BENGALURU: Karnataka’s decision to increase the property registration fee to 2% of the transaction value is set to affect Bengaluru’s housing market, which is already struggling with affordability issues for buyers.
The rise in transaction costs for home purchases is steep, with experts warning it may diminish buyers’ confidence in the market. “This change will strain homebuyers’ budgets,” noted Navin Dhanuka, director at ArisUnitern RE Solutions. He added that developers will likely need to adjust project financing to sustain demand, given that significant inventory is expected to enter the market in the coming quarters.
Industry estimates suggest that Bengaluru’s housing market was already cooling before this announcement. In the April-June quarter, housing sales dropped approximately 8% year-over-year to 15,100 units, following a 16% decline a quarter earlier. Unsold inventory has surged nearly 30% year-over-year, reaching 58,900 units. This declining demand makes the timing of the fee increase especially concerning, as many fear it could further slow the market.
The increased costs are already causing concern among homebuyers. Previously, the stamp duty and registration fees for a flat valued at ₹1 crore were around ₹6.6 lakh; under the new rates effective Monday, this has risen to nearly ₹7.5 lakh. For properties in the ₹40–70 lakh range, buyers will face an additional burden of ₹50,000–75,000.
“Since banks do not cover registration fees, families must find this money independently. For first-time buyers and those on salaries, this added cash requirement could either delay or entirely derail home purchase plans,” said a managing director of a listed real estate firm, who preferred to remain anonymous.
Mid-priced and affordable segments will likely face the most significant impact.
Market dynamics are shifting towards premium housing. In H1 2025, Bengaluru saw 34,551 new residential launches, a 19% year-over-year increase, with Q1 contributing 20,484 units, marking a 62% surge. This growth is largely driven by the premium housing segment (priced at ₹1 crore and above), where launch volumes have more than doubled compared to the previous year, per a report by JLL Real Estate Intelligence Service.
This strong demand in the high-end market indicates that affluent buyers, less concerned about transaction costs, may continue to generate activity despite the registration fee hike, while the mid-market and affordable segments could be more severely impacted.
Analysts suggest developers might focus further on luxury projects to capitalize on existing demand, potentially neglecting the affordable housing market.
Bhavesh Kothari, founder of Property First, stated that the abrupt hike in stamp duty will likely dampen consumer sentiment. “Bengaluru’s residential market has experienced historic growth over the past five years with soaring rents and property values, making it one of the top markets in the nation,” Kothari noted. He added that ongoing industry collaborations with banks and housing finance companies, offering flexible payment terms and services, may help cushion the impact of the increased registration fees. However, with many registrations already delayed due to eKhata, consumers may face additional challenges,” he mentioned.
The Karnataka government has defended the fee increase, asserting that even post-hike, transaction costs in the state remain lower than in neighboring Kerala or Tamil Nadu. They have pointed to revenue shortfalls, indicating that collections from stamp duty and registration are below targets. Nonetheless, critics question the timing of the hike, especially since property prices in Bengaluru have risen over 50% in the past four years, compounding the difficulties faced by ordinary buyers.
Analysts expect a slowdown in registrations as buyers reassess their budgets and postpone decisions. There are concerns that the state may unintentionally push buyers towards renting or even prompt under-reporting of property values to minimize fees.
