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Is stamp duty cut by Maharashtra govt enough to revive real estate demand?

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Is stamp duty cut by Maharashtra govt enough to revive real estate demand? 2

In order to revive demand in the real estate sector, the Maharashtra government has reduced the stamp duty on property registration by 3% for the period 1 September to 31 December 2020, and by 2% from January 2021 to March 2021. Earlier, stamp duty charges were 5% in key cities such as Mumbai, Pune, Nagpur and Nashik, while 6% in others.

According to the experts, it is a good move, and given the fact that many developers have rolled out or planning festive discounts, it may incentivise some of the fence-sitters to buy houses.

“The stamp duty reduction is technically like an instant flat discount on the cost of the property. A 2-3% price reduction is significant, if we consider the usual ticket size of a property purchase in a hyper-expensive city such as Mumbai,” said Anuj Puri, chairman, Anarock Property Consultants.

Stamp duty is a state levy paid to registrar. It is a fixed percentage levy and is charged on the transaction value or circle rate (minimum price of a property as per government), whichever is higher.

So, for a person buying a house worth 50 lakh in Mumbai, a 3% reduction in stamp duty will result in a savings of 1.5 lakh while for a property purchase worth 1 crore, the savings will be equivalent to 3 lakh.

Given the fact that interest rates are at almost a decade low, reduction in stamp duty will bring down the cost further for homebuyers.

“ Globally, governments are coming out with such incentives to revive the demand in the sector. Australian government announced a house subsidy of $25,000 to homebuyers, similarly, the UK announced an eight-month stamp duty waiver. Therefore, the decision to reduce stamp duty by Maharashtra government is a move in the right direction.” said Tanuj Shori, founder, SquareYards.

However, Pankaj Kapoor, managing director, Liases Foras believes more is needed to bring back the demand in the sector.

“The property registration in Mumbai Metropoliton Region (MMR) and Pune has shrunk around 30% of their pre-covid levels. The government needed to bring in certain incentives to revive the demand. But stamp duty reduction alone may not be enough given the grim situation around jobs and increments. Maybe, a higher tax exemption against the interest payment coupled with discounts from developers may attract buyers,” said Kapoor.

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