Real estate developers have welcomed the Maharashtra state government’s decision to cut premium on real estate projects by half, saying the move will go a long way in expediting project completions. A few days back the Maharashtra government reduced all premiums related to ongoing and new projects by 50% up to December 31, 2021.
According to real estate industry people, there are as many as 22 premiums collected in Mumbai under various heads as compared to 10 in Bengaluru, three in Hyderabad and five in Delhi. These premiums amount to 25-35% of project cost for developers. Halving these will lead to significant cost savings for developers and if part of the gains transferred to buyers the move may result in reduction in housing prices.
However, developers will be eligible for these benefits only if: (a) they pay premiums based on the 2019 Ready Reckoner (RR) rate or 2020 rate, whichever is higher and (b) they pay the entire stamp duty when they sell flats to buyers by giving an undertaking to local bodies which will make effective stamp duty for consumers nil.
Housing sales in Maharashtra has surged since the government’s decision to cut stamp duty rates in August 2020 which was reduced from 5% to 2% till December 31, 2020 and 3% till March 31, 2021. After the reduction in stamp duty, Mumbai witnessed highest ever registration of 19,600 units in December 2020 and 36,800 units during Q4CY20 against a monthly average of 5,650 units during CY19 and 5,900 units during CY16-19. It should be noted that Mumbai is the most expensive housing market in India and lack of affordability has been the prime reason keeping housing sales subdued in the city. According to analysts, decision to slash premiums will help sustain the recent momentum in housing demand by bringing down prices for home buyers.