BENGALURU: Property transactions in Karnataka fell to an almost 10-year record low in the past two days after demonetization of Rs 1,000 and Rs 500 currency kicked in, reflecting what the future possibly holds for the realty sector.
“We recorded only about one-third of daily transactions on Wednesday and Thursday even after we allowed online transactions because of demonetization. We’re hoping the market picks up from Friday, after the new currencies get into circulation and eventually stabilizes after a few weeks,” said Manoj Kumar Meena, inspector-general of registration and commissioner of stamps.
On an average, about 10,000-15,000 documents are registered daily in sub-registrar offices across the state. More than 90% of them are property documents and the rest comprise marriage certificates and power of attorney papers.
Hitherto, the ‘black money’ component played a major role in purchase and sale of land in most parts of Karnataka, except residential projects promoted by reputed developers in major cities like Bengaluru and Mysuru. Sources said a large number of these remain officially undervalued as the buyer pays a small fraction in ‘white money’ and the rest in ‘black’ to cut down on income tax, property tax and registration and stamp duties, which amount to about 6% of the property value. “But all such transactions which formed about 50% of registrations, would be halved now,” said a property developer.
The department of registration and stamps is anxious. In the current financial year, officials said the state witnessed a decline of 10% in receipts, compared to the same period last financial year. In September-October alone, the government lost Rs 300 crore in revenue on account of a series of bandhs and the Cauvery agitation.
State government data reveals that revenue collected from stamp duty and registration fee was Rs 4,800 crore during the April-October 2016 period, while the target for the current financial year stood at Rs 9,100 crore. With black money virtually out of market after demonetization of high-value currencies and with a slump in the real estate market, official sources say it would be “near impossible” to meet the revenue target in the current financial year.
Meena, however, said it’s too early to draw any such conclusions, and attributed the lukewarm response primarily to the shock quotient triggered by prohibition of Rs 500 and Rs 1,000.
Credits ET Realty