The revised land taxing protocols that have come into play in the capital city of Karnataka, Bengaluru, has drawn a mixed bag of reactions from the spectrum of real estate investors and owners.
The Department of Stamps and Registration had taken a swoop for the jugular of real estate investors and owners alike when they introduced the revised stamp duty diktats in the land ownership protocols. This act was introduced in the April of 2017 and has since impacted the real estate market in Bengaluru in different degrees. The move was an effort by the Government to ensure no lapses in the land tax deposited by developers. It was also orchestrated to bring regulation to urban land development in nascent urbanized land tracts in suburban Bengaluru.
However, the move has ingeniously ousted the malpractice of tax duty evasion tactics exercised by real estate developers. Up until the revision in the stamp duty, the stamp duty was levied on plots summing up to 10,890 square feet. Any plot of land above that, drew the same rate as a plot of agricultural land, tallied on the basis of the going rate of land in that area (in sq. ft.). This enabled the malpractice whereby developers often purchased tracts of land and had it converted to agricultural land on paper and took their own sweet time to develop anything at all while paying considerably less in the way of stamp-duty or land-taxes.
However, the adroitly planned land tax revision has ensured that the protocol leaves no loopholes in the system with respect to such wrongful practices. In contrast to the erstwhile system where land-owners had to pay the applicable non-agricultural land taxes only when a non-agricultural project was commenced upon conversion, the new system enforced that the applicable rates would be levied as soon as the owner applies for conversion. This ensured that the government did not lose large chunks in taxes owing to the loopholes in the system.
The novel idea has also brought in a revised tax chart that demarcates the taxes applicable on pockets of land, while also classifying them on the basis of industrial, agricultural or residential. The percentage of stamp duty/ land tax applicable for a given parcel of land goes progressively decreases as the magnitude of the plot increases. In brief, bigger the plot owned the lesser percentage of land would be taxed. This though systematic, has affected independent real estate buyers and developers who were already playing by the book.
The new land tax policy has hiked up prices for those looking to invest in real-estate for residential/personal use. Investors looking to own plots of land in affluent, suburban areas are discouraged by the percentage of land tax they would have to pay. Areas like Frazer Town and Richmond Town which are known for their steep property value have seen a lukewarm response from investors and buyers following the revision in the taxes applicable. This has led to pundits forecasting a stale real-estate market in the seasons after.