The Maharashtra government has reduced the stamp duty on property registrations from 5 per cent to 2 per cent for transactions made between September 1 and December 31. This comes a relief for home buyers. How big would the impact be on your home purchase costs?
A three BHK (bedrooms, hall and a kitchen) apartment in Ville Parle, Mumbai can easily cost you above Rs 3 crore. Similarly, a 3 BHK in Koregaon Park, Pune carries a price tag of around Rs 1.5 crore and a 3 BHK in Jyoti Nagar Aurangabad will require you to fork out Rs 75 lakh. However, besides the cost of a house that a buyer has to pay to the seller, there are other expenses too. These indirect costs can significantly increase the cost of purchase for a buyer. One such cost is stamp duty, which is usually between 4 per cent and 8 per cent in different states across India.
However, a reduction of 3 per cent in stamp duty means a benefit of more or less Rs 9 lakh, Rs 4.5 lakh or Rs 2.25 lakh, respectively, for someone buying an apartment in the above-mentioned locations.
There’s more. The stamp duty will be 3 per cent for property registrations done between January 1 and March 31. This decision came in the wake of the slowdown that the real estate sector is witnessing.
Stakeholders welcome the government move.
“The Stamp Duty is a mandatory expenditure while buying a house; it adds to the overall cost of buying a property. So, any reduction decreases the overall cost of the house. It will boost sentiment, and help ‘fence sitters’ take the ‘buy’ decision,” says Niranjan Hiranandani, President (National) Assocham and National Real Estate Development Council (NAREDCO).
“The other notable benefit of lowering duty is that it increases compliance and, hence, may positively impact the exchequer’s revenue,” says Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and PropTiger.com.
Stamp duty impact
Stamp duty is a state subject. The rate for registering a property varies from state to state. A buyer has to pay stamp duty on the actual transaction value or ready reckoner rate (minimum price of the property, as per the government), whichever is higher.
The buyer’s gender can also play a role in determining how much stamp needs to be paid. For instance, in New Delhi, a woman home buyer has to pay 4 per cent stamp duty, while a male pays 6 per cent. Similarly, in Haryana, a male homebuyer is required to pay 8 per cent stamp duty in urban areas and 6 per cent in rural areas, while a woman has to pay 6 per cent and 4 per cent, respectively.
Reduction in stamp duty rate can bring down the purchasing cost for the home buyer significantly. Payment of stamp duty also qualifies for deduction under section 80C of the Income Tax act 1961, which has an overall limit of Rs 1.5 lakh.