A quick look at another sector shows the positive results of lower transaction costs, unarguably one of the first steps towards efficiency and inclusion. I’m talking about the impact that finance, markets and lower transaction costs, when replicated in the property market, can deliver. As brokerage rates on share transactions fell by 92 per cent, from 2.5 per cent in 1992 to 20 basis points (that’s 0.20 per cent) today, turnover in the cash segment of the Bombay Stock Exchange rose from Rs 45,696 core to Rs 816,074 crore in 2006 (almost an 18-fold jump), the number of trades rose 20 times to over 260 million, and the average trade size rose 8.5 times to Rs 30,911.

This model needs to be urgently cut-pasted on property markets through lowering of stamp duties. Among others, the Delhi government is doing very well on this front. Stamp duties in the city, which had been steady at 8 per cent between financial year (FY) 1981 and FY 2001 jumped 5 percentage points to 13 per cent in FY 2002. In FY 2004, the government brought it back to 8 per cent. The result: between 2003 and 2007, the government’s receipts from stamp duties rose from Rs 382 crore or 6 per cent of total receipts to Rs 850 crore or 8 per cent of total receipts. If the Rs 1,350 crore target (10 per cent of total receipts) for FY 2008 is reached, the state would have seen receipts from stamp duties grow at a compounded rate of almost 30 per cent per annum — almost as fast as corporate India’s net profits.

... contd.