States should lower stamp duty to make houses more affordable to low-income families, a study by the Centre-backed National Housing Bank (NHB) has said.
The revenue loss will be offset by the taxes they will generate by building additional houses under the Centre’s Pradhan Mantri Awas Yojana (PMAY) and Housing for All (HFA) programmes, the study conducted by IIM- Bangalore for NHB says. PMAY aims to provide houses to all urban households by 2022.
“That may reduce the revenues upfront but that will be more than compensated for through the increased construction activity that is promoted not just by PMAY but also through the increase in demand that will follow,” Professor Venkatesh Panchapagesan from IIM-B Real Estate Research Initiative told Moneycontrol.
In early November, the Karnataka government reduced the property registration from 5 percent to 3 percent for flats that cost less than Rs 20 lakh.
The decision was taken to improve demand in the affordable housing sector. The new rate of 3 percent will also apply to industries buying a property (building or land).
Panchapagesan said other states should also think long term and reduce the duty.
The HFA policy, which provides a subsidy to persons from low and middle-income groups, does not address the issue of high prices directly and a key component of prices continues to be the taxes that state governments charge as stamp duty and registration charges at the time of a property transaction, the study says.
The report recommends that all stamp duty and registrations charges (including those on mortgages) may be waived in the affordable housing segment. This means that any securitised pool consisting of only affordable housing loans will also be exempt from stamp duty and registration charges, it says.
It will encourage primary lenders to securitise the loan and sell it to SPVs in the state of domicile itself, thus mitigating servicer risk.
With COVID-19, the argument had become more persuasive, Panchapagesan said. “The logic during the pandemic is that it is the incomes of the lower priced bracket that have been hurt, one can also expect that some of them would have lost their jobs,” he said.
The outbreak had curtailed their ability to generate income and that was all the more reason why stamp duty should be reduced to provide them with a healthy and safe environment to live in, he said.
(Source: Moneycontrol)
