Maharashtra government has decided to temporarily reduce the stamp duty over two different time periods. The cost of owning a home of your own in Maharashtra has come down. The government of Maharashtra has cut the Stamp Duty charges while registering a property in the state. According to PTI, in a major policy decision aimed at boosting the real estate sector. Maharashtra government has decided to slash the stamp duty on sale deed documents by 3 per cent between September 1 and December 31 this year. The relaxation will continue with the 2 per cent cut from January 1 to March 31 next year.
“To boost the stagnant real estate market which is badly hit following the pandemic lockdown. Maharashtra government has decided to temporarily reduce the stamp duty. The reduction will be for two different time periods, First, there will be a 3% reduction for transactions between 1st September to 31st December 2020. Second, there will be a 2% reduction for the transaction between 1st January to 31st March 2021. This relief is over and above the 1% reduction in stamp duty for two years that the government has announced in the budget.
Stamp duty is levied by the states and is charged while registering a document with the state registrar, which is generally a transaction document agreed upon by two or more parties. In most cases, it is a fixed percentage of the agreed value as mentioned in the agreement.
“The phased reduction in the stamp duty rates from the present 5% in Mumbai and Pune to 2% (until December 2020) and 3% (January – March 2021) is a much-awaited measure from the Government of Maharashtra. As the residential real estate markets in these top two cities are reeling under pressure. The rest of Maharashtra will also benefit from a reduction in stamp duty. Undoubtedly, this will augur well for prospective home buyers as it is expected to result in direct financial savings for them. It will act as an attractive incentive towards fastening the time taken for several deal closures in the current market environment. Though temporary in nature, this is a strong inoculation into the dampened market sentiment and will help in reviving sales,” says Ramesh Nair, CEO & Country Head (India), JLL.
In the case of property registration, stamp duty is charged on the transaction value or circle rate whichever is higher. The Circle Rate is the minimum price of the property, as set by the government. In order to boost the sentiments, sometimes the government reduce circle rate while at times the stamp duty is cut.
Reduction in stamp duty is a welcome move and will provide a temporary reprieve. However, there have been media reports of interest subvention scheme being under consideration which will be positive too. The key still remains macroeconomic factors and unless the lockdown is completely removed which the State is hesitating to do. The long term recovery cycle will continue to remain subdued. There is a limit to which technology and interface can make up for genuine interaction and confidence in the economy.
For the home buyers, the low interest on home loans, credit-linked subsidy offered by the central government under PMAY scheme. Other such benefits could prove to be the right time to own a property. We believe that the residential market is unlikely to offer this palette anytime soon – rationalised pricing, lowest home loan interest rates. An extension of credit linked subsidy scheme and developers doling out lucrative schemes. Now this is topped with lower stamp duty rates.
As a lesser-known feature of tax savings on registering the property. The payment of stamp duty by homebuyers qualifies for section 80C tax benefit of the Income-tax Act, 1961. Announcement on the reduced stamp duty at the onset of festivity with Ganesh Chaturthi will influence the home buyers in buying their dream home at a more affordable price. Homebuyers will be able to get more benefits and more registrations will take place. A residential asset is a one-time investment and the announcement from the state government provides an opportunity to make a purchase at a significant price value, which in turn will provide home buyers more liquidity at hand.
A property measuring 500 sq. ft. in a locality in Mumbai can cost as much INR 14,100/sq. ft. as a basic price. Parking charges can run up to INR 2.80 lakh, and floor rise charge to INR 45/sq. ft. (for a property on the 7th floor, the floor rise premium will be INR 315 per sq. ft. (45*7=315). The total base price will thus be INR 14,415/sq. ft.
- Saleable value = 500 * 14,415 = INR 72,07,500 (basic cost) + 2,80,000 (parking charges) = INR 74,87,500 /-
- Registration Charges = 1% of INR 74,87,500 = INR 74,875 /-
- Stamp duty = 5% of INR 74,87,500 = INR 3,74,375 /-
- Total cost of the property = INR 79,36,750/-
If stamp duty charges are reduced by 2% to a new rate of 3%. A buyer immediately saves Rs 1,49,750 /-. With a 3% reduction, the saving is nearly INR 2,24,625 /-. Such amounts matter in affordable and mid-segment properties.
Given that the residential industry revival will necessarily be a collaborative effort involving all stakeholders. There is anticipation that the government will provide this important nudge to what is traditionally the period of maximum traction for the housing sector.
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