Mumbai stamp duty and property registration charges

[ecis2016.org] The stamp duty collections in the month of June stood at Rs 420 crore as compared to Rs 268 crore in May and Rs 514 crore in April 2021.

Homebuyers have to pay stamp duty and registration charges in Mumbai at the time of property registration. Even though Maharashtra had temporarily reduced the stamp duty rates in view of the Coronavirus pandemic in 2020, it has reinstated the old stamp duty rates, since March 31, 2021.

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Mumbai stamp duty 

As a percentage of the property’s value

Registration charges in Mumbai

Property registration charges in Mumbai is 1% of the property value for properties priced below Rs 30 lakh. The property registration charge is capped at Rs 30,000 for properties priced above Rs 30 lakhs.

Mumbai stamp duty: 1% concession for women buyers

The Maharashtra government, in its budget for 2021-22, announced a concession of 1% over the prevailing stamp duty rate on property transactions, if the transfer of house property or registration of sale deed, is done in the name of women. The announcement was made by deputy chief minister Ajit Pawar, on March 8, 2021. Consequently, women buyers will now pay only 2% of the property value as the stamp duty.

For details on stamp duty calculation read all about Stamp duty on immovable property in Maharashtra

Maharashtra changes stamp duty rates on loan deals

December 10, 2020: In a move that might slightly increase the cost of property registration in the state, the Maharashtra government has increased the stamp duty on registration of various banking agreements related to property sale and purchase, after a cabinet meeting held on December 9, 2020.

The decision will result in the stamp duty increasing from 0.2% to 0.3% of the agreement value on registration of documents, such as title deed, equitable mortgage, hypothecation submitted for the loans, etc. This effectively means that a home loan borrower will have to pay Rs 9,000 to register the loan document, if he is applying for a home loan of Rs 30 lakhs. On the other hand, the stamp duty on home loans where the buyer has yet to get possession has been reduced to 0.3% from the existing rate of 0.5%.

It is pertinent to mention here that when the sale deed is registered with the sub-registrar, the bank that lends the fund to the buyer for the purchase is given the original documents to keep as security, till the loan is fully repaid. To formalise this arrangement, a memorandum of deposit of title deed (MODT) is executed. Under the state laws, stamp duty and a registration charges are levied on this document, which must be registered.

Stamp duty is the state government-determined levy that buyers have to pay, as the legal cost of asset acquisition. The registration charges, on the other hand, are paid for the paper work that government agencies have to carry out, in order to formalise the ownership transfer in case of an immovable asset.

Charges on registration of home loan documents vary from state to state.

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Online registration of documents and online filing of notices will attract a stamp duty charge of Rs 15,000 now. The aim of the exercise was to bring uniformity and ensure people comply with the guidelines, the state revenue ministry said.

Recall here that Maharashtra has earlier reduced the stamp duty on property purchases with a view to boost consumer sentiment in the backdrop of the Coronavirus pandemic that resulted in property registrations in the state hitting record low during the lockdown period.

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With the reduction that came into effect in August 2020, the state brought down the stamp duty on property registrations from 5% to 2% till December 31, 2020. After this period, buyers will pay 3% as the stamp duty on property registrations between January 1 and March 31, 2021. This reduction is available to buyers only for a limited period.

The reduction is stamp duty has been a key incentive for property investments, with 78% respondents in a consumer sentiment survey by ecis2016.org, saying they want to buy a property in the next one year.

To further encourage the builder community, the Maharashtra government recently reduced the construction premium by 50%, offering a major respite to developers. According to Dhiraj Bora, head-Marcomm, Paramount Group, the recent reduction in real estate premiums and stamp duty for Maharashtra has brought a windfall of sales for the region.

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After stamp duty cut, Maharashtra hikes ready reckoner rates by an average of 1.74%

Days after announcing a 3% temporary reduction in stamp duty charges, the Maharashtra government has announced a hike in ready reckoner rates

September 14, 2020: Days after it announced a significant reduction in stamp duty, with an aim to boost buyer sentiment in the state, the Maharashtra government on September 11, 2020, announced a hike in the ready reckoner (RR) rates by an average 1.74%. Although marginal, the hike in the RR rates may undo the good done by the stamp duty reduction, industry experts say.

The hike in RR rates — a government-determined value below which a property cannot be registered in a particular locality — would be effective from September 12, 2020, exactly 11 days after the new and reduced stamp duty charges were implemented.  Stamp duty on property transaction is calculated, using the RR rates, also known as circle rates, guidance value or collector rates. As cities are vast and the value of one area may be quite different from the value of another, the circle rates vary from locality to locality.

The developer community —  which has been reeling under the combined effect of a prolonged slowdown, which has been aggravated by the Ccoronavirus pandemic and a severe liquidity crunch — has criticised the state government’s move. “It is surprising that in a scenario where everybody was suggesting a price reduction, be it (HDFC chairman) Deepak Parekh, (road and transport minister) Nitin Gadkari or (commerce minister) Piyush Goyal, the state government has instead opted to enhance the RR value,” says Niranjan Hiranandani, president (National) NAREDCO and ASSOCHAM. “Income tax provisions mean that a developer cannot sell at a price point lower than the RR rate, as it translates into taxation burden for both, the buyer and the seller. In this situation, the expectation was that the state government would reduce the value. Instead, it has chosen to increase the same,” Hiranandani added.

