Along with other industries, real estate sector has taken a major hit due to the COVID-19 outbreak. To boost property sales, the state cabinet of Maharashtra has decided to cut the stamp duty charges on flats for the next seven months. This decision is expected to help homebuyers as well as developers whose projects have been stuck due to blocked cash flows.
From 1st September to 31st December, the stamp duty charges would be lowered from 5% to 2%. It will be raised slightly to 3% from 1st January to 31st March in 2021. Even if this doesn’t sound like much of a discount, it would help the homebuyers save a substantial amount of money. With the current 5% stamp duty, one has to pay INR 5 lakhs as stamp duty charges for a home worth INR 1 crore. Now they would have to pay only 2%, i.e., INR 2 lakhs as stamp duty.
Even before the pandemic struck, the real estate sector in India was going through hard times. The several tax and other reforms introduced in the last few years had adversely affected the economy and the industry, resulting in a fall in sales and a credit crunch. The problem was further aggravated by the NBFC crisis. Developers facing a shortage of cash due to a stagnant market and lack of investment weren’t able to finish many of their projects. This resulted in a rapidly increasing inventory of unsold properties, a majority of which are located in Mumbai.
The government had started to take up a number of measures to help the real estate sector revive. However, that’s when the COVID-19 pandemic broke out and a lockdown ensued. The realty sector now faced a severe downturn, with a steep drop in sales. To maintain a steady cash flow, many developers were forced to sell their properties at rates lower than the market price. The real estate players then urged the government to reduce stamp duty and other taxes to help reduce the property prices and increase sales. The decision by the Maharashtra government to reduce stamp duty would provide the fence-sitters with an incentive to buy a property now.
An advocate also requested the government to reduce the market price of properties by 30%. This is because the payable income tax on property sales is based on the market value of the property. However, with many of the builders forced to sell the properties at lower prices, they are now having to pay higher tax than what they should have if the current selling price would have been the market price. Other demands of the developers include a reduction in GST, which would considerably boost sales.
Recently, the reduction of stamp duty proved to be an effective way to increase sales and facilitate growth in the economy when it was implemented by the UK government. The decision by the Maharashtra Government has been welcomed widely by various leading real estate developers. It is expected that the affordable mid-segment properties would witness the largest boost as a result of the reduction in stamp duty. The cabinet also decided to cut the stamp duty charges in rural areas down to 1% till 31st December and 2% till 31stMarch.
Such moves by the government are expected to help the ailing real estate sector regrow and revive once again.
Source By The Times Of India