[ecis2016.org] The move is aimed at helping the civic bodies to generate additional income, in the aftermath of the Coronavirus pandemic that has severely damaged their income-generating capacity
In a move that would significantly increase the cost of purchasing homes from the secondary market across Haryana, the state government has decided to levy an additional 2% duty on the transfer of such properties.
Buyers will have to bear this additional cost, over and above the stamp duty and registration charges. On sale deeds, home buyers in Haryana have to pay stamp duty between 5% and 7%, depending on the area where the property is located. However, the new levy would be charged, on only those transactions where the property is located within the municipal limit of a city.
[ecis2016.org] Stamp duty and registration charges in Harayana
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The developer community, as well as the local broker community in Haryana, have expressed their displeasure over the announcement. While stating that the 2% additional duty on the transfer of immovable properties in Haryana, will raise the cost of home ownership in the state and hit the momentum in the housing market, Mohit Goel, CEO, Omaxe Ltd, says that the decision may help in the creation of better infrastructure, for enhanced livability for the people of the state, with more funds available to the municipal bodies.
According to Lakhan Pal, a Gurgaon-based broker, who is primarily involved in the in secondary market, this announcement could not have come at worse time. “Buyer sentiment in some of the most promising markets in the state, including Gurgaon, has been already at an all-time low, because of the comparatively high expenses that buyers have to bear towards the property registration process. The extra levy would ruin any chances of a near-term recovery in the secondary market,” says Pal.
Pradeep Aggarwal, founder and chairman, Signature Global Group says that “Though the move will increase interest in the primary market, the secondary market is also critical for real estate development. Many people purchase properties as an investment tool. With the extra duty, the cost (of property acquisition) will rise, potentially reducing people’s interest in the secondary market.” The move, hence, is detrimental to the overall health of the sector, maintains Aggarwal, who is also chairman of the industry body Assocham’s National Council on Real Estate.
Brokers are also viewing the government’s move to hike the cost of property purchase in the secondary market, as a tool to boost upcoming projects. “This move could easily be seen as the sign of the state government trying to appease the builder lobby in the state. Since the pandemic made home buyers seek ready properties, to avoid waiting for years before they move to their homes, the resale market in the state has started to show signs of recovery. The new announcement is a sure shot way to direct this buyer interest towards new projects,” say Rohit Dahia, owner of Bhiwadi-based Dahia Propeties.
Real estate developer concede the point, too. While terming the decision a ‘shocker’, Akshay Taneja, MD, TDI Infratech, says the move would hurt sales growth.
Unlike some states, which have announced measures to lower the cost of property acquisition through reductions in stamp duty (Maharashtra, Karnataka and Madhya Pradesh) or circle rates (Delhi), Haryana has paid no attention to the various suggestion by the central government and industry bodies to lower stamp duty on property purchases.
The reluctance of the state to do so, gains significance in light of the fact that Gurgaon, the top-performing real estate market in this state, has been among the worst-hit markets, because of the multi-year slowdown that was further aggravated by the Coronavirus-introduced economic slump. Average rates of properties in in key markets of Haryana are also higher, when compared to its peers in neighbouring Uttar Pradesh.
“Haryana should take inspiration from the decisions made by other states, such as Karnataka and Maharashtra, which are easing the pressure on buyers to ensure the sector’s growth. The sector is already facing multiple problems and expecting favorable policies. With the latest imposition of additional taxes, Haryana’s markets would crash due to the additional financial burden being placed on buyers,” says Taneja.
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