At a time when the real estate and housing sector is under pressure due to few takers, the Indian Institute of Management (IIM)- Bangalore study conducted for the 
National Housing Bank (NHB) has stated that States should lower stamp duty to make houses more affordable to low-income families. It has been said thatsuch a reductionwill induce more people from low income groups to own such dwelling units.
According to the study, the revenue loss for the states can be offset by the taxes they will generate by building additional houses under the Centre’s Pradhan Mantri Awas Yojana (PMAY) and Housing for All (HFA) programmes.Further, there would be generation of more houses since several lakhs of additional units 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.The Modi government’s flagship initiative of PMAY aims to provide houses for all urban households by 2022.
Professor Venkatesh Panchapagesan, IIM-B Real Estate Research Initiative said “it may reduce the revenues upfront, but that will be more than compensated for through the increased construction activity that is promoted not just by PMAY, but also through the increase in demand that will follow.”
In early November this year, the Karnataka government reduced the property registration from 5 per cent to 3 per cent for flats that cost less than Rs 20 lakh. There have been several proposals calling for reducing stamp duty and registration fees to generate more demand in the real estate and housing sector.
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The decision was taken by the Karnataka government to improve demand in the affordable housing sector. The new rate of 3 per cent will also apply to industries buying a property (building or land). Panchapagesan said other states should also think long term and reduce the duty to help more resources.
The HFA policy, which provides a subsidy to persons from low and middle-income groups, does not address the issue of high prices directly and a key component of prices continues to be the taxes that state governments charge as stamp duty and registration charges at the time of a property transaction, says the study.
The report recommends that all stamp duty and registrations charges (including those on mortgages) may be waived in the affordable housing segment. This means that any securitised pool consisting of only affordable housing loans will also be exempt from stamp duty and registration charges, it says.
The law will encourage primary lenders to securitise the loan and sell it to special Purpose Vehicles (SPVs) in the state of domicile itself, thus mitigating servicer risk.
In the context of the ongoing COVID-19 pandemic and the slow in the economy, the argument had become more persuasive, Panchapagesan said. “The logic during the pandemic is that it is the incomes of the lower priced bracket that have been hurt, one can also expect that some of them would have lost their jobs,” he said.
