When the Union Finance Minister, Nirmala Sitharaman, urged the States to cut Stamp Duty rates in her 2024-25 budget presentation, this was by & large seen as a mere headline making statement. Why would States cut the Stamp Duty on property when it is one of the major sources of revenue, was the general feeling in the collective consciousness. But now sources tell Track2Realty that there had been a message of deep meaning to the States going to polls.
Prima facie what seemed to be a headline material; with no relevance on ground, had actually been a message to the States going to polls. According to sources, States like Haryana Maharashtra are seriously contemplating to cut Stamp Duty, ahead of the polls. This could be one of the major election-winning agenda for these States.
Surprised? Yes, these States are going to polls and, politically speaking, are on the backfoot with no other major achievement to showcase. Now one may wonder that Stamp Duty is the major source of revenue, and how would States fulfill other poll promises when there is an overall dip in the revenue.
This is where smart politics comes into to play and public sentiments is channelized, even when they end up paying the same or even more. Call it financial jugglery, but the smart politics knows how to take more out of your pocket by even pleasing you with something that in the final cost & benefit analysis hurts more than it helps.
Still surprised? Well, let me simplify this now. The States have the option to compensate this revenue loss with hike in Circle Rate once the poll agenda of Stamp Duty cut is over. It is as simple as that.
Property might become costlier. But with property prices going up and actually burning your pocket, public sentiments could also go up.
Even a 1% lower Stamp Duty with 20% extra Circle Rate would bring same revenue to States. And property appreciation in double digit will be showcased as growth. Now if you add LTCG (Long Term Capital Gains) tax without Indexation into this inflated property prices, the States would bring more revenue to their respective coffers.
For example, a property is worth INR 50 lakhs (as per circle rate). Now Stamp Duty at 6% is INR 3 lakh. If the State cuts the Stamp Duty to 5% to appease the masses with a savings of INR 50,000, but increase circle rate to make it costlier, the State earns the same amount of revenue.
For example, if tomorrow the same property, as stated above, is priced at INR 60 lakh, Stamp Duty with 5% rate amounts to same INR 3 lakh.
And public sentiment is positive; as positive as it was the LTCG reducing from 20% to 12.5% but indexation benefits gone.
Ravi Sinha
Twitter: RaviTrack2Media
Ravi Sinha is a journalist with over two decades of cross-discipline media exposure. He is the CEO of real estate thinktank group Track2Realty. He has been writing extensively on the real estate sector for more than a decade now. Evaluation of real estate brand performance is his core domain expertise and he has immense insight into consumers’ psychograph. He has conceptualised Track2Realty BrandXReport as India’s 1st & only objective & non-paid brand rating journal that is industry-accepted benchmark of brand equity & ranking of the Indian real estate companies.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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