July 5, 2022

Y M L P-298

It Must Be Business

Do Stamp Duties Affect the Transaction Volumes?

3 min read
Stamp duty cut: How might it affect me? | The Independent | The Independent

A transaction in real estate involves various costs in terms of registration fees, stamp duties, brokerage, etc. If a person sells his real estate property, the government levies stamp duty on such transactions. Stamp duty is a percentage of the circle value of the property. A pertinent question arises here – Do stamp duties affect the transaction volumes? Let’s find out!

Real Estate Transactions Affected by Stamp Duties

The following real estate transactions involve stamp duties, without which agreements cannot be registered:

  • Sale Deed
  • Mortgage
  • Re-conveyance of Mortgaged Property
  • Gift Deed
  • Exchange Deed
  • Tenancy Agreement
  • Lease Agreement
  • License Agreement

Implications of Changes in Stamp Duties on Transaction Volumes

The increase in stamp duties directly impacts the real estate market. Stamp duties, therefore, cause the market inefficiencies to disrupt the real estate transactions. India predominantly has a high rate of stamp duty, especially in the southern part. For instance, the stamp duty in Tamil Nadu goes as high as 8%-10%.

But when considering the volume of transactions, India is still at a stage where most real estate properties are purchased out of necessity and not as an investment. Stamp duties cover a larger share of the transaction costs involved in the real estate market, but a slight increase does not significantly influence the volume of the transactions.

Perhaps, the volume of real estate transactions in India is affected by various other factors, which are interlinked, such as the property value, ongoing home loan interest rates, prospects of the rise in property value in the future, etc. Stamp duty is just one of the factors involved when purchasing a property.

Home Loan Interest Rates: Implications

Interest rates have a direct effect on the economy and consumer spending. Home loan have played a significant role in enabling people to purchase their own houses. Currently, home loan interest rates are at an all-time low, and this is the reason behind the increased spending in the real-estate sector. One only needs to satisfy the home loan eligibility criteria for raising funds for buying their house. The following are those criteria:

  • The age of the applicant should be between 24-65 years.
  • The applicant can either be a salaried or a self-employed individual.
  • The CIBIL score should be 750 or above.
  • The salaried individuals should have a minimum monthly salary of Rs. 30,000 and a minimum work experience of 2 years.
  • The self-employed individuals must have a minimum work experience of 3 years.

In A Nutshell

Each state has a different stamp duty. Some states also provide concessions for females to persuade them to purchase residential properties. Stamp duties are crucial, but they are not the only criteria when dealing in property. If you plan to acquire a property, look at several aspects, such as the stamp duty, home loan interest rate, lender, registration, etc.

While selecting the lender, you can also use financial tools like the home loan EMI calculator. It can help you calculate the EMIs with just a few clicks. Through this, you can compare and check the EMI that you need to pay, as well as the total interest you will be paying over the tenure of your loan. Choose a lender such that you save the extra cost of the interest and also benefit from their services in the long run.

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