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The real estate sector in India is a torchbearer for the economy, contributing 6-7 per cent to GDP and is the second-largest employment generator after agriculture. As the fortunes of the sector are linked to nearly 220 allied sectors, any change or impact on it has a multiplier effect. The central and state governments and the Reserve Bank of India (RBI) have been providing relief via various policy measures to boost demand and the business sentiment.
The Maharashtra government reduced the stamp duty by 3 per cent, as an initiative towards direct stimulus for the housing sector. Earlier the stamp duty charges were 5 per cent in Mumbai, Mumbai Metropolitan Region, Pune, Pimpri-Chinchwad and Nagpur, and 6 per cent for the rest of the state.
The recent cut in stamp duty coupled with the 1 per cent reduction announced earlier in the year will help attract investments in the housing sector. If you calculate, the stamp duty rates have declined by more than 66 per cent since the start of the year. It is the second time this year that the state government has taken such a step to provide relief to homebuyers.
The real estate industry could not have asked for more, as this is the most opportune time for the Maharashtra government to have slashed stamp duty rates. We are on the threshold of the festive season and this move by the state government is a win-win for both developers and homebuyers. As we move forward, with the government opening up more and more sectors for regular business activity and business are expected to pick up traction.
A home is where a person feels secure and safe. A recent survey conducted in the backdrop of the COVID-19 pandemic reveals that more people are preferring to buy a home rather than renting it out as the odds favour the former and the preference is shifting more towards ready to move-in homes. The outcome of the study can be witnessed by the registration data that has seen a steady rise for the past few months.
Ready to move-in homes will be in focus now as homebuyers will have to pay only 2 per cent stamp duty and it does not attract any GST like in the case of under-construction housing units.
Besides, the Maharashtra government’s latest move complements the central government's push for housing by announcing a one-year extension for Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY) and the central bank cutting lending rates to a two-decade low.
The stamp duty cut is time-bound, with the 2 per cent stamp duty cut effective from September 1 till December 31, and 3 per cent from January 1, till March 31, 2021. This well-planned move will incentivise the fence-sitters to buy homes. The subsequent rise in sales is expected to make up for the revenue loss the state government may incur due to the hefty cut in stamp duty. The combined measures announced by the Central Government by extending the CLSS scheme by another year and other liquidity boosting measures are expected to provide easy access to funding.
Moreover, the announcement of Affordable Rental Housing Complexes (ARHCs) and the subsequent granting of the infrastructure status to them, the Maharashtra government’s decision on cutting stamp duty by 4 per cent this year and RBI reducing repo rate by 110 BPS to reduce it to 4 per cent have again made real estate a good investment option!
Manju Yagnik is Vice-Chairperson Nahar Group and Vice President National Real Estate Development Council (NAREDCO), Maharashtra