For the common man, the costs of owning that dream home in Mumbai just keep on inching up. The Maharashtra Assembly has passed by voice vote a bill to levy a one per cent surcharge on stamp duty for immovable property in Mumbai where crucial urban transport projects are being undertaken.
As per the provisions of the Mumbai Municipal Corporation Act (second amendment) bill, the move is aimed at creating sufficient corpus for such projects. Currently, a 5% stamp duty is charged. The Maharashtra government’s proposal to levy a surcharge of 1% on stamp duty, increasing it to 6% from the existing 5% comes at a time when the market has just begun to pick up from its slumber.
As per ANAROCK data, MMR has been the most vibrant among the top seven cities in 2018 as far as new supply and housing sales are concerned. To hike the stamp duty at such a sensitive time is definitely a sentiment dampener.
Anuj Puri, Chairman, ANAROCK Property Consultants, says the impact of this hike will be more felt in the affordable segment as it will not only increase the overall cost of realty transactions for buyers of such properties but also their buying decisions. Other segments such as upper-mid range, luxury and ultra-luxury may not really feel the pinch.
Sentiment is likely to be hit. Shishir Baijal, Chairman and Managing Director, Knight Frank India feels the increase in stamp duty on property by 1% universally to fund infrastructure projects is timed to coincide with the large scale development projects being undertaken in the city. “We expect this to impact buyers’ sentiments especially in the affordable homes and mid segment category, since a 1% increase will be seen as a significant outflow, thereby putting many in a wait-and-watch mode.”
A hike affects developers too. For developers, a forced escalation of total outflow towards home purchase by end-users can mean some more heartburn. This escalation will hamper the purchase decisions of fence sitters who were warming up to the idea of buying a home on the back of stable capital values that have remained unchanged in the past four to six quarters, says Baijal.
It is a paradox that on one side the Government is offering multiple sops to boost affordable housing in line with its mission of Housing for All by 2022, and on the other is adding to the burden of the very price-sensitive buyers of such homes.
As far as the stakeholders’ claim – that the money collected will be used for funding urban infra projects including metro, monorail – stands true, the proposal is justified. After all, the city’s real estate market is largely spearheaded by physical infrastructure facilities and to this effect, it will be a boon for the market here in the long-term. “However, if the funds collected are not deployed appropriately then the move is not really justified. Taxes have been increased in the past as well on such pretexts but not much work has been visible,” says Puri.