According to Ram Naik, executive director, The Guardians Real Estate Advisory, the state government’s move would send mixed signals among the buyers in Maharashtra. “While on one hand the government is indicating to home buyers that they want them to buy homes, by slashing the stamp duty, it is marginally increasing the ready reckoner rates on the other hand,” says Naik. “This increase, to a certain extent, is going to nullify the gains of the reduced stamp duty for the recently-motivated customer. This increase is also going to force developers to pass on the additional burden of increased premium costs that are linked to the ready reckoner prices, onto the customers. All in all, we could have waited for a better day for such announcements,” he adds.

Others, on the other hand, view the state move as more of a balancing act.

“The government has made a marginal upward revision in locations, where the rates were low and reduced the rates where they were high which has made it more balanced. This is a welcome move in favour of the customers,” said Rajan Bandelkar, president, NAREDCO west and convener, Housingforall.com.

According to Anuj Khetan, director, Vijay Khetan Group, the government has only rationalised the rates.  “The rates have been slashed in few areas, whereas they have been hiked in some other areas. Therefore, it is not a direct increase in the rates,” says Khetan. “Nonetheless, it is not the right time to do this exercise, when the industry’s balance sheet is under severe stress and the country is reeling under the horrific COVID-19 pandemic,” he adds.

Impact on pricing in key cities

 While the RR rates have been slashed by a marginal 0.6% in Mumbai, the average hike is quite steep in another expensive real estate market, Pune, where rates are now costlier by around 3.91%. “We have parameters to assess transactions and we have seen the maximum transactions in Pune district. Therefore, there has been a rise in the rates here,” inspector-general of registration and stamps (IGR), Omprakash Deshmukh said.

In Raigad and Nandurbar, too, the RR rates are now 3% higher. In Navi Mumbai, the RR rates have been increased by an average of 0.99% while the average hike in Thane has been of 0.44%. The average hike in RR rates in rural areas of Maharashtra was 2.81%.  The average hike in RR rates in areas falling in influential zones of Maharashtra was 1.89%. Rates have been increased by an average of 1.02% in areas falling under the corporations, while the hike has been of 1.29% in areas falling under municipal councils.

Stamp duty reduction in Maharashtra

With stamp duty collection touching a historic low, amid the Coronavirus-induced lockdowns, the Maharashtra government on August 26, 2020, decided to temporarily reduce the stamp duty on property purchase in two slabs by up to 3%.

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From September 1, 2020, to December 31, 2020, it decided to charge only 2% as stamp duty on property registrations as against the earlier 5%. From January 1, 2021 to March 31, 2021, the government announced a reduction of only 2%, effectively bring the stamp duty on property registrations to 3% for the three-month period.

[ecis2016.org] Maharashtra Stamp Act: An overview on stamp duty on immovable property

This was in fact the second reduction in stamp duty charges by the state in 2020.  The step was prompted by a record low property registrations that caused severe damage to the state’s coffers.

Stamp duty is that percentage of the property value, which buyers have to pay to the state government to get the properties registered in their names. Additionally, 1% of the property value has to be paid as the registration charge. This significantly increases the total cost of the purchase and often acts as a deterrent for buyers in Mumbai and Pune, where the cost of properties are already high and buyers may not be a position to arrange for the extra costs.

The developer community, which has been demanding that the state reduce the stamp duty and rationalize RR rates, as the cost of buying property in key cities, especially Mumbai, is quite high, had then welcomed the move.

“We thank the government for acknowledging the slowdown in the overall economy and reducing the stamp duty rates, to stir up demand for homes. This will immensely benefit home buyers, as well as boost the real estate sector,” said Shailesh Puranik, MD, Puranik Builders.

“This is a fantastic move. Kudos to the Maharashtra government! It will certainly boost sales, as all those sitting on the fence will take the plunge. What is commendable is that they also put a timeline to it, which encourages buyers to buy sooner rather than later,” added Ram Raheja, director, S Raheja Realty.

With an aim to boost sales in the state earlier, especially in prime residential markets such as Mumbai, Pune and Nashik, the Maharashtra government, while presenting the annual budget in March 2020, lowered the stamp duty for these cities from 6% to 5% for two years.

However, before the reduction could make an impact, the central government announced a nationwide lockdown on March 24, 2020, that remained in force till May 30, 2020. During this period, property registration operations were partly suspended in the major markets of the state, severely impacting revenue.

Housing sales in Mumbai, for instance fell, 81% in April-June 2020, year-on-year(y-o-y), shows ecis2016.org data. Mumbai developers sold a total of 4,559 units between April and June 2020 as against 23,969 units in January-March, 2020 and 29,635 homes in Q2 2019.

What makes matters worse is that Mumbai also has the highest inventory stock, as compared to other leading residential markets in India. After seeing an annual reduction of 14% in its unsold stock, India’s financial capital currently has an inventory consisting of 2,76,492 units. At 37%, Mumbai is the highest contributor to the national inventory stock level, which stood at 7,38,335 units, as on June 30, 2020. At the current sales velocity, builders in this market would take approximately 40 months to sell off this stock.

In the Pune market, builders sold a total of 4,908 units during April-June 2020, as compared to 18,580 units in the same period last year. Pune also has an unsold inventory of 1,35,124 units, second only to Mumbai. The inventory overhang in Pune is, however, lesser at 30 months.

Inventory overhang is the time sellers would take to offload the unsold stock in a market, based on the current sales velocity.

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