharge. In total, property buyers currently pay 6.6% in cess and duty. If the government approves the hike, this amount could rise to 7.6%.

Chief Minister Siddaramaiah, who also holds the finance portfolio, convened a meeting on June 18 to review the performance of the Department of Stamps & Registration. Taking a serious note of the revenue shortfall, he directed both the finance and stamps & registration departments to take measures to improve revenues. Finance officials suggested an upward revision in stamp duty. Sources indicate that the CM will take a final decision once there is a consensus between the revenue and S&R departments.

Karnataka has the lowest stamp duty among its neighbors, except for Andhra Pradesh. Tamil Nadu levies 11%, which includes stamp duty and registration fee, while Maharashtra imposes 7%.

Underwhelming revenues from property registration have been a cause of concern, as it potentially implies a sluggish real estate sector. While Siddaramaiah fixed a target of Rs 26,000 crore for 2024-25, he was forced to downscale it to Rs 24,000 crore. However, the department managed to collect only Rs 22,500 crore by the end of the year. For the current fiscal year, the CM set a target of Rs 28,000 crore. By the end of the first quarter, which concludes on June 30, the department was expected to collect Rs 7,000 crore on average. Instead, it collected Rs 4,556 crore, marking a 35% shortfall.

'The government is obviously worried about the revenue shortfall, but a stamp-duty hike is not the solution. It should realize that the shortfall is mainly due to the ill-implementation of the policy mandating e-khata for registration and tech glitches in the Kaveri portal. The government does well to rectify this instead of hiking stamp duty,' said T Bhaskar Nagendrappa, state president of Credai (Real Estate Developers' Associations of India).

He added that the government increased its guidance value by 39% in 2023, and any hike in stamp duty would make property purchase costlier and negatively impact the sector. 'The irony is that the government decided to keep sub-registrar offices open on weekends. But what's the use if the portal is glitch-ridden and e-khatas are not issued,' remarked one sub-registrar.