Calcutta: Property deals valued up to Rs 1 crore will be given a 1 per cent relief on stamp duty, the Bengal budget has proposed.

The budget proposal unveiled on Wednesday is expected to benefit many consumers in Calcutta and other urban clusters in the state. In rural areas, the stamp duty will be 5 per cent of the total value for property purchases up to Rs 1 crore.

Till now, the concession duty rates of 6 per cent in urban areas and 5 per cent in rural areas were applicable only to deals valued up to Rs 40 lakh. Properties valued above this cut-off used to attract 7 per cent in urban areas and 6 per cent in rural areas.

Once the budget proposal is passed, deals below Rs 1 crore will be levied only 6 per cent stamp duty in urban areas and 5 per cent in rural areas. Purchases above Rs 1 crore will continue to attract duties of 7 per cent (urban) and 6 per cent (rural).

The budget proposal seeks to reflect the ground reality as hardly any property is available in Calcutta below Rs 40 lakh, the earlier cut-off for the 6 per cent concession rate.

"I am certain that this measure will greatly help the middle class and the housing construction sector," finance minister Amit Mitra said in his budget speech.

Buyers will have to continue to pay a 1.1 per cent registration fee on top of the stamp duty. The stamp duty will be decided on the total value estimated by the registrar. For instance, even if the sale deed puts the price below Rs 1 crore in an urban area but the registrar values it above that amount, the higher 7 per cent stamp duty will apply.

Nandu Belani, president of the Bengal chapter of real estate body Credai, said the budget proposal would aid the majority of buyers. "Nearly 80 per cent of all units sold in Calcutta is less than Rs 1 crore. So it will benefit the vast majority. Going forward, the state should reduce the stamp duty by another 1 per cent," Belani said.

The proposal to reduce the stamp duty comes at a time the construction industry has been facing headwinds because of demonetisation and the goods and services tax.

According to a report by property consultant Knight Frank, sales and new launches in Calcutta were down by 17 per cent and 32 per cent in the second half of 2017 over the same period last year.

Total incidence of tax on an under-construction property now stands at 12 per cent which has replaced the 4.5 per cent service tax imposed earlier. Given that most of the developers are absorbing at least 5 per cent of the additional burden by factoring in input tax credit, the net impact on the buyer is still 2.5 per cent. Following the budget proposal, the net impact will come down by another 1 percentage point.

According to Sushil Mohta, chairman of Merlin Projects, the budget benefit will be most pronounced on projects under the Pradhan Mantri Awas Yojana where the GST on under-construction property has been reduced to 8 per cent.