Friday, February 26, 2016

STAMP DUTY JOINT DEVELOPMENT AGREEMENT

STAMP DUTY JOINT DEVELOPMENT AGREEMENT

The Government of Karnataka under Karnataka Act No.9 of 2009 has brought out certain amendments to the Karnataka Stamp Act, 1957 effective from l" April, 2009. According to this Amendment Act and in terms of article 5(t) thereof, stamp duty chargeable for joint development agreements relating to construction or development or sale of immovable property is at the rate of one rupee for every one hundred rupees or part thereof on the
  1. Market value of the property
  2. The estimated cost of construction of proposed construction or development or proposed development of the property as the case may be which is the subject matter of such transfer under the agreement in accordance with the provisions of sec.28 of the Karnataka Stamp Act, 1957] or
  3. On the consideration of such transfer, whichever is higher?
It is the normal practice that when any landlord desires to develop his agricultural land into an apartment complex, he would enter into a joint development agreement with the developer of his choice. It is also the normal practice that when such joint development agreements are entered into, only the total built up area and the undivided share of land would be shared between the landlord and the developer at the agreed ratio. Not only this, at the time of execution of joint development agreement it would be premature and not feasible for the developer to estimate the cost of construction or the proposed construction or development and sharing of square feet area. In spite of this factual position, when joint development agreements are presented for registration, some of the sub-registrars in Bangalore have been insisting on mentioning some figure as the proposed cost of construction to arrive at the stamp duty payable on registration of such a joint development agreement or the same is referred for valuation under sec.45-A or the document is impounded. Thus, there is no uniform system adopted by the sub-registrars regarding stamp duty on registration of joint development agreements.
To have a clear picture of the issue, Shri S.Selvakumar, Editor, Real Estate Reporter, took up the matter with the Inspector General of Registration and Commissioner of Stamps under Right to Information Act,2005 and sought clarification on the point.
As the information furnished by this authority was not convincing, an appeal was filed before the Appellate Authority under the Right to Information Act. The Inspector General of Registration and Commissioner of Stamps, as an appellate authority, has passed the following order on the subject vide his order No.RTI/239/09-10
"In the instant case, only agricultural land is given for development and there is no mention of cost of construction or proposed construction etc., or there is no consideration for such transfer. Under these facts and circumstances and in the absence of specific case on hand, stamp duty is chargeable on the market value of the agricultural land which is deemed to be the subject matter of transfer under the Joint Development Agreement."
Thus, when a joint development agreement is entered into by the landlord with the developer to develop his agricultural land wherein no cost of construction or proposed construction is mentioned or there is no consideration for such transfer, stamp duty payable will be on the market value of such agricultural land and if the land in question is a converted land, stamp duty payable will be on the market value for such converted land and where there is a fraction of converted land with revenue khata, stamp duty is payable on square feet basis as per guidelines value fixed by the Central Valuation Committee.
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