Last week, Finance Minister R. Ashoka announced that the government is considering revising the guidance value by December. This move excludes industrial areas and zones along highways.
Discussions in the state government regarding the decline in guidance values have sparked optimism among developers and potential home buyers. This revision is expected to invigorate the real estate sector, which is showing signs of recovery after the second wave of COVID-19.
A reduced guidance value is anticipated to boost property registrations, consequently increasing government revenue. In August, about 2.1 lakh documents were registered, generating revenue of Rs 1,142 crore. This is an increase from Rs 969 crore in 2020 (1.7 lakh documents) and Rs 911 crore in 2019.
What is Guidance Value?
Guidance value is the minimum sale price of a property, determined by the government based on the area and type of building. Downward revisions result in lower property prices. According to regulations, the government must review these costs annually. In January 2019, the government announced an increment ranging from 5 to 24 percent.
Demands to Lower the Rates
K.P. Mohanraj, Inspector General of Registration and Commissioner of Stamps, stated that the guidance value could not be revised in 2020 due to the pandemic. As the government intends to address this issue this year, the process has commenced. Longstanding demands for lower rates have been heard, particularly in areas where the guidance value is excessively high, contributing to real estate overpricing. For instance, the guidance value of a property on MG Road exceeds Rs 1.9 lakh per square metre, while on Lavelle Road, it is approximately Rs 2 lakhs per square metre. Some real estate representatives noted that due to the COVID-related recession, certain properties were undervalued and sold.
Government Should Also Provide Stamp Duty Exemption
MS Shankar, the general secretary of the Forum for People’s Collective Efforts, asserted that a decrease in guidance value would impact property tax. This news has added to the positive sentiment, especially in light of the recent property tax uproar caused by BBMP’s erroneous zoning. He urged the government to consider reducing the stamp duty on property registrations across all price ranges.
Suresh Hari, chairman of CREDAI-Bangalore, welcomed the government’s plans to lower the guidance value. He expressed hope that the government would also account for underlying realities before finalizing the rates. He added that real estate sales have reached 30 percent of pre-COVID levels.
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