Stamp duty benefit will apply only to joint development

 In what could be a blow to the real estate sector, the State Stamps and Registration department has decided that the benefit of one per cent stamp duty or maximum Rs 15 lakh will apply only to those joint development agreements (JDAs) wherein the land owners and the developers agree to sell their portions separately after completing the project.

In a detailed circular issued recently, the department has said JDAs, wherein the land owner and the developer agree to share the developed property (both the undivided land area and built-up area) and later sell it to the buyers, will be deemed sale conveyance and five per cent stamp duty will be imposed on such agreements.

One per cent stamp duty or a maximum of Rs 1.50 lakh for JDAs was first announced by the then chief minister Jagadish Shettar in 2013-14 budget, with an intention to bring down property prices and thereby spur the growth of sluggish real estate sector. It was retained in the revised budget later presented by Chief Minister Siddaramaiah. The builders too had said that they would pass on the benefit to the property buyers.
The department used to impose five per cent stamp duty on all JDAs before the announcement of the budget.

But there was an ambiguity in the definition of JDA, which builders frequently use for taking up apartment projects. In the absence of clarity, sub-registrars in many places were refusing to register JDAs as per the budget announcement. Moreover, it was not clear whether one per cent stamp duty should be charged to General Power of Attorney (GPA) related to a JDA, official sources said.

The department has now clarified that only Rs 200 will be charged towards stamp duty and registration fee for GPA related to JDA.

The JDA, wherein the land owner and the developer agree to share the developed property, is widely used by the builders. Not many builders take up JDA projects wherein land and built-up portions are sold separately. The budget announcement is unlikely to serve its purpose, officials pointed out.

The builders, as a result, had petitioned to the department to clear the confusion. The department clarified recently, after obtaining opinion of the State Law department.
H N Vijaya Raghava Reddy of the Builders' Association of India, Bangalore, said property buyers will not trust the project if the land owners and the builders sell their portions separately. “The entire procedure (to be followed to get the benefit of one per cent stamp duty) is cumbersome. Not many builders prefer JDA of that kind, which the government should understand. Instead of helping the real estate sector grow faster, the government is putting a lot of hurdles,” he added.

When contacted, Inspector General of Registration and Commissioner of Stamp Adoni Syed Saleem said the department has clarified on the issue after consulting the Law department. The intention is to prevent misuse of the budget announcement, he added.