Personal Finance

Guidance value revision will push up prices in Bangalore

Anjana Chandramouly Anil Urs | Updated on August 29, 2011 Published on July 23, 2011

The Karnataka government expects the revision to help boost revenue by Rs 500-850 crore this fiscal.





Reena Menon has been on the look out for a property in K.R. Puram, on the eastern fringes of Bangalore, for the past two months. She has increased her efforts ever since she heard of a revision in property guidance values New rates would mean an increase in spend by way of higher stamp duty and registration charges.

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The Stamps and Registration Department, Government of Karnataka, has come out with the preliminary notification, and the new rates will come into effect shortly.

“As per the notification, we plan to hike the guidance value of few localities from 20 per cent to 100 per cent depending upon the area in Bangalore,” said Mr B. Shivappa, Inspector General, Stamps and Registration Department, who has authored the guidance value report.

Public opinion

The department has sought public opinion on the notification and suggestions. “Currently there has been no opposition to the proposed hike. But we have made available copies of the gazette notification at all offices of sub-registrars , district commissioner , zilla panchayats and other local bodies for people to file their objections before August 1,” he said.

Wherever guideline values were very low vis-a-vis market values, the revision will boost the final purchase price for the buyer, said Mr Shreenath Shastry, Regional Director – South, Knight Frank India.

The last revision in guidance value was in April 2007. Bangalore has been a sensitive zone for the department as it generates one of the highest revenues. According to department statistics, 12.04 lakh properties were registered in the State in 2010; of these, 2.35 lakh were from Bangalore. The total revenue from the State was Rs 3,795 crore, of which Bangalore contributed to Rs 2,584 crore. A senior government official said that the steep revision in guidance value is to shore up revenues to meet infrastructural needs of the emerging areas in the city. The department expects that the revision will help increase revenues by Rs 500 crore to Rs 850 crore in 2011-12.

A property valuer and senior arbitration consultant said that the guidance rates revised now seem to be fair and pragmatic since the rates were last revised/updated four years ago. But still there is a gap between guidance and market values. “Any deviation between guidance value and market rates could be property-specific. Generally, the revised rates seem to be in order – only effect could be the land rates going up.”

Market Impact

How would the revision impact the real estate market in the city? “The market is facing many challenges and this increase will hurt the buyer and, in effect, hurt sales,” said Mr Koshy Varghese, Managing Director, Value Designbuild Pvt. Ltd, Bangalore-based developer.

With interest rates set to go up again and all construction input prices on the rise, real estate prices are already north-bound, and this will hurt the consumer more and also affect demand, say industry analysts. According to them, 30-100 per cent revision is substantial and inflationary in nature.

“Revising the guidance value gradually could have been more reasonable,” added Mr Neville M. Vaswani, Managing Director, Vaswani Group's Southern Operations (Bangalore and Goa). Mr Sushil Mantri, President, CREDAI - Karnataka, said that buyers may now have to shell out 30-35 per cent more in the form of taxes and duties.

Prices may also increase 15 per cent due to stamp duty on joint development. “Joint development costs could go up by about 30 per cent, and developers will have no choice but to pass on the increased burden on to the customer. Finally, it will be the end-price for the customer that will be huge,” said Mr Farook Mahmood of Silverline Realty.

Losing sheen

Emerging areas in Bangalore North and East, especially those adjoining the Outer Ring Road (ORR), national highways, and the peripheral ring road to the Bengaluru International Airport have seen the maximum increase in the guidance value revision.

For instance, guidance value for properties on Bellary Road (National Highway 7), which is in Bangalore North where the international airport is located, has been revised to Rs 10,000 per sq ft from Rs 7,000 per sq ft. Properties on either side of the ORR could see 100 per cent revision.

Buyers book apartments in the suburbs for price advantage which would stand to be erased given the steep revision in guideline value. Analysts point out that demand will be affected, as there may be delays in decision-making.

“Earlier, people would finalise a property in two-three weeks. Now with guidance value revision, it may take four-six months, which will impact the market adversely,” said Mr Mahmood.

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