The real estate industry is the second largest employer after the agriculture market, and it has gone through many ups and downs in the wake of Covid-19 in 2020. But there are positive signs in the year 2021 and the sector is looking to overcome the enduring turmoil of 2020, with a positive step taken by the government of Maharashtra to revive the real estate sector. To boost the real estate business in Maharashtra, the government cut the stamp duty till 31st March 2021. This proactive measure taken by the government is surely meant to support the real estate market that has been facing a lot of heat from the meltdown caused by the global pandemic. This enhancement will generate a lot of attention in the market and incentivize people at a time when the interest rate for home loans is less.
Why is the home-buying stamp duty reduced?
Owing to the current pandemic, the government and residential real estate developers are making efforts to make home-buying attractive. The government wants to influence the buying decision of potential first-time homebuyers by reducing the cost of owning a home.
Stamp duty is one of the bigger expenses in the home buying process. Now that it has been reduced, albeit temporarily, it will mean significant savings for prospective home buyers. E.g., before this reduction, in Mumbai, it was 5% of the property value. Therefore, on a property worth ₹1 crore, a buyer had to pay a stamp duty of ₹ 5 lakhs.
Understanding the reduction in stamp duty
Let’s assume that a flat measuring 1,000 sq. ft. costs about Rs 15,000 per sq.ft. To this, we have to add parking charges, registration charges, and stamp duty. So, we have:
Base price: Rs 15,000 per sq.ft.
Parking charges: Rs 3 Lakh
Total saleable value: Rs 1,53,00,000 (1,000*15,000+3,00,000= 1,53,00,000)
Registration charges: 1% of Rs 1,53,00,000, which is Rs 1,53,000
Stamp duty: 5% of Rs 1,53,00,000, which is Rs 7,65,000
Now, if the stamp duty is reduced to 2%, stamp duty charges will come down from Rs 7,65,000 to Rs 3,06,000, saving Rs 4,59,000.
More revenue for the government
This is a great decision favoring homebuyers. Homebuyers should not wait any longer to buy their dream home as this is the best time. But also, a great decision for the government as they can generate badly-needed revenue via increased registrations after the most severe downturn in recent history.
Real estate has gone through several tumults in 2020, but the future looks bright and in 2021 the sector is poised to grow at an impressive rate, contributing to the overall economic growth of the country.
The decision is good for purchasers as homebuyers can save on the initial investment. It will attract them to purchase early and increase revenue for the government which has reduced heavily due to the COVID-19 pandemic. So currently, it seems like an ideal opportunity for the homebuyers to take advantage of this move by the Maharashtra government and book a home they always wanted to own.