Higher guidance value may dampen buying spirits

The Bengaluru residential property market may face a further slowdown as the guidance value is set to be hiked in the next few days. If the guidance value goes up, people may put off buying land and flats, and instead wait for some stability in property prices before making any decision.

Experts say a hike in guidance value is likely to dampen the residential property market, which has already slowed down. “Typically, people get discouraged by a hike in registration fee. They will act only after the market shows some stability in terms of guidance value and selling rates,” a realtor said.

The guidance value was probably hiked to make up for the shortfall in revenue in the stamps and registration department, sources say. The department has fallen short of the target of Rs 8,200 crore by around Rs 2,000 crore.

One official who did not want to be named, said the department was hoping more people would register their properties before March 31 to beat the higher guidance value that would set in from April 1. The rush for registrations before April 1 may help meet the current year’s target of Rs 8,200 crore. The hike in guidance value comes in the background of a slowdown in property registrations, with hundreds of flats remaining unsold.

The government has also proposed a 2% cess on market value of fresh layouts to implement projects for the city. With the hike in guidance value and imposition of cess on private layout developers, realty experts said property prices could shoot up. This is good for sellers, but buyers find it depressing. The rise in property prices should not be so high as to disturb the buying sentiment, experts say. Property buyers and realtors are looking at the property market closely to understand which way the property sentiment and the pricing move, they say.

In September, the government had increased guidance value between 10 and 20%. An amendment to the Karnataka Stamp (Amendment) Bill, 2014 authorised the central valuation committee to review guidance value every year. The target for 2015-16 for the stamps and registration department was Rs 8,200 crore, while the  amount mobilised till December 2015 was around Rs 5,000 crore. In 2014-15, the department collected Rs 7,000 crore in stamps and registration fee as against target of Rs 7,400 crore.