Credai-Kerala has voiced concern over the budget proposal to increase stamp duty from 5 to 7 per cent for the registration of flats, saying it will have an adverse impact on the real estate sector.

Kerala real estate market has still not recovered from the deep impact of GST and Covid 19 crisis. From the stamp duty, registration fees and GST on real estate transactions, the State is substantially benefiting with a 14 per cent (7+2+5) direct revenue. This is apart from the 18 to 28 per cent GST paid by the developers on the construction materials and labour charges.

The budget proposal will adversely affect Kerala market as most of the neighbouring states such as as Karnataka, Andhra, Telangana, Maharashtra are having 3 to 4 per cent less duty.

“We request to reconsider the proposal and instead of increasing the rate by 2 per cent, and maintain the same rate of 5 per cent without any cut off period of 6 months. Such a decision will definitely bring new investments State thereby increasing the volume of transactions, leading to increase in the State GDP”, Credai said.

Tax on multiple house ownerhip

Likewise, the budget proposal to impose tax on multiple ownership of house by a single owner will directly affect NRKs and other domestic investors who continue to invest in the Kerala real estate as the undisputed safest investment portfolio ever.

The availability of second home investment meets the majority of rental housing requirements, particularly for IT sectors. While the central government encourages investment in second homes by providing a tax reduction on the interest paid on second home loans, the state government’s new decision to impose a tax on multiple ownership is a discouraging and disappointing move. Such a decision will result in new investments being diverted to other states.

The proposal for a blanket increase in fair value of land by 20 per cent need to be reconsidered and it should be done on the basis of location and prevailing market value of adjacent properties.

Credai also urged the government to reconsider the proposal to impose tax on vacant houses as that would result in new investors to stay away from the real estate market. The houses that seem to be vacant are mostly owned by NRKs who will put to use such houses during their annual vacation to Kerala.

On imposing social security cess of ₹2 for petrol and diesel, Credai said this would lead to higher freight costs and significantly increase the construction cost.