Property to cost less after Maharashtra cuts stamp duty

Mumbai: In an unprecedented move to boost the stagnant real estate market, Maharashtra cabinet has decided to cut the stamp duty on flats for seven months. The stamp duty in Maharashtra will come down from 5% to just 2% from September 1.

To trigger immediate transactions, the government has also introduced a sunset clause that this 2% stamp duty will be applicable on real estate transactions till December 31. The stamp duty in the state will be 3% from January 1 to March 31, 2021. So, people who are buying till December will get a significant benefit due to the reduced stamp duty charges. First time homebuyers, especially fence-sitters, are now expected to take their buying decisions after this landmark decision by the Maharashtra state government.

In July this year, the State Revenue Minister Balasaheb Thorat hinted at the state government's plan to reduce stamp duty on property registrations to boost transactions.

Dr Niranjan Hiranandani, National President, National Real Estate Development Council (NAREDCO), says, "We have been representing the issue to the state governments and other states will also like to emulate the step taken by the Maharashtra government. The government and bureaucracy have understood the issue. The reduction in stamp duty will not only lead to more revenue for the state government but also help in employment generation and tax collections. It will have a multiplier effect as builders will buy materials and GST collection will also go up."

Developers bodies like NAREDCO and CREDAI have been demanding stamp duty reduction since the lockdown to push property sales. The step is likely to push fence-sitting buyers to make their purchase decision now. The real estate industry felt that the government has taken initiatives to boost the supply but reduction in stamp duty will boost demand and augur well with all the decisions taken in the past few months to benefit homebuyers.

Nayan Shah, President, Credai MCHI, explains, "The State Chief Minister Uddhav Thackeray had appointed a cabinet committee to revive the economy under Vijay Kelkar and banker Deepak Parekh, who was given real estate. The suggestion was given by him to kickstart the demand. It is the fence-sitters who will now take their buying decisions due to the sunset clause the government has introduced while reducing the stamp duty. A new buyer is at the top of the real estate pyramid and this decision will encourage them to buy now."

Will this decision impact the state government's revenue? In the past, it has been seen that any decision to reduce taxes has given a rise to demand and therefore, more transactions lead to an increased demand in a stagnant market.

"Revenue through stamp duty was low due to the lockdown but now it will increase and benefit the government. The sunset clause is wonderful. People will have to be quick to get this benefit. There will be an urgency to close the transaction. We have already seen comebacks in terms of enquiries. Conversions are good now and serious buyers are out in the market. Conversions will be much better post this decision," adds Virendra Joshi, VP-Research, ANAROCK.

Buyers have to pay 5% stamp duty charges in cities like Mumbai, Pune, Nagpur and Nashik and 6% in other cities. A 2-3% reduction will lead to significant savings for property buyers. Will other states follow Maharashtra? This will be seen in months to come.

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