To revive demand in the realty sector, the Maharashtra government last week reduced the stamp duty on property registration by 3% from 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 experts, given the fact that many developers have rolled out or planning to roll out festive discounts, the move is likely to incentivise some of the fence-sitters to buy houses. “The reduction is technically like an instant flat discount on the cost of the property. A 2-3% 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 saving of ₹1.5 lakh, while for a property worth ₹1 crore, the savings will be around ₹3 lakh.
Given the fact that interest rates are at almost a decade low, reduction in stamp duty will further bring down the cost for homebuyers.
“Globally, governments are coming out with incentives to revive the demand in the sector. Australia announced a house subsidy of $25,000. 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, a tech-led real estate brokerage platform.
However, Pankaj Kapoor, managing director, Liases Foras, a Mumbai-based real estate research firm, has a different view. “The property registration in Mumbai Metropolitan Region (MMR) and Pune has shrunk around 30% of their pre-covid-19 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.