Dasara is the state festival (Nadahabba) of Karnataka and
generally any Government rewards its citizens on such happy occasion. But Bangaloreans, who were rejoicing in
celebrations and picknicking were shell shocked to hear that Guidelines values
for registration of properties in 12 sub-registrar’s office of Bangalore
What is Guidance Value
These values are
fixed by Department of Registration & Stamps. These are the minimum values that a property
in specified areas would supposed to fetch and on which stamp duty and
registration charges are to be paid. The
value varies from area to area. This is
different from market value. If the
purchase value is more than the guidance value, the stamp duty and registration
charges are to be paid on the purchase value.
Vicious circle
The Government
of Karnataka had revised the guidance values previously on 02.08.2004. Before it was done during July 2002. The hike in guidance value on 02.08.2004 at
certain places was abnormal more than 200% which was much resented by common
public, as owning a house had become unaffordable by then itself. When the Government increases the guidance
value; the price of properties begins to soar, when the market value increases,
the government enhances the guidance value; the guidance value and market value
each trying to catch each other, which never happens. But gradually the shelter, a home, a
fundamental need will become a day dream and purchasers become scarce. The properties may not find buyers and the
market may crash leading severe dent in economy of the country. The Government is myopic targeting immediate
increase in revenue, a short term benefit least bothered about long term
effect. The latest revision effective
from 14.10.2005; has been done without any link to the prevailing rates. The revised rates are abnormal. The rise and fall of rates are natural in any
business and the Government should allow any sector to have its natural
course. The review of the Guidance
values should not be too frequent. The
property sector is not to be allowed to become a share market. Some of the examples of the revised guideline
values will show how the Government had contributed to unreasonable price rise,
which may lead to bubbles in market, a dangerous trend.
Comparative
Statement of Guidance values as on 03.08.2004 and 14.10.2005.
|
Area
|
Rate per Sq.ft
as on 03.08.2004
|
Rate per
sq.ft. as on 14.10.2005
|
%
increase
|
Increase in
regist-ration charges for a site of 1200 sq.ft in Rs.
|
|
Avalahalli Telecom Layout
|
450
|
1000
|
122.22%
|
65,736/-
|
|
Valmikinagar
|
300
|
700
|
138.33%
|
47,808/-
|
Jayanagar
|
|
|
|
|
|
(South end
circle, Anebande to 3rd
|
1000
|
2800
|
180%
|
2,15,136/-
|
|
22nd
main road Nanda Talkies to cosmopolitan club
|
1500
|
2500
|
66.66%
|
1,19,520/-
|
|
Rajajinagar
|
|
|
|
|
|
|
450
|
1000
|
122.22
|
65,736/-
|
|
|
1100
|
2500
|
127.2%
|
1,67,328/-
|
|
RGI Colony
|
400
|
1100
|
175%
|
83,664/-
|
|
|
|
|
|
|
|
Arakere Mico
Layout
|
400
|
1000
|
150%
|
71,712/-
|
|
Arakere HSR
layout Sector - 7
|
700
|
1600
|
128.57
|
1,07,568/-
|
|
80 feet ring
road opposite to HSR Layout
|
800
|
1800
|
125
|
1,19,500/-
|
|
Bilekehally
|
350
|
820
|
128.57%
|
53,784/-
|
|
Vijaya Bank
GNS
|
400
|
1200
|
200%
|
95,600/-
|
Social obligation
Government has a
social obligation to provide affordable shelter to its citizens. Such affordable house need not be a small
hutment, but should at least have minimum requirements like bedroom, kitchen,
toilet, hall etc, with sufficient ventilation.
By frequent abnormal increase in Guidance value, the poor, middle class
are finding it difficult to purchase the houses and are destined to what the
Government provides. The Government
itself is subverting its social obligations.
Real estate investment is becoming the exclusive domain of rich and
influential. The government has a duty to not to fuel the price rise.
Stamp duty and Registration Charges.
The stamp duty
and registration charges are very high in Karnataka. As the guideline values increase, it will be
more expensive. Apart from these
charges, the purchaser has to pay sales tax, service tax and for transfer of
khatha, power, water connection. The
seller has to pay capital gains tax.
