20 November, 2020, Bengaluru: IIM Bangalore’s Real Estate Research Initiative (RERI) has conducted a study for the National Housing Bank (NHB) on the impact of changes in stamp duty and registration charges on residential property, which suggest a revenue-neutral model for enabling ‘Affordable Housing for All’.
The Study was conducted under Professor Venkatesh Panchapagesan, Chair, Real Estate Research Initiative at IIMB (IIMB-RERI) and co-authored by N. Karthik, Advisor, IIMB-RERI. The report proposes a revenue-neutral model that would allow states to lower stamp duty and registration charges for affordable housing. The model is built around the fact that any resultant loss of revenue for states would be more than adequately compensated by revenue generated through new constructions triggered by the Centre’s policy of ‘Housing for All.’ The proposal, therefore, suggests complete stamp duty waiver for low-value housing.
The study focuses on the State of Karnataka to highlight the impact on revenues with and without the implementation of the proposed stamp duty change. The analysis is conservative and provides for compelling reasons for states to lower stamp duty, and thereby lower prices, to make houses affordable to low income households. The approach is broad and can be easily replicated for other states provided data is made available. The report also quantifies the magnitude of a pro rata reduction in stamp duty that states could offer on all housing if they choose not to grant full waiver to only affordable housing. The study, inter-alia, covers the history and evolution of document registration and stamp duty, stamp duty rates, international evidence of stamp duty rates, evidence and estimate of under reporting of stamp duty and its impact, circle rates or guidance value, highlighting the position of stamp duty as a major contributor to the state government’s tax revenues.
State governments generate tax revenue every time a house is built and transacted (or registered). Several lakhs of additional houses are expected to be built under ‘Housing for All’ (HFA) with direct or indirect Central subsidies. Along with increase in housing stock, lower housing prices are essential to enable Affordable Housing, a success in our country.
The key recommendations of the study are: All stamp duty and registration charges (including those on mortgages) may be waived off for the affordable housing segment. Thus, any securitized pool consisting of only affordable housing loans may also be exempted from stamp duty and registration charges. Second, loss of revenue from such waiver may be compensated by the additional taxes that the state government would generate out of the additional construction activities owing to the ‘Housing for All’ (HFA) impetus. Alternatively, if the stamp duty and registration charges are capped and standardized nationwide, this will enable all type of mortgages to be securitized without distinguishing between affordable housing loans vis-à-vis others and will encourage more securitization. Special Purpose Vehicles (SPVs) need to be set up in all the states. The recommendations of the report may help state governments to take up stamp duty reforms to address the housing shortage and enable ‘Affordable Housing for All’. Further, the MS-Excel Utility provided empowers the States to upfront gauge and benchmark the gain to implement suitable policies.
Click here for full report.
Click here for the MS-Excel Utility that empowers the States to upfront gauge and benchmark the gain to implement suitable policies.
Real Estate Research Initiative (RERI): This initiative of IIMB aims to evolve into a world-class Centre of Excellence that conducts scientific and interdisciplinary research on the Indian real estate sector. The research is published in leading academic and practitioner journals. RERI works to provide guidance and policy prescriptions to government and industry stakeholders on major issues relating to the sector.
20 November, 2020, Bengaluru: IIM Bangalore’s Real Estate Research Initiative (RERI) has conducted a study for the National Housing Bank (NHB) on the impact of changes in stamp duty and registration charges on residential property, which suggest a revenue-neutral model for enabling ‘Affordable Housing for All’.
The Study was conducted under Professor Venkatesh Panchapagesan, Chair, Real Estate Research Initiative at IIMB (IIMB-RERI) and co-authored by N. Karthik, Advisor, IIMB-RERI. The report proposes a revenue-neutral model that would allow states to lower stamp duty and registration charges for affordable housing. The model is built around the fact that any resultant loss of revenue for states would be more than adequately compensated by revenue generated through new constructions triggered by the Centre’s policy of ‘Housing for All.’ The proposal, therefore, suggests complete stamp duty waiver for low-value housing.
The study focuses on the State of Karnataka to highlight the impact on revenues with and without the implementation of the proposed stamp duty change. The analysis is conservative and provides for compelling reasons for states to lower stamp duty, and thereby lower prices, to make houses affordable to low income households. The approach is broad and can be easily replicated for other states provided data is made available. The report also quantifies the magnitude of a pro rata reduction in stamp duty that states could offer on all housing if they choose not to grant full waiver to only affordable housing. The study, inter-alia, covers the history and evolution of document registration and stamp duty, stamp duty rates, international evidence of stamp duty rates, evidence and estimate of under reporting of stamp duty and its impact, circle rates or guidance value, highlighting the position of stamp duty as a major contributor to the state government’s tax revenues.
State governments generate tax revenue every time a house is built and transacted (or registered). Several lakhs of additional houses are expected to be built under ‘Housing for All’ (HFA) with direct or indirect Central subsidies. Along with increase in housing stock, lower housing prices are essential to enable Affordable Housing, a success in our country.
The key recommendations of the study are: All stamp duty and registration charges (including those on mortgages) may be waived off for the affordable housing segment. Thus, any securitized pool consisting of only affordable housing loans may also be exempted from stamp duty and registration charges. Second, loss of revenue from such waiver may be compensated by the additional taxes that the state government would generate out of the additional construction activities owing to the ‘Housing for All’ (HFA) impetus. Alternatively, if the stamp duty and registration charges are capped and standardized nationwide, this will enable all type of mortgages to be securitized without distinguishing between affordable housing loans vis-à-vis others and will encourage more securitization. Special Purpose Vehicles (SPVs) need to be set up in all the states. The recommendations of the report may help state governments to take up stamp duty reforms to address the housing shortage and enable ‘Affordable Housing for All’. Further, the MS-Excel Utility provided empowers the States to upfront gauge and benchmark the gain to implement suitable policies.
Click here for full report.
Click here for the MS-Excel Utility that empowers the States to upfront gauge and benchmark the gain to implement suitable policies.
Real Estate Research Initiative (RERI): This initiative of IIMB aims to evolve into a world-class Centre of Excellence that conducts scientific and interdisciplinary research on the Indian real estate sector. The research is published in leading academic and practitioner journals. RERI works to provide guidance and policy prescriptions to government and industry stakeholders on major issues relating to the sector.