ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Housing MarketSubscribe to Housing Market

Determinants and Efficiency of Stamp Duty Revenue Collection

The determinants of stamp duty revenue collection (income, tax rate) in West Bengal are studied using a unique panel data set of the state’s 19 districts from 2002–03 to 2010–11. The role of efficiency-improving conditions imposed on stamp duty revenue collection under the Jawaharlal Nehru National Urban Renewal Mission is studied. A Laffer Curve relation is found for stamp duty revenue collection. Though revenue collection fell due to the rate cut, there was an efficiency gain because avoidance in the housing market dropped, valuation software was implemented, and the circulation of fake stamp papers was prevented.

Mortgage Loans, Risky Lending, and Crisis

The link between the loan market and the housing market that works through mortgage loans is critically examined. Repayment of such mortgage loans depends on the future earning potential of the borrowers, which in turn depends on the overall state of the macroeconomy. Under buoyant macroeconomic conditions, all borrowers pay back their loans and both the loan market and the housing market function well. However, a temporary income shock in the economy, which undermines the repayment ability of the borrowers, may result in imprudent lending by banks thereby leading to a crisis. This calls for strict monitoring of mortgage loans by regulatory authorities.

Delinking Housing Cycles, Banking Crises, and Recession

The nexus of housing boom-busts, banking crises, and economic cycles is not unique to the last crisis and has been increasingly present in each of the major banking crises since the break-up of Bretton Woods in the early 1970s. Housing is a politically charged issue. A safer housing market, via planned fiscal intervention to steady supply, would do more to make the financial system safer than all of the other recent initiatives put together. Cheaper finance without cheaper homes only deepens housing inequality.
Back to Top