Bengaluru is still a great place for those who would want to invest on real estate. But state government should consider taking necessary steps to generate revenue instead of increasing the property tax percentage.
With Bengaluru growing as one of the best places for the real estate investors, the rise in guidance values of commercial and residential real estate has actually surprised the real estate developers who are now facing a sink in the demand. It seems that the immediate impact is being felt with the rise in property tax rates, and the developers opine that the government should think about revising the rates, especially at times when the prices have skyrocketed.
Suresh Hari, the Secretary of CREDAI (Confederation of Real Estate Developers Association in India) feels that the revision of guidance values hasn’t been very scientific. He says that, the prices have to be revised to avoid the undervaluation of properties, and the revision cannot just be for the taxation purpose. The artificial increase in the prices can hurt the genuine property buyers also. All that it’s done is increasing the stamp duty on registration and increasing the property taxes, which is why he feels that it’s not the right approach.
Outside Agency to Assess Property Value
Suresh Hari says that there has to be an outside agency to assess the value of a property. In some cases, they just have taken the biggest sale rate and have assessed all the adjoining properties on the same rate. But the value of a property can differ based on the plot size, road width, position and lots of other things. So any agency from outside the state would do it objectively.
There are lots of real estate experts who agree with the third party appraising the value of a property. They feel that, it’s absolutely necessary to get a third party involved in the assessment of properties. Sometimes, the parties here will not have the required expertise to assess the value of a property; if the assessment is done by such parties, it would just be an unrealistic increase.
The Impact of the Rise
Directors of the popular real estate firms of Asia Pacific have said that the rise in guidance values has had a huge impact on the property owners of suburban areas like Bommanahalli and Mahadevapura. An effective increase of about 50% has been seen in these areas, whereas in zones A and B which include deluxe areas like Koramangala, MG Road and Jayanagar won’t be affected much by the percentage rise.
Real estate pundits say that property tax is one of the very important sources for revenue generation for governing bodies like Bruhat Bengaluru Mahanagara Palike (BBMP). Even a small sink in the BBMP’s funds will definitely have a bad effect on many infrastructure development initiatives like widening the roads, sealing potholes, waste management, etc. Apart from increased BBMP’s revenue, property tax increase will also diminish the waning infrastructure issues.
In spite of all these, Bengaluru is still a great place for those who would want to invest on real estate. But state government should consider taking necessary steps to generate revenue instead of increasing the property tax percentage.
There are lots of things that consistent demand and purchase of property brings; sales tax, stamp duty, labour employment, VAT and so on. Recently BBMP announced the increase in tax for residential properties by 20% and for commercial property by 25%. The effect of this increase will be very hard to control. The state government has to take a different view on generating the revenue rather than suddenly putting a rise on property taxes.
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