CHENNAI: The state government is likely to reduce stamp duty and registration charges for all rental agreements of more than 12 months as it is one of the pre-conditions set forth by the world bank to fund the Tamil Nadu Housing Sector Strengthening Programme.
According to a recently passed government order, World Bank will be funding Tamil Nadu Housing and Development project at a cost of $72 millon (Rs 504 crore) and First Tamil Nadu Housing Sector Strengthening Programme (FTNHSSP) worth USD 200 million (Rs 1400 crore).
Stamp Duty is essentially a form of tax levied on legal documents in return for making them legally effective.
In Tamil Nadu, the Stamp Duty paid for rental agreements is usually 1 percent of rent plus deposit amount irrespective of the lease term.
Builders Association of India state treasurer S Ramaprabhu said that the waiver would reduce a substantial burden and help in boosting affordable housing.
Most of the rent agreements are signed for 11 months, so that the stamp duty and other charges can be avoided.
According to the Registration Act, 1908, lease agreement registration is mandatory if the leasing period is 12 months or more than that.
If a rent agreement is registered then it is also mandatory to pay registration fee and stamp duty.
With the World Bank putting it as a one of the pre-conditions to fund the project, the government may consider taking such a move.
The objective of Tamil Nadu Housing and Habitat Development Project, which has two components, is to strengthen the housing sector institutions of the state for increased and sustainable access to affordable housing.
The project will support innovations in housing finance and institutional strengthening of housing sector institutions in the state to expand access to affordable housing and improve the sustainability of housing institutions and programmes.
The two components include enabling private sector participation in affordable housing and strengthening of Tamil Nadu's Urban Housing institutions for enhanced sustainability.
Tamil Nadu Housing Sector Strengthening Programme, which includes three pillars, will support policy reforms to develop efficient and inclusive markets and to increase the supply of affordable housing with a total development policy financing loan of $450 million.
In the first tranche $200 million as financial support will be provided.
The pillars include strengthening policies and institutions to support inclusive and efficient housing sector development, developing an enabling environment to increase supply of affordable housing and crowding of private sector participation in affordable housing.