States should reduce stamp duty, registration fee for affordable houses: NHB study

NEW DELHI: A study done for the National Housing Bank (NHB) has suggested the state government to reduce stamp duty and registration charges for low value houses for the poor (affordable housing) to induce more people from low income groups to own such dwelling units.

The study done by IIM, Bangalore has estimated that states’ revenue won’t be hit due to this as they would generate more since several lakhs of additional houses are expected to be built under Housing For All (HFA) with direct or indirect central subsidies. The government has set the target to ensure every urban household has a pucca house by 2022. The total estimate is around 1.02 houses in the low and middle income segments.

These charges are paid by the buyers of land or built property and range from 5 to 13% of the transaction value of the property. They generate a lot of revenues for state governments.

Advocating 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 generate huge incremental tax revenues for the states that are over and beyond the normal growth in stamp duty and registration charges revenues as determined by economic activity.”

It has recommended 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 induce more people to seek such affordable houses. Along with increases in housing stock, lower prices are a must if HFA has to succeed. It also said the volume of transactions or registrations may increase more than enough to compensate for the drop in tax revenue per transaction even when the states reduce charges.

It said the HFA policy, which provides subsidy to persons from low and middle income groups, does not address the issue of high prices directly and a key component of prices remains the taxes that state governments levy as stamp duty and registration charges at the time of a transaction.