Govt needs to extend guidance value cut till Dec’22: Real estate developers

NT Features

With the input costs of construction having seen a huge spurt, real estate developers in Karnataka have been mulling an increase in property prices wef April 1, 2022. Steel prices have seen a nearly 100% increase from around Rs. 40,000 per tonne in 2020 to Rs. 85,000 per tonne in 2022. Similarly, cement has increased from Rs 270 per bag to Rs 365, a nearly 50% increase. Sand has also seen around 10 to 15% increase and brick prices have nearly doubled.

The developers had been pleading to the state government to consider a reduction in guidance value and reduction in stamp duty from 5% to 3% for all properties so that the market sentiments improve post the massive slowdown which the industry witnessed in the last 2 years. The government had announced a reduction in guidance value on Jan 1, 2022 but had announced it only for a period of 3 months till Mar 31. However, stamp duty reduction has not been considered in the state budget and it remains 5% for all properties above Rs 45 lakhs.

Now the government might be planning to extend the reduction in guidance value for another 3 months wef April 1, 2022. The developers have welcomed this which they feel will give an impetus to the staggering real estate market.

“It will be a great move by the Karnataka government. The slash in guidance value if continued will help to create more registrations and therefore more home buyers. Reducing the guidance value will immensely help real estate industry in general and affordable housing in particular,” says Pranav Sharma, Founder Director, Swarna Griha, a company into low-cost housing under PMAY scheme.

“A good move and will certainly help the buyers,” agrees Suresh Hari, Chairman, CREDAI Bengaluru. “Also new buyers will take time to freeze their sale and some take few months to close their payments. So, the reduction should be available for a reasonable period of time, perhaps minimum of 12 months.”

“The change in the guidance value is primarily applicable on the available stock of residential and commercial buildings which has already obtained the Occupancy Certificate. The window of three months is too short in our view.

This must ideally be extended up to December 2022 to realize the true benefit of this change as this is when many more projects would have obtained OC,” avers CN Govindaraju, Chairman & Managing Director, Vaishnavi Group, a leading real estate developer in Bengaluru.

“Such extension will increase the quantum of fixed residential and commercial projects that are eligible to avail the benefit of this revision in guidance value. Further, this will motivate the developers to complete projects sooner and obtain OC. This in turn will be an incentive for prospective customers to invest in such projects and move the unsold inventory. This will aid the government in higher revenue collection in terms of stamp duty,” he adds.