Abstract
Even though pervasive, land transfer taxes (LTTs) and its impacts on the economy are rarely studied. This paper analyses the role of governments as market regulating institution in land markets by studying the land registration tax policy regime. While land registration can be considered as a way in which government intervenes/participates in the land markets, it is also source of taxation revenue for the government. Considering the fact that land taxes are meagre in India and LTTs provide more revenue to the state governments, LTTs have got relevance in the current Indian scenario. This paper attempts to analyse the impacts of LTTs on the land markets of Kerala, in the background of changes in the tax rates as well as structures. Findings indicate that intervention of new taxes has not distorted the land markets while bringing out the pro-policy seasonal nature as well as the short-term nature of the tax policy shocks on the land markets and revenue generated from it. The paper also highlights the importance of tax waiver scheme on harnessing the revenue potential from land transfers while discussing the distorting nature of LTTs on the land and real estate markets.
This is a preview of subscription content, access via your institution.
Notes
- 1.
Seventh schedule (Article 246) of the Indian constitution defines the powers of the centre and states into three lists; the union list, the state list and the concurrent list.
- 2.
The stamp duty rates used to vary across Panchayath, Municipality and Corporation areas in Kerala until 2013.
- 3.
In fact the low rate during 2004–05 was on the expectation of a possible introduction of fair value land taxation which however was not materialised.
- 4.
In the 2010–11 Budget speech where the fair value land taxation was notified, the finance minister Sri T.M. Thomas Isaac mentions that it was insisted that the fair value should not exceed 50% of the market value.
- 5.
As per this, stamp duty was fixed to 2% at Panchayath level, 3% at Municipalities and 4% at Corporation premises for immovable property conveyances. Surcharge of 2% of stamp duty was also included for all the regions.
- 6.
See the previous section for details regarding increased rates during 2004–05.
- 7.
Capital assets are distinguishable on the basis of the period of holding. This can vary across taxing institutions. For example, Kelkar in the Report of the Task force on Direct Tax (2002) considers any transactions involving capital assets more than 3 years as long term. In the case of equity, more than one year is considered as long term.
- 8.
- 9.
Please see Table 1 for a comparative picture.
- 10.
Regarding providing power of attorney to a promoter or developer for construction or development of a property or sale or transfer, stamp duty has to be paid on the value of the property par with conveyance rate prescribed in respective locations. Stamp duty if paid earlier for such agreements regarding the construction shall be deducted from the stamp duty payable for the conveyance (Budget speech 2007–08).
- 11.
The effective rate of stamp duty, surcharge and registration fee in Corporation areas was brought down from 15.5 to 11%; in Municipality/Township/Cantonment areas from 14.5 to 10%; and in Grama Panchayathh from 12 to 9%.
- 12.
- 13.
As per this, re-sale of a land purchased within a period of 3 months from the date of registration of the purchase deed shall be subjected to double the stamp duty of the previous conveyance deed and for those after 3 and before 6 months of purchase to warrant one and half times the stamp duty of the previous conveyance (Budget Speech 2013–14).
- 14.
But the revenue curve represented here in real variable did not maintain the momentum shown in the early couple of years, and could not recover after the fall during 2008–09 unlike the previous acceleration. This may be due to the fact that after the introduction of fair value taxation and subsequently short-term capital gains taxation, the rates of stamp duty and registration fees were normalised to lower rates. Though these measures have increased revenue in nominal terms it has actually brought lower real revenue.
- 15.
Tax rates on transfers were normalised to lower rates in the recent years with the introduction of fair value and short-term capital gains tax policies.
