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If you are looking to buy a home this year, one of the first tasks you must do is follow the news about real estate. And if you plan to buy property in Bengaluru, here’s how you can benefit from the recent government announcement on reduced Guidance Value on property in Karnataka. Yes, the government has reduced the Guidance Value in the State by a whopping 10 per cent. But, it is valid only till March 31, 2022.
So, read on to know how you stand to benefit from this as a homebuyer.
What is Guidance Value?
In real estate terms, Guidance Value is also called Guideline Value or Circle Rate in different States in the country. In Karnataka the real estate industry terms it Guidance Value.
The Guidance Value of property is decided by the Department of Stamps and Registrations in each State and is applicable to all types of properties within a locality. This includes an apartment in a residential building, an independent villa, a plot in a layout or agricultural land, etc.
Guidance Value of the property is the market value of the property. It is the minimum price for registration of the property. So, after you buy property you need to register it at the Guidance Value fixed for the locality you buy it in.
The market value of a property is usually determined based on several factors that can influence the real estate market, such as how developed the location around the property is, the proximity to enhanced connectivity such as an airport or Metro rail stations, good social infrastructure and so on. This means, the Guidance Value of a property close to an upcoming airport can be higher than one which is located in an undeveloped area.
What a high Guidance Value means
Before the Department of Stamps and Registration fixes the Guidance Value of a certain property, it conducts research to find out the market rates of properties in each location. So, any change in the Guidance Value can have a direct impact on the value of the property.
This means, if the Guidance Value of a certain location is high, the market value of any property coming up here or already constructed in this locality automatically goes up. This will also mean that you as the property owner will have to pay a higher stamp duty and registration charges on your property.
And as per the law, even if you buy the property at a lower price than the Guidance Value fixed for it, you will still have to register the property at the Guidance Value.
How can you benefit with the reduced Guidance Value
With the Karnataka government having reduced the overall Guidance Value by a huge 10 per cent means you as a new homebuyer can look forward to a number of benefits.
- A low Guidance Value on your new apartment means you will have to pay less Stamp duty on your property. Presently, the Stamp duty is 3 per cent for properties that are priced in the Rs 21 lakh to Rs 45 lakh range, and 5 per cent for those that cost more than Rs 45 lakh.
For example, if the Guidance Value of a home is Rs 1 lakh, you as a homebuyer will have to pay the Stamp duty of 5 per cent which is Rs 5,000. With the 10 per cent reduction, the Guidance Value will drop to Rs 90,000 and you will need to pay Rs 4,500 as Stamp Duty.
- The reduced Guidance Value gives you the advantage of paying a lower Registration fee on your new home.
For instance, if you have bought your new apartment for Rs 5000 per sft and the Guidance Value in the locality is Rs 3000 per sft, you can register your property for a rate between Rs 3000 and 5000 per sft.
- A lower Guidance Value can encourage homebuyers to get the best deals on their new homes as developers have the advantage of paying lower capital gains tax on the sale. This three-month period from January to March 2022 is the ideal time for you to buy your home and register your property at the earliest.
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Your time starts now as the countdown to March 31, 2022 begins.
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