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Chennai , Nov. 23

Property developers and builders have welcomed the Tamil Nadu Government's decision to reduce stamp duty on registration. They say this will spur building activity, especially when the market is looking up. However, developers want the Government to act on the guideline value for properties, which they say is unrealistic.

The Government reduced stamp duty to a uniform 8 per cent, including surcharge, in both urban and rural areas. It was 13 per cent in the case of urban areas and 12 per cent for rural areas. The Government said it was reducing the stamp duty following the recommendation of the Tax Reforms and Revenue Augmentation Commission headed by the economist, Dr Raja Chelliah.

According to developers, the stamp duty reduction should see an increase in revenues as it will encourage more properties to be registered and result in more transparency in transactions.

The high stamp duty deterred most developers from purchasing a property outright. Instead, they obtained a power of attorney from landowners to develop the plot of land. The agreement with the landowner allowed the developer to sell the undivided share of land to prospective buyers. This meant that only the buyers paid the stamp duty while the developer paid only Rs 100 as power of attorney fee.

Mr C. Subba Reddy, Managing Director, Ceebros Property Development Pvt Ltd, said the stamp duty reduction brought Tamil Nadu in line with most other States. Developers now would be willing to buy a property outright, as they would be in a position to provide it as collateral security to obtain loans. By getting the property in their names the developers would also not be at the mercy of landowners who might revoke the power of attorney.

He is certain that the revenue to the Government will go up - the number of registrations will go up and when the developers buy the land they will have to pay stamp duty on the transaction, not to mention the stamp duty paid on each flat purchased.

Mr Ramesh Kumar Reddy, Managing Director, Chaitanya Builders and Leasing P Ltd, said the market was looking good and the stamp duty reduction would provide a boost. But, he felt that the unrealistic guideline value in Chennai needed to be addressed.

According to him, the guideline value prescribed by the Registration Department in most areas of the city is almost twice the actual market value. And, the stamp duty has to be paid on the guideline value, which pushes up the property price.

He said the guideline value was based on the property prices prevailing till the mid-1990s, but after that the property market crashed. The market values now were only 50 per cent of those prevailing in 1996, he said and added that the 10 per cent annual upward revision in guideline value also increased property costs.

Mr Reddy said that in areas like Gandhi Nagar, the last transaction was at Rs 40 lakh a ground but the guideline value now was Rs 80 lakh a ground. Instead of having a fixed guideline value, he suggested that the Registration Department could look at transactions on a case-by-case basis.

According to Mr Navratan Lunawat, Managing Director, Arihant Foundations and Housing Ltd, the stamp duty reduction will benefit buyers. This reduction has come about when there is a demand for both commercial and residential space.

He said that the residential market in Chennai had picked up especially in the below Rs 15 lakh range and at the upper end of the market. There was good demand for commercial space from information technology and telecommunication companies, and for shopping malls.

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