In what could bring cheer to the real estate sector, stamp duty cut by the Maharashtra government and discounts offered by developers are encouraging homebuyers to come forward to buy property. This has led to increased sales recovery and registrations in the financial capital so much so that sales registration are at over 90 percent of pre-COVID levels, a study by Propstack, a data analytics firm has said.
According to the state government data, sale registrations stood at 207 in May after registrations reopened post the lockdown. The number increased to 1,839 in June, 2,662 in July, 2,642 in August and 5,597 in September. The September numbers were almost at par with the February sales registrations that stood at 5,927, according to an analysis by Mumbai-based Propstack, a data analytics firm.
"Overall a buyer is getting an average discount of 10-15 percent on a property purchase that includes a stamp duty cut of 3 percent and over 5-10 percent discount by the developer. This is encouraging homebuyers waiting in the wings to come forward and sign on the dotted line," Sandeep Reddy, co-founder at Propstack, told Moneycontrol.
However, had it only been a stamp duty cut and no discounts from builders, the story would have been different, he said.
It’s been over a month since stamp duty rates were brought down by the government but this trend is likely to continue, especially during the festival season, as there is pent-up demand. Also, these numbers could include a mix of both buyers who may have bought property earlier but are registering now and new property purchases and this is a healthy sign, he says.
On August 26, the Maharashtra government decided to temporarily reduce stamp duty on housing units from 5 percent to 2 percent until December 31, 2020, to boost the stagnant real estate market hit by COVID-19. Stamp duty from January 1, 2021, until March 31, 2021, will be 3 percent. Later, the ready reckoner rates were hiked by 1.74 percent.
Read More: Mumbai stamp duty collection down for August as homebuyers wait for stamp duty rate cut
However, the stamp duty cut in August has led to lower stamp duty collection by the exchequer.
If Rs 16 crore was collected in the form of revenue from registrations in May after the registration offices reopened after the lockdown, Rs 153 crore was collected in June, Rs 214 in July and Rs 176 crore in August. The total collections stood at Rs 181 crore in September, a month after stamp duty rate cuts were announced.
Revenue collections stood at Rs 454 crore in January, Rs 438 in February and Rs 305 crore in March, according to the analysis.
Some sales in August may have been registered in September. This time some registrations took place even during Pitru Paksh, which is from September 1 to September 17.
Culturally, the Pitru Paksh period marks a dull phase in terms of real estate transactions. Instances of sale and leasing properties are minimal during this period. The age-old belief among Hindus is that the Pitru Paksh days, devoted to ancestors, are considered inauspicious to buy new things or start a venture.
Sales, however, were at par with pre-COVID levels. The actual value of the property sold and registered in September was at Rs 9,025 crore which was at par with the values in January this year at Rs 9,080 crore.
“The actual property value was almost at pre-COVID level and that is a healthy indicator,” Reddy said.
The average ticket size of an apartment in Mumbai was around Rs 1.5 crore. It was at Rs 1.61 crore in March and Rs 1.61 crore in September, the Propstack analysis said.
Read More: Housing secretary cheers Maharashtra stamp duty cut as 'good step', urges other states to follow suit
The government’s decision to reduce stamp duty was a well-thought-out move to boost demand. Even before this announcement, several developers were absorbing stamp duty and GST on behalf of the buyer.
“The stamp duty reduction and developers absorbing the stamp duty or GST, reduction in mortgage rates - all these are necessary conditions and may not be sufficient to boost demand. The sufficient conditions will happen only when GDP gradually improves over the quarter and job creation picks up,” says Samantak Samantak Das, chief economist and head of research and REIS, India, JLL.
Property agents also told Moneycontrol that several homebuyers who were to register their property documents in August held on to their decision hoping that stamp duty rate cuts would be announced by the government. “Buyers were in a wait-and-watch mode,” they said, adding they were all waiting for the Rs 3 lakh saving on stamp duty which is substantial.
In September, Tata Housing had announced a new scheme with zero stamp duty for customers availing a construction-linked payment plan for projects in Maharashtra. This scheme is valid for projects across the country with units ranging from Rs 25 lakh to Rs 6 crore.
Days after the Maharashtra government decided to temporarily reduce stamp duty on housing units from 5 percent to 2 percent until December 31, 2020, to boost the stagnant real estate market, Naredco, the national body of the real estate sector, has decided to give a zero stamp duty booster to homebuyer. The offer is available from September 3 until October 31, 2020. All the projects are RERA registered.
Naredco Maharashtra members said they would be paying stamp duty from their own funds. "We will take on the burden ourselves and the buyer would have to pay zero stamp duty,” Rajan Bandelkar, president, NAREDCO – West and convener, HousingForAll.com had said.