Do banks offer loans for stamp duty payment?

Homebuyers in India must pay a significant amount of money to register their property to legalise the purchase under the provisions of the Indian Stamps Act and the Registration Act of 1905. Being a state levy, stamp duty rates on property differ from one state to another in the country. However, on average, a buyer will end up paying at least 4% of the property value as stamp duty—in Delhi, for instance, women homebuyers pay 4% stamp duty to register property. The rate can be as high as 8% in other states—in Kerala, for example, women homebuyers pay 8% stamp duty to register property.

So, for a property worth Rs 1 crore, a homebuyer in Delhi will have to arrange Rs 4 lakh to pay as stamp duty.  In Kerala, on the other hand, they will have to arrange Rs 8 lakh to pay stamp duty based on the prevalent rates.

When the registration fee is added to this, the amount swells up further. So, the buyer in Delhi has to arrange another Rs 1 lakh, bring his total liability at Rs 5 lakh, considering the registration fee is Delhi is 1%. The buyer in Kerala will have to arrange Rs 2 lakh over and above stamp duty since the state currently charges 2% registration fee. This brings this buyer’s total liability to Rs 10 lakh.

Considering the amount is quite huge and most homebuyers might not have saved up enough to make the down-payment as well as this additional charge, what options do they have?

Do banks offer stamp duty and registration fee as part of home loans?

Under the existing norms in India, banks offer only up to 80% of the property cost as home loan, in the best-case scenario. This amount can be a lot lower based on the profile of the applicant and the down-payment they make. Unfortunately, banks in India so far don’t consider stamp duty and registration fee as part of the property acquisition cost. This means that even though a homebuyer in Kerala must spend Rs 1.10 crore to pay a Rs 1 crore property, the bank would sanction only up to 80% of the Rs 1 crore i.e. Rs 80 lakh. The buyer must arrange the remaining Rs 30 lakh from their own pocket.

Plans in the making to include stamp duty as part of home loan

According to media reports, banks are waiting for an approval from the Reserve Bank of India (RBI) on a proposal under which they plan to include stamp duty and registration fee as part of the property value and sanction loans accordingly. It will come as a major relief for buyers if the plan gets an RBI nod.