In an attempt to boost the stagnant real estate market, the Maharashtra government on Wednesday announced its decision to reduce stamp duty on flats from 5 percent to 2 percent till December 31 and to 3 percent between January 1 and March 31.
The reduction in stamp duty is estimated to save a significant amount of money for homebuyers as well as provide support to the demand in the sector. Along with this, the reduced borrowing cost, lower transaction cost, and developers offering lucrative prices create a great opportunity for serious consumers.
Currently, Maharashtra charges stamp duty of 5 percent in cities like Mumbai, Pune, Nagpur, and Nashik. In other cities, the rate is 6 percent.
The affordable and mid-segment properties, which are in maximum demand, will see the most traction from such this move.
This stamp duty rate cut can push sales further into the green during the festive season, said Anuj Puri, Chairman – ANAROCK Property Consultants.
The saving calculation
According to ANAROCK estimates, a property measuring 500 sq. ft. in a locality in Mumbai can cost as much Rs 14,100/sq. ft. as a basic price. Parking charges can run up to Rs 2.80 lakh, and floor rise charge to Rs 45/sq. ft. (for a property on the 7th floor, the floor rise premium will be Rs 315 per sq. ft. (45*7=315). The total base price will thus be Rs 14,415/sq. ft.
Thus, the total saleable value will be (500*14,415) Rs 72,07,500 (basic cost) + 2,80,000 (parking charges) = Rs 74,87,500.
Further, registration charges of a percent and stamp duty of 5 percent will make the total cost of the property at Rs 79,36,750.
After the reduction of stamp duty charges by 3 percent to a new rate of 2 percent, a buyer immediately saves Rs 2,24,625. With a 2 percent reduction, the saving is nearly Rs 1,49,750.
Such amounts matter in affordable and mid-segment properties.
Understanding stamp duty: A comparison
The stamp duty rate, payable on the sale agreement, is fixed by the respective state governments and therefore varies.
Stamp duty charges in Karnataka are 5 percent for properties costing more than Rs 35 lakh, 3 percent for properties priced between Rs 21 lakh to Rs 35 lakh and 2 percent for properties up to Rs 20 lakh.
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, UP, 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, according to ANAROCK report.
Source | ANAROCK Property Consultants
Real estate developers feel that this is the best time for a homebuyer to purchase their dream home amid the prevailing situation.
"My advice to all the homebuyers is they should not wait any longer to buy their dream home. It is a convenient time considering that stamp duty has been reduced, also, property prices and bank loan rates are at a low. Therefore, it is a win-win situation for both developers and homebuyers," said Rajan Bandelkar, President, NAREDCO West & Convener, Housingforall.com.
JLL CEO & Country Head (India) Ramesh Nair said the move will augur well for prospective homebuyers as it is expected to result in direct financial savings for them.
"Though temporary in nature, this is a strong inoculation into the dampened market sentiment and will help in reviving sales. While economic growth is expected to be under pressure in the short term, we definitely see positive synergies for home buyers," Nair added.
Developers also believed that if the central government could slash GST rates in an upcoming council meeting, it would act as a shot in the arm.
First Published: IST