The Uttar Pradesh National Housing Bank (NHB) has recommended a state government to reduction in the stamp fee and registration charges, a move aimed at helping the realty sector recover from the financial crisis or to induce more people from low income groups to own such dwelling units.
The research done by IIM, Bangalore has projected that states’ revenue won’t be affect due to this as they would generate more since several lakhs of additional houses are likely to be constructed under Housing For All (HFA) with direct or indirect central subsidies. The government has set the goal to ensure every urban household has a pucca house by 2022. Government has set a goal of 60 lakh houses for the current financial year.
These costs are paid by the buyers of land or built property and range from 5 to 13% of the transaction value of the property. They create a lot of profits for state governments.
Encouraging the need to lower these charges, the report said, “Several lakhs of additional houses are expected to be built under HFA with direct or indirect Central subsidies. These houses will make huge incremental tax revenues for the states that are over and beyond the normal evolution in stamp duty and registration charges revenues as determined by economic activity.”
It has suggested that states can share a part of these additional tax revenues with low value home buyers by lowering or eliminating their stamp duty and registration charges. Lower prices may encourage more people to pursue such affordable houses. Along with increases in housing stock, lower prices are a must if HFA has to do well. It also said the value of transactions or registrations may increase more than enough to compensate for the drop in tax revenue per transaction even when the states decrease charges.
It said the HFA policy, which delivers subsidy to persons from low- and middle-income groups, does not address the issue of high values directly and a key component of prices remains the taxes that state governments levy as stamp duty and registration charges at the period of a transaction.