The residential property sales in Bengaluru is unlikely to be dampened by the recent 14% hike in guidance value of immovable property by the Karnataka government owing to the strong underlying demand.
The guidance value of all immovable properties across the state was revised during 2018-19 and came into effect in January 2019. The last update to circle rates was made in 2018-19, where it was raised by 25% before the erstwhile BJP government granted a 10% rebate on stamp duty was also provided to the sector.
However, due to the outbreak of the COVID-19 pandemic, the guidance value of immovable properties has not been revised to date.
“We are quite bullish on Bengaluru’s real estate market and its long-term ability to generate stellar returns for investors. The properties will turn slightly expensive in certain micro markets in Karnataka if the guidance value exceeds the average free market rate. However, it is unlikely to impact demand sentiment,” said Darshan Govindraju, Director at the Vaishnavi Group.
According to industry experts, the revised guidance value will also help reduce spurious cases of undervalued properties by developers in the unorganised space and cash transactions.
The recent circle rate hike is also a factor of inflation, and property value going up will help the government in generating more revenues and increase spending on infrastructure.
“Given the price appreciation of over 10-20 per cent post-COVID, the revised guidance value will end up in line with market prices. The impact will be felt only in the cases where property considerations have been undervalued. I don’t foresee any impact on sales from reputed developers,” Sunil Pareek executive director Assetz Property Group.
The hike in guidance value will also be reflected in the price rise on the land sales due to better infrastructure and access. The rate hike is also expected to increase land value in markets beyond Bangalore.
Mallanna Sasalu, CEO Provident Housing, feels the rate hikes will not affect sales or acquisitions. “At 6.5% registration cost of the guidance value, the real impact is 1% on the total value of the asset, which is a minimum impact that the business and customers can take. Developed assets are close to the guidance value or a bit higher; hence mostly, there is no impact.”
Experts also feel that this circle rate hike will propel fence sitters to invest in the market before another periodic increase in circle rates causes any significant rise in property rates, reiterating Bengaluru’s stance as one of the country’s fastest-growing real estate markets.
“The market rates have increased significantly over the last few years, circle rates, which are revised periodically and hikes were paused due to the COVID-19 pandemic, have not moved in tandem and hence the hike was on the expected line,” Bhavesh Kothari, founder PropertyFirst.
Bengaluru, one of the fastest-growing real estate markets in the country, attracts investors and job seekers from across the country and the globe, maintaining healthy demand for residential and commercial properties.
According to property brokers, the prices across Bengaluru have shot up by 5% every quarter, and the average selling prices hovers anywhere between Rs 8000 per sq ft to Rs 10,000 per sq ft.
The city recorded almost a decade of high sales and new launches as compared to the other top markets in the first half of 2023. Bengaluru recorded sales of over 26000 units in the first half of 2022, led by mid income housing. It contributed around 17% of all India residential sales only behind Mumbai and NCR.