In order to check flow of black money into real estate sector, Prime Minister Manmohan Singh today said stamp duty needs to be reduced, a step that realty players welcomed, stating it will bring in more transparency.
“I think as far as black money in real estate is concerned, unfortunately that is a reality and one way out of this would be to lower the stamp duties,” Singh said at the India Today Conclave here.
Replying to a poser on black money transactions in the real estate sector, the Prime Minister said stamp duties in the country are a “big obstacle to cleaning the mess with regard to transactions in real estate.
“So that’s one way, in which we can work towards a system whereby black money would be less of a menace in transactions relating to real estate.” The Prime Minister’s statement has been welcomed by private players in the sector, saying it will help cleanse illegal funding.
“Whatever the Prime Minister has said, is absolutely true. There has been rampant use of black money in the real estate sector. I think, this is a welcome move and will help the sector,” Tata Housing Development Company Managing Director and CEO Brotin Banerjee told PTI.
Stamp duty is a property tax, to be paid in almost every deal at a prescribed rate on the transaction value or calculations based on circle rate, whichever is higher. It varies from state to state.
This particular tax varies from around 4 per cent in Mumbai to about 13 per cent in Kerala. Haryana charges 6 per cent as stamp duty on properties, while it is 8 per cent in Uttar Pradesh. Most of the states charge around 6-8 per cent.
The industry players have been asking to reduce stamp duty for a long time, terming it an unfavourable levy on the way to offer affordable housing to consumers. At present, stamp duty is charged from both consumers and developers.
Banerjee, however, said Tata Housing does not (rpt) not indulge in trading black money in developing projects and utilises funds that are generated in a “transparent” manner.
“Reduction of stamp duty will benefit both consumers as well as developers. Currently developers pay stamp duty while registering the land and consumers again pay stamp duty while taking possession of the flats,” he said.
He also said rationalising of the duties to around 4 per cent will also help discouraging the firms in underquoting the property prices, thereby, checking revenue losses to the government.
Parsvnath Developers Chairman Pradeep Jain said stamp duty needs to be rationalised as it will lead to corporate governance and transparency in deals. “Central government had set up a fund to compensate the states to a certain extent which reduces the duty. Availing this, some states such as Delhi and Uttar Pradesh cut stamp duties… Other states should also follow this,” he added.