Naturally, the parties prefer to disclose the less value in the
conveyance document to circumvent increased registration charges and cash
component would be more. This leads to
unaccounted transactions, accumulation of black money. Some may even opt for holding the property
through General Power of Attorney, affidavits, by declaration of delivery of
possession and avoid registration. It is
a established principle, lower the fees more the income. The following example elucidates the effect
of revised guidelines on stamp duty and Registrations.
Example
The
stamp duty payable on conveyance of properties falling under Basavanagudi
Sub-registrar’s area is 8.96% and the registration charges are 1%. The increase
in stamp duty and registration charges for a 30 X 40 (1200 Sft) at Vijay Bank
Griha Nirmana Sangh is worked as below
|
As
per guidance value as on 05.08.2004
Area 1200 sft
Rate per sft
–Rs.400/-
Value –
Rs.4,80,000/-
Registration
Stamp duty }
@ 8.96% }
Rs. 43,050/-
(Rounded off)
}
Registration }
Charges @ 1% } Rs.
4,800/-
-----------------
Rs. 47,850/-
-----------------
|
|
As
per guidance value as on 14.10.2005
Rate per sft
–Rs.1200/-
Value – Rs.14,40,000/-
Registration
Rs.1,29,050/-
Rs. 14,400/-
------------------
Rs.1,43,450/-
------------------
Increase – Rs.95,600 i.e. 199.79%
|
Practical problems
The Revised
guidance value has classified the areas into Main Road
HOME LOANS
Financial
institutions were very liberal in extending home loans. This was serving a national cause of
providing housing. But restrictions on
registrations of conveyance deed has dented their enthusiasm, and they are
playing safe. Even if they enforce the
SARFESAI Act and auction the properties offered as security, they cannot
register the sale certificates.
Many purchasers
have recourse to the home loans to purchase the property, which is related to
their income. As the price of the
properties increase on account of revised guideline values, they may require
higher amounts of loan to purchase the properties for which their incomes do
not qualify. They may have to opt for
small/substandard properties. Many
agreement holders and vendors may have to opt for litigation.
PROPERTY
TAX
The BMP has
planned to switch over to capital based taxation, which is linked to Guidance
value, with the increase of the Guidance value, the property taxes will
increase. This will be a additional
burden to the citizen.
Impact on Capital Gains
The
tax on profit earned on transfer of capital asset that is immovable property
has to be paid by the seller. If the
value of the property disclosed in the sale deed is lesser than the guidance
value, capital gains tax is payable on the basis of guidance value.
In case the
value disclosed in the document is less than guidance value, value of the
property will be deemed as that of guidance value and attracts tax
accordingly. In some cases market value
of the property is less than guidance value, and the seller incurs loss. Guidance value will have the priority and
attracts capital gains tax, and the seller has to pay the tax.
Loss of Revenue
By introducing
various restrictions on the registration of properties through notifications
RD/174/MUNOMU/2005 dated 23.04.2005 and RD/174/MUNOMU/2005 dated 24.05.2005,
the registration of properties in the areas of City Municipal Corporations,
Village panchayat had come to a stand still.
The clarifications issued by Revenue Secretariat in its notification
RD/174/MUNOMU/2005 dated 23.08.2005 has increased confusion and the
sub-registrars are refusing to register, the properties in BMP areas including
old areas like Chamarajpet, Basavanagudi, Seshadripuram, Shivajinagar, Ulsoor,
Avenue Road, etc and are demanding land conversion orders, which is not
practically possible. These properties
are centuries old, assessed for property taxes for nearly a century. Earlier each sub registrar office were
registering 300 documents whereas today hardly registers 30 documents per day
per office. With the revision of Guidance values it may further go down.
Harassment
to the public
The
registering public are utterly confused as to the documents required to be
submitted for registration, and also jurisdiction of sub-registrar
offices. The Government should implement
user friendly measures, make the registration charges affordable, so that
revenue to the Government would increase.
The assure
online registration, and centralised office have not yet come through, and the
present offices are not easily accessible by the public. The Government should implement these
immediately.
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