Maharashtra government approves 50% reduction in realty development premiums

MUMBAI: The government of Maharashtra has approved the proposal to reduce premiums charged by the civic authorities on real estate development by 50% for the next one year until December 31, 2021, as recommended by the Deepak Parekh committee.

The reduction in premium can be availed only by those developers who would absorb homebuyers’ stamp duty burden. ET was first to report on December 25 that the state government is considering this proposal that would help homebuyers, the industry and the exchequer.

The premium will be calculated based on ready reckoner rates of 2019 or 2020, whichever is higher.

The move is expected to support the property sector by reviving stalled projects, avoid delays and rein in speculative price rise.

“This move will go a long way in expediting the project completion and the industry will witness new launches in the market. The industry applauds this booster dose making many projects viable and we shall adhere to the rules laid down in lieu of availing these benefits,” said Niranjan Hiranandani, President of realty developers’ body NAREDCO.

According to him, the reduction in premiums for new launches will help the development at the lesser input cost and over a period of time there is possibility of lower price for new inventories that would come into the market.

In December, the Congress Ministers had objected to the proposal claiming that the party was not informed beforehand about the contours of the bill. The Congress move to block the bill was being seen as a sign to throw its weight in the cabinet after several ministers complained to the party high command that they were not being taken on board while taking decisions.

The decision is expected to impact big cities in the state including Mumbai as on an average, one-third of a project’s cost goes towards over 22 premiums collected in the country’s most expensive realty market. This is significantly higher than in other comparable top cities like Bengaluru where there are 10 premiums and charges, five in Delhi and just three in Hyderabad.

The effective zero stamp duty burden on homebuyers is expected to help the property market maintain the buoyancy it has been witnessing since the last few months following the announcement of reduction in stamp duty charges.

“The premium reduction, coupled with the stamp duty charges which will also be borne by the developers, will lead to reduced cost for homebuyers thereby increasing their purchasing power – further underlining the opportune time for them to buy a house in Mumbai region,” said Deepak Goradia, president, CREDAI-MCHI. “This decision is bound to bolster the state’s economy.”

In August, the state government had announced the reduction in stamp duty on property registrations to 2% for transactions between September 1 and December 31 from 5% earlier. The stamp duty will be 3% for agreements to be registered between January 1 and March end.

Property registrations in Mumbai have continued its record-setting ride in December as homebuyers rush to conclude deals on the back of lowest home loan rates on record, price discounts and reduction in stamp duty charges.

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