References
Bird RM, Slack E (2002) Land and property taxation: a review. Available at http://www1.worldbank.org/publicsector/decentralization/June2003Seminar/LandPropertyTaxation.pdf
Brown HG (1927) Land speculation and land-value taxation. J Polit Econ 35(3):390–402. Available at http://www.jstor.org/stable/1822055. Accessed on 18 May 2009
Case KE (1992) Taxes and speculative behavior in land and real estate markets. Rev Urban Reg Develop Stud (4)
Dachis B (2012) Stuck in Place: The Effect of Land Transfer Taxes on Housing Transactions. Commentary No. 364, C D Howe Institute
Dachis B, Duranton G, Turner MA (2012) The effects of land transfer taxes on real estate markets: evidence from a natural experiment in Toronto. J Econ Geogr 12(2012):327–354
Davies JB et al (2008) The world distribution of household wealth. Discussion paper 2008/003. UNU-WIDER, Helsinki
Deininger K, Feder G (2009) Land registration, governance, and development: evidence and implications for policy. World Bank Res Observer 24(2). Available at http://wbro.oxfordjournals.org
Deininger KW, Hilhorst D, Huberta M, Narayanan S, Bahadur D (2016) India—land governance assessment: national synthesis report. World Bank Group, Washington, D.C. http://documents.worldbank.org/curated/en/643361468038336423/India-Land-governance-assessment-national-synthesis-report
Foldvary F (1998) Market-hampering land speculation: fiscal and monetary origins and remedies. Am J Econ Sociol 57(4):615–637 Available at https://www.jstor.org/. Accessed on 21 July 2008
Gaffney M (1994) Land as a distinctive factor of production. Wealth and want. Available at http://www.wealthandwant.com/docs/Gaffney_LaaDFoP.htm. Accessed on 1 Nov 2008
Government of Kerala Various Issues. Economic Review. Kerala State Planning Board, Thiruvananthapuram
Government of Kerala Various Issues. ‘Administrative Reports.’ Inspector General of Registration.Thiruvananthapuram
Government of Kerala Budget Speeches 2004–05 to 13–14. Available at http://www.niyamasabha.org/Budget. Accessed on 1 Oct 2014
Government of Kerala. Kerala Finance Bills. Various Issues. Available at http://niyamasabha.org/bills/13kla/published. Accessed on 1 Dec 2014
Harilal KN (2008) Bhooprasnam muthal bhooprasnam vare. Madyamam Online, March 11th to 18th. Available at http://www.madhyamamonline.com/news_archive. Accessed on 2 April 2008
Kelkar V (2002) Report of the task force on direct tax. Consultation paper to Government of India. Available at http://www.prsindia.org/uploads/media/DTC%20Bill/kelkar%20direct%20taxes.pdf. Accessed on 26 June 2014
Morris S, Pandey A (2009) Land markets in India: distortions and issues. India Infrastructure Report
Mukherjee V (2013) Determinants of stamp duty revenue in Indian states. South Asian J Macroeconomics Public Finance 2(1):33–58
Naresh G (2003) Property taxation in India. In: Bird RM, Slack E (eds) International handbook of land and property taxation. Edward Elgar
Pietola K, Myyrä S, Pouta E (2011) The effects of changes in capital gains taxes on land sales: empirical evidence from Finland. Land Econ 87(4):582–594
Rodrik D (2013) The institutional organisation of the market economy. Available at http://isites.harvard.edu/fs/docs/icb.topic1220470.files/The%20Institutional%20Organization%20of%20the%20Market%20Economy-2.ppt. Accesed on 27 Mar 2014
Sreekumar TT (1993) Urban process in Kerala. Centre for Development Studies, Thiruvananthapuram (Occasional Paper series)
Wadhwa A (2013) Distortionary impact of stamp duty evasion in Haryana a case study of Gurgaon city. PhD thesis submitted to the Maharishi Dayanand University. Accessed from http://hdl.handle.net/10603/7867
Yinger J, Mills ES, Börsch-Supan A, Bloom HS (1988) Property taxes and house values. Academic Press
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2017 Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Nirmal Roy, V.P. (2017). Land Transfer Tax Policy Regime and Its Influence on Property Markets: Analysing the Land Transfer Tax Policy of Kerala in the Last Decade. In: Pellissery, S., Davy, B., Jacobs, H. (eds) Land Policies in India. India Studies in Business and Economics. Springer, Singapore. https://doi.org/10.1007/978-981-10-4208-9_5
Download citation
DOI: https://doi.org/10.1007/978-981-10-4208-9_5
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-10-4207-2
Online ISBN: 978-981-10-4208-9
eBook Packages: Business and ManagementBusiness and Management (R0)