Maharashtra government’s decision to slash the stamp duty charges on residential properties in Mumbai Metropolitan Region (MMR) and Pune is most likely to revive the home buying sentiment in the two cities in the ensuing quarters. Consequently, the move is anticipated to give a thrust to housing sales in Pune and Mumbai.

To push housing sales in MMR and Pune, the Maharashtra government has slashed stamp duty charges by one percent on property purchase for the next two years. From April 2020 onwards, a residential real estate buyer in Mumbai would have to pay five percent (including one percent metro cess) for any transaction. Earlier, stamp duty charges in Mumbai were six percent of the property cost.

Reduced stamp duty rates will be applicable on property transactions – sale or transfer in areas falling under –

  • Mumbai Metropolitan Region Development Authority (MMRDA)
  • Pune Municipal Corporation
  • Pimpri-Chinchwad Municipal Corporation
  • Nagpur Municipal Corporation

Stamp duty payment in Pune – Before and after April 2020

Until March 31, 2020

If a person buys a property worth Rs 50 lakh in Pune, he/she is liable to pay seven percent stamp duty, including one percent Local Body Tax (LBT) and one percent Transport Surcharge (Metro Cess).

For instance,

Five percent stamp duty on Rs 50 lakh = Rs 2.5 lakh
One percent LBT = Rs 50,000
One percent Metro Cess = Rs 50,000

Total stamp duty to be paid on a property worth Rs 50 lakh = Rs 3.5 lakh

From April 1, 2020, onwards

Four percent stamp duty on Rs 50 lakh = Rs 2 lakh
One percent LBT = Rs 50,000
One percent Metro Cess = Rs 50,000

Total stamp duty to be paid on a property worth Rs 50 lakh = Rs 3 lakh

Evaluating the above calculation, a homebuyer would be able to save Rs 50,000 on a property worth Rs 50 lakh in Pune. The cut in stamp duty rates across MMR would result in similar savings across Mumbai, Navi Mumbai and Thane. All properties purchased in Nagpur, too, would attract reduced stamp duty charges.

What industry experts have to say?

According to 99acres' Insite, despite a 10 percent dip in prices of new units in certain projects in MMR, homebuyers deferred home buying decision in anticipation of further price correction in the ensuing quarters. MMR has an inventory overhang of over two lakh residential units (as in December 2019). The decision to slash stamp duty rates would encourage more buyers to finalise their deals in the residential market, which would eventually result in a reduction in the unsold housing stock.

Several real estate stalwarts are speculating an increase in residential sales in the coming months, especially in the mid-income segment. However, luxury and ultra-luxury segment is expected to be minimally impacted by the recent amendment. Vikas Jain, Managing Committee Member, CREDAI-MCHI, Raigad, opines that lowering the stamp duty charges by one percent is a positive step taken by the Maharashtra government. The real estate sector is already struggling due to subdued demand and poor sales. Reduction in stamp duty values would benefit homebuyers as their purchasing power will increase.

Nayan Shah, President, CREDAI - Maharashtra Chamber, avers, “Though the reduction is marginal, it is still a welcome decision. It will benefit the middle-class segment in buying properties and even boost sales.”

Besides highlighting its positive impact on the home buying sentiment, Niranjan Hiranandani, President, NAREDCO-National, also states an alternate view on the slashing of the stamp duty rates. “The recent decision by the government would reduce the overall revenue of the Stamps and Registration department by nearly Rs 1,800 crore in a year. The shortfall in State’s revenue should be recovered via alternative avenues,” adds Hiranandani.

To conclude, slashing stamp duty rates on real estate transactions is a positive move from the State government. It would help revive the realty market, especially in the affordable and mid-income price segments.