Maharashtra’s Stamp Duty Reduction May Help Boost Affordable Home Sales

Maharashtra—which houses India’s most expensive real estate market—said on Aug. 26 that stamp duty on property transactions would be reduced in two slabs:

• A 3% reduction between Sept. 1 and Dec. 31, 2020
• A 2% reduction between Jan. 1, 2021, and March 31, 2021.

At present, stamp duty is 5% in key markets like Mumbai, Pune and Nagpur and 6% in other cities.

This will boost sentiment and help ongoing as well as ready-to-move-in inventories, according to Mohit Agrawal, equity research analyst at IIFL. Developers who are into medium to affordable housing will get the maximum benefit, he said, adding government intervention in terms of tax rebates have helped revive the property market around the world.

The Mumbai Metropolitan Region, according to Anarock Research, has nearly 1.72 lakh affordable units under construction as on March of which unsold affordable stock stands at 68,970 units.

“In Maharashtra, we believe that Pune market and peripheries of MMR are set to see more impact of this move,” Agrawal said. “Developers like Godrej Properties Ltd., Kolte Patil Developers Ltd., Mahindra Life Spaces and Sunteck Realty Ltd., which have projects in mid-to-affordable segments, will be the key beneficiaries.”

Prices Could Fall By Up To Rs 2.2 Lakh

Here’s how buyers can benefit from the move, according to an illustration by Anarock Consulting.

A property measuring 500 sqft in a locality in Mumbai can cost as much Rs 14,100 per sqft as basic price. Parking charges can run up to Rs 2.80 lakh, and floor rise charge can be up to Rs 45 per sqft.

For a property on the seventh floor, the floor rise premium will be 45*7 = Rs 315 per sqft.

• The total base price will be Rs 14,415 sqft.
• Saleable = 500 * 14,415 = Rs 72.07 lakh (basic cost) + Rs 2.8 lakh (parking charges) = Rs 74.875 lakh.
• Registration charges = 1% of Rs 74.875 lakh = Rs 74,875.
• Stamp duty = 5% of Rs 74.875 lakh = Rs 3.74 lakh.
• Total cost of the property = Rs 79.36 lakh.

A 2-3% reduction in stamp duty leads to savings of Rs 1.49 lakh to Rs 2.24 lakh, Anarock Consulting said. That could make a difference in affordable and mid-sized property segments.

The reduction in stamp duty is a commendable move that will improve affordability, especially for aspiring first-time homebuyers, Arvind Subramanian, managing director and chief executive officer of Mahindra Lifespaces, told BloombergQuint. “It will aid in accelerating purchase decisions, while driving demand in the affordable and mid-premium segments.”

Pankaj Kapoor, founder and managing director of Liases Foras, is not convinced. The move might not help in the sale of premium units where there is still consumer inertia, he said. “That may be due to existing conditions, expectations of price correction and 2-3% might not make much difference in the overall cost of property prices.”

Kapoor said in the mid-to affordable housing segment too, this move alone might not be able to attract consumers. “For developers to attract consumers along with stamp duty reduction there needs to be some more things in place such as, developers should cut prices by 10-15%, government should give higher benefit to consumers under income tax return and rationalisation of GST rates.”