In a bid to push the real estate demand, the government of Maharashtra has proposed a stamp duty reduction. 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.
The move has come reportedly to attract the fence-sitters as developers will start to roll out discounts during the upcoming festive season. In a hyper-expensive city like Mumbai, a reduction of 2-3 percent should be a considerable amount in light of the usual ticket size of any property purchase.
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.
However, a segment which was already in slowdown prior to the pandemic just might not much be affected by the stamp duty cut. Pandemic-ensued income slowdown, amid depleting households’ balance sheets have only intensified the slowdown in the residential real estate in the near term.
“It is highly unlikely that temporary measures such as one-time reduction in stamp duty for a limited period will revive confidence in the real estate markets,” Financial Express quoted a report by Indian Ratings and Research.
To generate real estate demand, consumers do not merely need accumulated wealth but also sustained income to create such assets. Now that India’s GDP growth has taken a downturn and has contracted by 23.9% in the April-June period, which is much worse than economists’ estimates and is worse in more than 40 years, a short-scale measure like stamp duty cut is expected not to have much effect.
In fact, what may actually prove to be useful for the real estate sector is a sustained recovery in GDP.
Anuj Puri, Chairman, ANAROCK Property Consultants, told ET:
“Though the contraction is deep, worse was expected. However, these readings must be viewed in the light of an unparalleled assault on the global economy, from which India is certainly not insulated, by a health disaster the likes of which the world hasn’t seen since the Spanish Flu in 1919. The world bounced back then, and will this time, as well. Indian real estate will continue its gradual recovery as housing demand returns and cities get further out of lockdown mode.”
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