[ecis2016.org] We look at the implications of the Maharashtra government’s move, to levy an additional surcharge of one per cent on stamp duty on immovable property transactions
The Indian real estate sector has become one of the fastest growing markets. However, the sector is battling some extreme challenges that act as roadblocks and restrict the sector from yielding full benefits of the potential growth.
The recent proposal of the Maharashtra government, to levy a surcharge on stamp duty of one per cent, on property transactions, will hurt the sentiments of potential home buyers, which was improving. The state government is adding Section 144 F in the Mumbai Municipal Corporation (Second Amendment) Act, 2018, to levy the additional stamp duty on sale, gift and mortgage of immovable property.
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The move is neither welcome by the buyers nor by the real estate developers. This would dampen the growth of the segment, which appeared to be on the path of recovery. The government aims to generate more revenue through this and will use it to fund the rising infrastructure needs of the city such as metro, monorail, bus rapid transport systems, freeways and sea-links. The bill is expected to be tabled during the winter session of the state legislature, which will begin on November 19, 2018.
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If this move is passed by the government, it will be a big hindrance for buyers, especially millennials, who have limited budget and plan to buy their first dream house. The consumer buying cycle will also become longer, as delays are expected in the decision making by the customers, which would impact the sales velocity of the real estate companies.
Also, the real estate industry, which is suffering from diminishing sales, liquidity crunch and mounting NPAs, will further be burdened with the hike on the existing five per cent, thereby, increasing the cost of real estate deals. Sales of both, affordable and luxury homes, will be unfavourably affected by the additional stamp duty.
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Property rates in the financial capital of the country are already skyrocketing, making it one of the costliest real estate markets in the world. In such a scenario, instead of taking measures to moderate the property prices in the city, this move will further slow the segment down.
We talk about affordable housing but in a scenario where the common man is already saddled with so many taxes such as GST, property tax, stamp duty, development charges, etc., does it make sense to bring in a further hike on the taxes? The government needs to rationalise taxes in the real estate segment, if it wants the sector to flourish in the long run. Increasing taxes will only plague the industry further, making it even worse for the overall economy.
(The writer is first executive, BrickAsset Pvt Ltd, a real estate consulting service company of Viiking Venture Group)
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