Another woe for property buyers in Mumbai as State plans to hike Stamp Duty
By: Manoj Asrani, First Executive – BrickAsset Pvt Ltd (A Real Estate Consulting Service Company of Viiking Venture Group)
The Indian Real Estate sector has become one of the fastest growing markets in the world. 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 government to levy a surcharge on stamp duty of 1% on property transactions will hurt the sentiment of potential home buyers which was seen improving. The state government is putting Section 144 F in the Mumbai Municipal Corporation (Second Amendment) Act, 2018, to levy additional stamp duty on sale, gift and mortgage of immovable property.
The move is neither welcomed by the buyers nor by the real estate developers. This would dampen the growth of the segment which is seen to be on the path of recovery. Government aims to generate more revenue through this and will use it to fund the rising infrastructure need 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 marked to begin on November 19, 2018.
If this move is passed by the government, it will be a big hindrance for the buyers, especially for the 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 5 percent increasing the cost of real estate deals. Sales of both, affordable and luxury homes will be unfavourably affected by the additional stamp duty.
It is high time to understand that the 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, there are new moves being introduced which will add to the slowing down of the segment.
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 further hike on the taxes.
The government needs to rationalize taxes in the real estate segment if it wants the sector to flourish in the long run. Such moves of increasing taxes will only plague the industry further, making it even worse for the overall economy.