Land Transfer Tax Policy Regime and Its Influence on Property Markets: Analysing the Land Transfer Tax Policy of Kerala in the Last Decade

Abstract

Even though pervasive, land transfer taxes (LTTs) and its impacts on the economy are rarely studied. This paper analyses the role of governments as market regulating institution in land markets by studying the land registration tax policy regime. While land registration can be considered as a way in which government intervenes/participates in the land markets, it is also source of taxation revenue for the government. Considering the fact that land taxes are meagre in India and LTTs provide more revenue to the state governments, LTTs have got relevance in the current Indian scenario. This paper attempts to analyse the impacts of LTTs on the land markets of Kerala, in the background of changes in the tax rates as well as structures. Findings indicate that intervention of new taxes has not distorted the land markets while bringing out the pro-policy seasonal nature as well as the short-term nature of the tax policy shocks on the land markets and revenue generated from it. The paper also highlights the importance of tax waiver scheme on harnessing the revenue potential from land transfers while discussing the distorting nature of LTTs on the land and real estate markets.