More States May Follow Suite As Maharashtra Slashes Stamp Duty Rates
In order to push the sales of ready-to-home residential units, the Maharashtra government has decided to reduce Stamp Duty on housing units—from 5% to 2%. A decision to this effect was taken at the State Cabinet meeting help on August 26. The reduced Stamp Duty rates of 2 per cent will be valid till December 31, 2020. Stamp duty rates from January 1, 2021, until March 31, 2021, will be 3 per cent.
The stamp duty rate, payable on the sale agreement, is fixed by the respective state governments and therefore varies. In Maharashtra, stamp duty charges are 5% in key cities like Mumbai, Pune, Nagpur and Nashik, and 6% in others. A 2-3% reduction in rates will result in significant savings for homebuyers.
Real estate developers have long been demanding a reduction in Stamp Duty rates. Post Covid-19 pandemic and the subsequent lockdown, the demand gained strength. Some more states are expected to follow suite, particularly some of the southern states, sources said.
The realty industry and those connected to the business are elated. "The phased reduction in the stamp duty rates from the present 5% in Mumbai and Pune to 2% (until December 2020) and 3% (January - March 2021) is a much-awaited measure from the Government of Maharashtra as the residential real estate markets in these top two cities are reeling under pressure," said Ramesh Nair, CEO & Country Head (India), JLL. "We believe that the residential market is unlikely to offer this palette anytime soon - rationalised pricing, lowest home loan interest rates, extension of credit linked subsidy scheme and developers doling out lucrative schemes and now this is topped with lower stamp duty rates," Nair said.
Pune-based Rohit Gera, Managing Director, Gera Developments said: "The proactive move by the government of Maharashtra is most welcome. This will help the struggling real estate sector tremendously. The 2 tiered reduction will help incentivise home buyers to purchase sooner rather than later''.
Sharad Mittal, CEO, Motilal Oswal Real Estate Fund said: “This will provide a thrust in demand for new homes as customers garner more confidence in the sector.”
Rajan Bandelkar, President, NAREDCO West & Convener, Housingforall.com hailed it as 'a welcome decision' favouring the homebuyers. "My advice to all the homebuyers is they should not wait any longer to buy their dream home. It is a convenient time considering that stamp duty has been reduced, also, property prices and bank loan rates are at a low. Therefore, it is a win-win situation for both developers and homebuyers," Bandelkar said.
Rahul Grover, CEO, Sai Estate Consultants also termed the reduction in stamp duty as a welcome move that will provide 'a temporary reprieve'. "The key still remains macroeconomic factors and unless the lockdown is completely removed which the State are hesitating to do, the long term recovery cycle will continue to remain subdued. There is a limit to which technology and interface can make up for genuine interaction and confidence in the economy," Grover said.
"Such measures are not new. In previous unprecedented times of extreme market stress – such as post structural reforms like DeMo, RERA etc. - some state governments gave concessions to boost their sluggish real estate markets. For instance, in FY 2017-18, the Haryana government slashed circle rates by 3-8% (which are usually revised upwards every year) to push housing sales while Maharashtra kept their ready reckoner rates unchanged, instead of revising them upward, the same year to push demand," Anuj Puri, Chairman – ANAROCK Property Consultants had said a day ago.
Impact of Reduced Stamp Duty Rates
Here is a ready reckoner on how the reduction in Stamp Duty rates impact the consumer as explained by an analysis from ANAROCK report.
A property measuring 500 sq. ft. in a locality in Mumbai can cost as much INR 14,100/sq. ft. as a basic price. Parking charges can run up to INR 2.80 lakh, and floor rise charge to INR 45/sq. ft. (for a property on the 7th floor, the floor rise premium will be INR 315 per sq. ft. (45*7=315). The total base price will thus be INR 14,415/sq. ft.
Saleable value = 500 * 14,415 = INR 72,07,500 (basic cost) + 2,80,000 (parking charges) = INR 74,87,500 /-
Registration Charges = 1% of INR 74,87,500 = INR 74,875 /-
Stamp duty = 5% of INR 74,87,500 = INR 3,74,375 /-
Total cost of the property = INR 79,36,750/-
If stamp duty charges are reduced by 2% to a new rate of 3%, a buyer immediately saves Rs 1,49,750 /-. With a 3% reduction, the saving is nearly INR 2,24,625 /-. Such amounts matter in affordable and mid-segment properties.
