To boost the stagnant real estate market hit by COVID-19, the Maharashtra government on August 26 decided to temporarily reduce stamp duty on housing units from 5 percent to 2 percent until December 31, 2020, sources said.
Stamp duty from Jan 1, 2021, until March 31, 2021, will be 3 percent, they said. The decision was taken at the state cabinet meeting on August 26.
Real estate developers had been asking for a reduction in stamp duty following the lockdown to encourage homebuyers to purchase properties during the pandemic.
"The move will benefit the customer and foster demand creation along with giving a stimulus to the allied industries coupled with employment generation. Whenever there has been a reduction in the stamp duty in the past, it has only lead to an increase in revenue in the government treasury, said Jaxay Shah, Chairman, CREDAI National.
“This is a proactive measure taken by the government and was most needed. It will provide buyers an incentive to buy homes, give them the option to take a decision to buy,” Satish Magar, national president of the Confederation of Real Estate Developers' Associations of India told Moneycontrol.
“Maharashtra Government’s decision to reduce the stamp duty from 5% to 2% till December 31 augurs well for the revival of MMR realty and is a much-needed boost to the ailing sector amid the pandemic. The reduced cost of the stamp duty is bound to encourage first-time homebuyers, fence-sitters as well as resale flat buyers to invest in real estate,” said Nayan Shah, president, Credai-MCHI.
“Coupled with the festive season, we expect demand to pick up significantly which will provide a huge respite not only to home buyers but also to developers who have been suffering amid low demand and limited cash flow availability due to Covid-19,” he said.
On August 15 state revenue minister Balasaheb Thorat hinted at a 2 to 3 percent reduction in stamp duty on property registrations in the state was in the anvil.
Also speaking on the matter, Niranjan Hiranandani, National President, Naredco said, "This will certainly stimulate the housing demand and help in converting inquiries into the sales closures. The fiscal advantage should nudge fence-sitters to convert into the actual home buyers with rippling effect on economic growth." adding that With many other favorable market conditions, this announcement shall rekindle ailing real-estate sector and see volumes in transactions. "If the central government can slash GST rates in an upcoming council meeting would act as a shot in the arm".
In Maharashtra, stamp duty charges are 5 percent in key cities like Mumbai, Pune, Nagpur and Nashik and 6 percent in others. A 2-3 percent reduction in rates will result in significant savings for home buyers.
“Apart from the obvious homebuyer benefits, the government can generate badly-needed revenue via increased registrations after the most severe downturn in recent history. Affordable and mid-segment properties, which are in maximum demand, would see the most traction from such a move,” said Anuj Puri, chairman – ANAROCK Property Consultants.
“To ease inventory pile-up and cost overruns, many players have already topped off discounts with added incentives such as booking amount refunds, statutory fees waivers, cashback schemes, easy payment structuring, and assorted freebies. A stamp duty rate cut could push sales into the green during the festive season,” he added.
The Maharashtra government on March 6 had announced that it is reducing stamp duty on properties by 1% for Mumbai, MMRDA Region and Pune for a period of two years.Stamp duty rates in other major states largely hover anywhere between 5-8 percent, but they are lower in some states if property registration is executed in the name of a woman. Delhi, Uttar Pradesh, Rajasthan, Punjab, and Haryana offer relaxation in stamp duty for women buyers. The exemption on stamp duty ranges from 1-2 percent in different states.