Synopsis: The government of Karnataka is considering increasing the property guidance value, which represents the minimum value required for property registration, by 10-30 percent. This would be the first increase since 2018-19, and while the impact on homebuyers is currently minimal, it could affect affordability in the next 1-2 years. The specific formula used to determine guidance value takes into account factors such as location, land area, and market worth. The decision to adjust the guidance value is expected to bring significant changes to the real estate market in Bengaluru.
According to sources from the Department of Stamps and Registration, the government of Karnataka intends to increase the property guidance value for real estate properties by approximately 10-30 percent. The guidance value represents the bare minimum value required for a property to be eligible for state government registration during its sale. In certain states, this is alternatively referred to as the circle rate.
It is the first instance where the state is contemplating an increase in the guidance values since the previous hike of 25 percent in the year 2018-19. In light of Covid-19, the government had previously provided a 10 percent rebate until July 2022.
The department's records indicate that they surpassed their revenue target for stamps and registration by collecting Rs 17,874 crores in the previous fiscal year, which was Rs 874 crores higher than their target of Rs 17,000 crores. The department gathered approximately Rs 1000 crore in April 2023. According to experts, while the current impact on homebuyers is negligible, a significant rise in prices could potentially impact affordability within the next 1-2 years.
To determine the guidance value, a formula is used that takes several factors into account, including the property's location, land area, and market or capital worth. Various regions within Bengaluru, including Indiranagar and Whitefield, possess distinct reference values that are presently accessible on the website of the state's stamps and registration department.
According to experts, if the guidance value is increased right away, it may affect affordability negatively within the next one or two years. Furthermore, it is important to take into account the specific subcategories and population segments that contribute to the contrast between the recommended value and the current market value. According to local brokers, the contrast in prices between central business district areas and the outskirts is approximately 40-50 percent and 30 percent, respectively.
Due to the pandemic and a lack of revisions in the past five years, the previous state government ordered the Department of Stamps and Registrations to re-evaluate the rates.
The real estate market in Bengaluru is likely to undergo significant changes due to the decision to adjust the guidance value, which the Karnataka government is waiting to be approved before forming its new cabinet. Strategically balancing the necessity for augmented revenue and guaranteeing reasonable prices for homebuyers will play a key role in determining the magnitude of the increase and its subsequent influence on the industry.
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