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Mumbai real estate fraternity reacts to the proposed hike in stamp duty

With the state government proposing a hike, both residential and non-residential purchasers would have to pay a five per cent stamp duty on the market value of the property or an additional Rs 17,400 per transaction.

The government has deleted Article 25 (d) of the Bombay Stamp Act, 1958, which was essentially for residential premises. With this, residential and non-residential transactions have been brought at par. Earlier, the stamp duty in Mumbai was charged at Rs 7,600 but it has now increased to Rs 25,000 per transaction or a 3.48 per cent extra for transactions up to Rs 5 lakh.

On average, around 2,00,000 such transactions take place annually in Mumbai alone; this translates that the government would get an extra Rs 350 crore.

Realty experts, however, observe that the move may not have an immediate impact and would not turn a sure-shot homebuyer into a fence-sitter . Says Subhankar Mitra, Head – Strategic Consulting (West) Jones Lang LaSalle India: “On an immediate basis, there would not be any significant change in demand . However, more and more tenants in cities like Mumbai and Pune would begin showing a preference for owned rather than leased properties, as this would make more financial sense. This dynamic would be more evident in Mumbai, as this city sees a higher incidence of property leasing on the account of the high cost of ownership. Less expensive cities like Pune would show a lower and slower impact.”

Similarly, developers point out that though it is an amendment that should not have been ideally announced at this stage when homebuyers are waiting in the wings, the amendment increases the cost by not a very huge amount, though. Shailesh Sanghvi, Director, Sanghvi Group of Companies, says: “The move will certainly make it difficult for homebuyers , since this will be an addition to the existing VAT and several other taxes incurred. With such polices/ laws amended from time to time, decision-making becomes a challenge leaving the homebuyer in a pool of complication . Ideally, this amendment should have been announced once and for all in January along with the Ready Reckoner.”

Similarly, Manoj John, Vice-President , Corporate Planning & Strategy at RNA Corp, points out that the proposed hike is not going to affect the sentiment of an urban homebuyer . “Prima facie, it won’t affect a buyer within the city limits, while the realty market beyond in gram panchayats would witness some affect, though” he says. Additionally , Vyomesh Shah, MD, Hubtown Limited, feels that the proposed increase is insignificant and will not make any difference to the market sentiment in general.

Incidentally, the Stamp and Registration department is a major revenue generator for the state government. Last year, the department had collected approximately Rs. 14,000 crore from all over Maharashtra. With the state government announcing an increase in the stamp duty rate by a minimum of 10 and a maximum of 30 per cent, as a result there could be a slowdown in property transactions in the city, points out Manoj Asrani – DGM Marketing, Soham World.

Overall, developers observe that customers should not let this small amendment change their decision of buying a home. On a positive note, with the Reserve Bank of India (RBI) reducing the home loan interest rates, a homebuyer will be able to offset the rise in stamp duty. Ideally, they should make a calculated decision and not let the slight increase impact their decision.

source: economic times

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