In separate letters to Chief Minister Udhav Thackeray, Finance Minister and Deputy Chief Minister Ajit Pawar and Revenue Minister Balasaheb Thorat, developers’ body CREDAI MCHI has requested the government to reintroduce the waiver by reducing stamp duty charges to 2% in Mumbai given the impact of second wave of Covid19 pandemic.
Developers have also suggested that stamp duty in other cities of the state be brought down to 3% from existing 6%.
“The real estate sector in Maharashtra and more specifically in Mumbai, was thriving on the back of the stamp duty rebate announced by the state government in August. CREDAI MCHI had requested for an extension of the reduction beyond March to ensure that the momentum of this industrial and economic revival stays on its tracks. However, in the last couple of months, we’ve seen a steep downward trend in enquiries and sales, hampering not just the steady progress made by real estate but also the nearly 260 ancillary industries, which come into play due to industry’s strong multiplier effect,” said Deepak Goradia, President, CREDAI MCHI.
According to him, it is now imperative that the state government realizes the need for a stamp duty rebate to enhance homebuyer sentiments and also increase its own revenue collections which have taken a massive hit in the month of May.
With an objective of kick-starting the real estate sector and nearly 260 linked industries by encouraging housing sales, the state government had announced a reduction in stamp duty charges to 2% from 5% from September to December-end. Stamp duty was charged at 3% of the agreement value between January and March 31.
The government’s revenues from property registrations during the last seven months of lower stamp duty window until March 2021 were 66% higher than those collected during the preceding 8 months of 2020 until August 2020, indicating that reduction in stamp duty rates had been compensated by a sharp rise in sales velocity, thereby leading to higher revenue generation for the government.
However, following the withdrawal of the stamp duty relief, property registration in the country’s biggest realty market have declined significantly resulting in lower revenue collection for the government despite reinstated higher stamp duty rates.
In May, Mumbai witnessed registration of over 5,360 property deals as against 17,728 in March and 19,581 in December, showed data from Inspector General of Registration (IGR), Maharashtra.
The government’s stamp duty collection in May declined to around Rs 261 crore as against Rs 875 crore in March and Rs 680 crore in December. The combination of registration and respective monthly stamp duty collection clearly shows that lower stamp duty rates had pushed the government’s revenue through higher deal volumes.
The decline in registration had already started in April immediately after the lower stamp duty benefit was withdrawn.
Developers believe the downward trend is set to continue with numerous genuine buyers sitting on the fence due to higher transaction costs, adversely affecting not just the real estate sector and its over 260 ancillary industries but also slowing down the momentum of the state’s economic revival in the post Covid19 era.
Acknowledging the support of the authorities and its decision to reduce the stamp duty in August 2020, the property sector was well on its path of recovery, with record breaking number of transactions and revenue collections for the government up until April, which witnessed a spill over effect owing to transactions from earlier months.
However, the move to not extend the stamp duty rebate beyond March and the outbreak of the second wave has led to extremely subdued homebuyer sentiments as well as decreased collections for the authorities, with both property registrations and stamp duty revenue collections down by 70% in May as compared to March, signifying the need of a cut in stamp duty charges to support the economy.