DEVELOPMENT PACT: Hike in stamp duty by 3 per cent hurts home buyers in AP
Vijayawada: The Andhra Pradesh government’s recent move to raise stamp duty by three per cent -- from one per cent -- on development agreement cum partition of apartments and commercial complexes has come as a major dampener to home buyers.
The cost of flats would thus go up from Rs 1 lakh to Rs 5 lakh per flat in the state.
The state government recently issued a memo enhancing stamp duty by three per cent of the total value of property including the land value and cost of construction of the built-up area from the present one per cent. This leads to payment of stamp duty of four per cent on the development agreement cum partition.
The government has given exemption on payment of enhanced stamp duty in case there is no partition of property among co-owners. But the Real Estate (Regulation and Development) Act, 2016, has made it clear that the developed property must be partitioned among co-owners and the developer.
This means the developed property has to be partitioned among all the co-owners and the developer so that they are supposed to pay stamp duty of four per cent with no exemption.
Development agreements are a common feature in the real estate sector wherein landowner or owners transfer their land to a developer for getting compensation in the form of flats or developed land or both.
The development agreements help a developer to acquire the rights from the landowner to develop land or to construct the buildings. The developer hands over the ownership rights of certain percentage of the developed area or units thereof to the landowner while the remaining flats or developed land will be retained by the builder to sell them to the third parties.
Homebuyers say that the cost of construction of buildings has already gone up with rise in prices of construction materials like cement, steel, sand, as also labour charges etc along with the steady rise in land value. They express concern that the rise in stamp duty by three per cent will cause an additional financial burden on them. This is because the realtors or builders will not take the financial burden on them and instead pass it on to their customers.
Realtors also critical of the state government for simply taking the number of development agreements being registered in the state per annum and calculating the income to be obtained by enhancing the stamp duty by three per cent and implementing it without looking at such an issue in a holistic manner.
They say that such a move will have a major impact on real estate industry which is slowly recovering after the Covid19 impact. A majority section of the home buyers with limited budgets will defer their lifetime’s dream of owning a house for some more time, as their financial status will not permit them to pay extra money.
Sources from the realty sector say that a section of the realtors have started moving to Hyderabad to take up ventures as the taxation in AP is no longer favourable to them and it is having a cascading impact on cost of homes they are constructing for sale.
AP Credai vice president Ramana Rao said, “We request the state government to review the enhancement of stamp duty by three per cent and restore it to one per cent as per old system. We would hold a meeting shorty to discuss the issue and submit a representation to the government.”
