In an attempt to encourage home buyers for the first time and promote affordable housing, the Karnataka government in its budget on Monday announced a reduction in tariffs to 3 per cent from the existing 5 per cent for flats worth between 35 and 45 lighter kunas. The announcement comes as a result of neighboring Maharashtra, where there has been a large increase in apartment sales due to tariff cuts for a limited period last year.
The announcement could have a positive impact on certain micro markets and on customer mood. “More than the numbers – a reduction from 5 to 3 percent – such moves positively affect the feeling of buying houses, in turn seeing a positive domino effect on 270 and more industries that are secondary to real estate and construction,” says NAREDCO President Niranjan Hiranandani.
However, according to ANAROCK research, Bengaluru currently has a total unsold inventory of almost 59,350 units in all budget segments. Of that, only 24 percent of the units are in the price range of 45 lighter, while 64 percent is within the price range of 45 lighter to 1.5 million.
Anuj Puri, president of ANAROCK Property Consultants, believes that while tariff reductions are a good factor, they are unlikely to provide a significant boost to apartment sales in Bengaluru similar to what was seen in Mumbai after the rate reduction for all segments.
“The fact is that the demand for residential buildings in Bengaluru is mostly leaning towards the middle segment, which includes properties ranging in price from 50 lakh to 1 crore Rs. For these properties, customs duties remain the same at almost 5 percent,” Puri said. .
Reiterating a similar view, Rajendra Joshi, CEO of Residential Brigade Enterprises Ltd, says it would be much more beneficial for the tariff reduction to be extended to other segments, given the growing rate of expansion not only in Bengaluru but also in the rest of the states.
“Although the customs fee is currently declared for the fiscal year 2021-22, we must keep in mind that the planning cycle to execution until property registration is significantly longer,” he added.