Bengaluru may see uptick in property prices as guidance value expected to go up from October 1

Bengaluru Property Prices Set to Surge with Anticipated Increase in Guidance Value

In a significant development that could reshape Bengaluru’s real estate landscape, the Karnataka state government is contemplating a substantial increase in the guidance value for properties starting from October 1st. Revenue Minister Krishna Byre Gowda recently announced this decision, which is expected to have far-reaching implications for property owners, investors, and the real estate market as a whole.

Understanding the Guidance Value

The guidance value, often referred to as the circle rate in some states, represents the minimum value at which a property sale can be registered with the state government. This value plays a pivotal role in property transactions, taxation, and revenue collection for the government.

The Long-Awaited Revision

One striking aspect of this announcement is the timing of the revision. According to Minister Gowda, the guidance values in Bengaluru have remained stagnant for the past five years, despite legal provisions requiring annual revisions. This long-overdue update is expected to result in a substantial increase in property prices.

Magnitude of the Increase

The anticipated increase in guidance values is substantial and varies depending on the locality. On average, property owners can expect an increase of 20-30 percent in their property’s guidance value. However, in densely populated IT corridors, the surge could be as high as 50 percent. This difference is reflective of the varying market dynamics across the city.

Market Discrepancies

Minister Gowda shed light on the glaring disparities between guidance values and actual market rates, especially in areas like the Electronic City IT corridor. In such areas, the market rate can be nearly 500 times higher than the existing guidance value. These disparities underscore the need for an adjustment to bring the guidance values more in line with market realities.

Rollout Strategy

Bengaluru will be the first city to witness these revisions, with other districts in Karnataka set to follow suit. This staggered approach allows the government to gauge the impact in the state’s largest city before applying similar adjustments elsewhere.

Revenue Boost

The government’s decision to revise guidance values is not solely motivated by a desire to bring equity to property transactions. It’s also seen as a significant revenue generation measure. Minister Gowda revealed that property registrations exceeding Rs 800 crore have taken place in September alone, compared to the previous year. This surge in property transactions is expected to bolster government coffers through increased stamp and registration fees.

Historical Context

The last revision in guidance values occurred in 2018-19 when a 25 percent hike was implemented. However, in the intervening years, property prices in Bengaluru have experienced substantial growth, rendering the existing guidance values outdated and inadequate.

Budgetary Proposal

The proposal to revise guidance values was initially introduced during the presentation of Karnataka’s budget for 2023-24 by Chief Minister Siddaramaiah on July 7th. The state government’s intent to revisit these values underscores the recognition of the evolving real estate landscape and the need for an adjustment to reflect current property prices.

Disparity Between Guidance Values and Market Rates

Local real estate experts have long pointed out the significant gap between the guidance values and market rates. In prime locations, often referred to as central business districts (CBD) areas, this gap can reach as high as 40-50 percent. Even in the outskirts, it stands at around 30 percent. This disparity has not only caused confusion but also hindered property transactions and valuation assessments.

Impact on Property Owners and Investors

The impending increase in guidance values will have several implications for property owners and investors in Bengaluru. Firstly, it is likely to result in higher property registration costs, which will need to be factored into transactions. Additionally, this increase may influence property prices in the city, potentially leading to a surge in the cost of both residential and commercial properties.

Investor Reaction

Real estate investors are expected to closely monitor the situation, as an increase in guidance values could affect property yields and investment decisions. Higher registration costs might prompt some investors to reconsider their strategies or diversify their portfolios.

Conclusion

The imminent revision of guidance values in Bengaluru signals a pivotal moment for the city’s real estate market. This move by the Karnataka state government aims to align property valuations with current market realities, address long-standing disparities, and bolster government revenue. While property owners and investors may face increased costs, these changes are a reflection of the dynamic nature of the real estate sector and the need for periodic adjustments to ensure fairness and accuracy in property transactions. As the revised guidance values take effect on October 1st, the Bengaluru real estate market is poised for significant shifts that will undoubtedly impact all stakeholders in the sector.

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