Developers Unhappy As Maharashtra Does Not Extend Stamp Duty Cut
Residential buildings in Cuffe Parade are seen from Marine drive in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Developers Unhappy As Maharashtra Does Not Extend Stamp Duty Cut

Maharashtra's stamp duty cut ended on Wednesday as the state decided not to extend the incentive that helped housing demand recover during the pandemic. While it kept the minimum property value on which taxes are calculated unchanged, developers are still unhappy.

“As the stamp duty concession has expired; regular rates will be applicable from now," Balasaheb Thorat. Maharashtra revenue minister, tweeted. "For women homebuyers, the government has announced 1% reduction in stamp duty which will be applicable from April 1 2021.”

The stamp duty was reduction came in two phases. It was cut by 3 percentage points between Sept. 1 and Dec. 31, 2020; and was 2 percentage points below the usual 5% till March 31. The usual rate is 5% of the property value in Mumbai and 6% in the rest of the state.

The incentive spurred demand for homes. Just between March 1 and 24 this year, according to Knight Frank India, Mumbai saw 12,696 properties being registered at a daily rate of 529 units, nearly 4.3 times higher than 123 units a day in March 2020. Sales peaked to 707 units a day after March 15 as homebuyers rushed to take the benefit before it lapsed.

Developers' lobby Credai-MCHI had urged the government to continue lower registration rates for 12 months. "We are disappointed," said Deepak Goradia, president at Credai-MCHI. “Given the current economic climate, the reduction in stamp duty charges not just galvanized homebuyer sentiment but also enabled the industry to spearhead the state’s economic revival in the post-Covid era as well."

An extension would have sustained sales momentum for the sector that generates employment, he said, adding that the industry will talk to the government to keep the stamp duty lower.

Anand Gupta, chairperson of Housing and RERA committee of Builders Association of India, said the government should review this decision and extend the concession by at least six months.

Niranjan Hiranandani, managing director at Hiranandani Group; and national president at developers' lobby Naredco, said the data clearly reflected an uptick in volume after the stamp duty cut, leading to increased state revenue in the second half of FY21. And it has an multiplier effect it draws on employment and GDP growth, he said.

Goradia, however, said 1 percentage point lower stamp duty for women will help.

Ready-Reckoner Rates Unchanged

Maharashtra kept the ready-reckoner rates (minimum property value to calculate property taxes) unchanged for the financial year 2021-22. “The decision has been taken after seeing that construction sector is reviving against the backdrop of Covid-19 epidemic,” Thorat tweeted.

While unchanged rates are good, the industry expected a reduction to foster real estate transactions, Hiranandani said.

There was no indication that the government would extend the stamp duty cut, Anuj Puri, chairman at Anarock Property Consultants, said. But a reduction in the ready-reckoner rates would have definitely aided the real estate market as it was something that all stakeholders were looking forward to, he said.

"A cut in RR rates would have given more room to developers to bring down the prices," Puri said. "Today, in a few of the micro-markets, the RR rate is almost on par with the market price.”

According to Pankaj Kapoor, founder and managing director of Liases Foras, the government has not acknowledged the benefits the stamp duty rate cut. “This was a big motivation for people to buy homes. There will be a sharp decline in the sales in the coming quarters. The only respite is that they have kept the RR rates unchanged.”

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