Ending the stamp duty holiday, provided in the aftermath of the COVID-19 crisis and resultant slowdown in real estate, the Maharashtra government has reinstated the pre-COVID-19 stamp duty rates across the State. However, the move has not gone down well with the real estate fraternity that was hoping for the extension of benefits till the year-end. Besides, the unchanged guidance values has also created tension as developers expected some relief via rate cuts.
The Coronavirus pandemic had presented a series of unprecedented challenges before the real estate sector of India. All-time low homebuyer enquiries, halted construction activities and negligible site visits amid a looming threat of infection subdued the real estate demand across cities, with Mumbai being the worst-hit. However, up to three percent stamp duty cut till March 2021 by the Maharashtra government evoked a positive response from potential homebuyers. This can be gauged from the fact that between September 2020 and November 2020, over seven lakh properties were registered in Maharashtra, and about 65 percent of these were sale deed registrations.
Commenting on the Maharashtra government's recent decision, Niranjan Hiranandani, MD, Hiranandani Group and National President- NAREDCO, avers, "The Maharashtra government has been a frontrunner in rolling out revolutionary measures like stamp duty reduction to augment the sluggish real estate market post-COVID-19 crisis. The extension of the benefits would have played a catalytic role in keeping up the sales and property registration momentum across the micro markets and different housing segments in the state. No hike in the ready reckoner rates is good, but the industry had expected a reduction in the guidance values to foster real estate transactions. Hence, NAREDCO requests the State government to kindly reconsider the decision, as it will be a win-win situation for all."
Rates reduction and aftereffects
For the uninitiated, the Maharashtra government had cut the stamp duty rates on all property sale transactions executed and registered between September 2020 and December 2020, by three percent and from January 2021 to March 2021, by two percent.
The usual stamp duty rates are five percent for Mumbai and six percent for the rest of Maharashtra. However, owing to the weak real estate market, the concessions came as a breather, and homebuyers rushed to avail themselves of the opportunity. The volume of registered property transaction between September and November 2020 was over two lakh or around 40 percent more than the property registrations recorded during the corresponding timeframe in 2019.
The year 2021 saw the continuation of the momentum. In January and February 2021, properties worth Rs 10,170 crore and Rs 11,750 crore respectively were sold in Mumbai itself, up by 34 percent from the corresponding period a year ago.
The move benefitted not only the homebuyers but also the exchequer. Between September 2020 and November 2020, the State government netted a total of Rs 5,110 crore through stamp duty charges. Stamp duty is one of the three largest contributors to State revenue.
Requests for extension and industry reactions
Real estate industry advocacy bodies such as the Confederation of Real Estate Developers Association of India (CREDAI) and National Real Estate Development Council (NAREDCO) had urged the Maharashtra government to extend the concessions till 2021-end.
While most real estate developers were hoping for an extension, some developers believe that the extension of the rate cut would have shown the State government in a negative light, and there are several other ways to provide relief to the sector.
On similar lines, Rohit Gera, MD, Gera Developments, said, "The Maharashtra Government had offered a two-tiered scheme to provide relief to home buyers for a fixed period of time. A large number of people availed of this opportunity and saved substantial amounts of money. Extending a time-bound commitment affects the credibility of the Government. It leads to an expectation of all future schemes being extended. The outcome of the scheme though is that the industry, the customers as well as the Government have all been beneficiaries of the scheme. Should the Government want to continue with boosting their revenues and coffers, there are a variety of ways to incentivise home buyers that do not tantamount to extending this scheme."
Nevertheless, a majority of developers from Maharashtra were hoping for an extension. The concessions have aided in the gradual revival of housing demand across the State, and the recent announcement might be detrimental to the recovery cycle.
Reactions from other industry stalwarts-
Ram Naik, Executive Director, The Guardians Real Estate Advisory
"We have witnessed record property registrations in the month of March 2021, with numbers at almost the same levels as that of December 2020. The mid-income housing segment has performed extremely well and apparently contributed the most to the unprecedented numbers. However, going forward we see the market entering a phase where its velocity would be slightly impacted, after two record-breaking quarters thanks to an extremely low transaction and borrowing costs. Post-April the affordable housing segment is bound to outperform all the other counter categories until and unless the travel restrictions are reinforced."
Rohit Poddar, Managing Director, Poddar Housing and Development Ltd
"The stamp duty reduction has spurred the property sales and registrations in Maharashtra to an all-time high, assisting the government in generating more revenue than the actual rates would have yielded. To sustain the momentum, it is essential for the government to extend the stamp duty reduction till March 2022 which in turn would help in generating even more revenue along with de-stressing the real estate sector and bringing the economy back on the growth track."
Pritam Chivukula, Co-Founder and Director, Tridhaatu Realty, Secretary, CREDAI MCHI
"The State government's decision to discontinue the stamp duty benefit will be huge distress for the homebuyers who would have decided to buy their dream home but could not do so because of the severe impact of the pandemic. We had requested the government to extend the stamp duty benefit for at least a year so that more buyers could fulfil their wish of buying their home. We will continue to urge the government to reconsider their decision and extend the stamp duty benefit further in the interest of the homebuyers."
Manju Yagnik, Vice Chairperson, Nahar Group and Sr. VP, NAREDCO, Maharashtra
"The holiday period for stamp duty in Maharashtra has ended on March 31, 2021 We have seen an unprecedented rush among the homebuyers willing to take advantage of the rebate, since its announcement on September 1, 2020. We thank the State government for having provided the rebate to home buyers which proved a huge success and gave an extra impetus to the industry that, in the wake of the first national lockdown, saw plummeting sales. The support extended to the industry with lowered stamp duty had created a positive environment enabling the state's real estate industry to take a lead in the revival of Maharashtra's economy."
Rohit Gupta, CEO, Mantra Properties
"The reduced stamp duty waiver offered by the State government did its job well and acted as a catalyst to kick start the realty sector and thereby the economy. We are thankful to the State government for working on such initiatives though we did expect an extension given the developments currently. It would have been good if there was a phase-wise increase rather than the way it is currently done as the increased stamp duty will cause a slowdown in sales velocity. We are with the government for taking the right steps especially when things were looking gloomy beginning of the year. We now hope for faster implementation of Unified Development Control Regulations (UDCR) clearances."