The Union government is encouraging states to lower stamp duty on property purchases for all, and consider offering lower stamp duty rates for properties purchased by women, said Finance Minister Nirmala Sitharaman during her Union Budget speech.
"We encourage states that continue to charge high stamp duty to moderate the rates for all, and also consider further lowering duties for properties purchased by women. This reform will be made an essential component of urban development schemes," she said.
The Union government has long flagged high stamp duty rates as the reason for high home prices, relatively low rates of property ownership, as well as the rampant "black money" dealings in the sector. Former prime minister Manmohan Singh also identified stamp duty rates as a major factor for corruption and "cash" dealings in the industry.
While some states have a flat rate of stamp duty, calculated on the value of the property being registered, others have rates working on the slab mechanism, with rates increasing with the value of the property being purchased. Most north-eastern states, and some hilly states, charge relatively high stamp duties, in the range of eight-nine percent, while major housing markets such as Maharashtra charge around six percent.
Some states have concessional stamp duty rates or discounts for women, such as Maharashtra, which in 2021 announced a one percent cut on the stamp duty for properties purchased by women. However, it came with a caveat that the property purchased cannot be sold to a man for 15 years, with a penalty and the 1 percent cut payable if anyone wants to negate the lock-in period. That provision was removed last year.
"Guidance to all states to rationalize stamp duty and to give more benefit for women buyers is a huge welcome step," said Harsh Parikh, partner at corporate law firm Khaitan & Co.
Stamp duty cuts were put in place by multiple states, such as Maharashtra and West Bengal, during the pandemic in order to provide a fillip to the residential housing sector. After struggling for years, Maharashtra's housing market got a major boost in August 2020, when the then-Uddhav Thackeray government announced a two-stage cut to stamp duty rates, which resulted in home sales in cities like Mumbai and Pune moving sharply up.
Responding to the finance minister's statement, Niranjan Hiranandani, chairman of the real estate developer Hiranandani Group said, "Stamp duty and development charge reductions have long been pending demands to optimize development costs, promote affordable housing, and enhance affordability. States like Maharashtra have previously implemented such measures, resulting in stellar demand and increased consumption velocity. Fiscal stimuli, including stamp duty and development premium reductions, significantly aided the industry in reducing unsold inventory, improving developers' financial positions, and initiating new supply cycles."
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