We know very well that real estate developers in Pune affect the government’s decisions. Let’s cover how an increase in stamp duty in Mumbai affects the real estate market.
The residential segment was the only bright spot in the real estate property in Mumbai in 2020. The uncertainties surrounding the COVID-19 virus epidemic harmed residential sales between April and June 2020. However, they rebounded considerably between October 2020 and March 2021.
How does metro cess also effects on real estate market?
The Maharashtra government recently declared that a Metro cess would impose beginning April 1, 2022. From April 1, an additional 1% cess will be charged on all property purchased in Mumbai, Pune, and Nagpur.
This tax is used to fund Metro rail projects and other transportation-related projects around the state. The 1% Metro cess is designed to boost revenue from Metro rail services and help pay off the loans that helped fund the project.
The cess will raise the stamp duty on property registration in Mumbai from 5% to 6% and from 7% to 8% in Pune, Nagpur, and Thane.
According to research, Mumbai saw 96 percent of pre-COVID sales in Q4 2021, and sales jumped by 30 percent and 130 percent year over year in 2021. As a result, demand looks to be picking up again, and buyers in the inexpensive and mid-segment will face higher costs.
The Metro cess will be counterproductive in the present real estate market rebound. At the same time, we recognize that The State Government must adequately support metro works to de-clutter cities and reduce traffic. We must explain why homebuyers must pay such expenses entirely.
Additionally, the timing of this decision can question; it has only been 2-3 quarters since residential sales volumes have increased. COVID-19 worries appear to be dissipating, and buyers appear to be going back to business.
How is stamp duty affecting the real estate market?
Maharashtra is already one of the costliest states to acquire property, and rising transaction costs will inevitably impact volume. We deal with a battle that has exacerbated developers’ already high input costs globally.
Steel and cement prices have reached all-time highs, and other input costs have also risen. With this in mind, a drop in sale volumes and selling values might be disastrous for the real estate business.
As a result, putting the financial burden of metro development on new homebuyers was probably not the ideal strategy to acquire funds for metro construction. Instead, it has been accomplished in a variety of ways. One option would have been to raise property taxes by a small amount.
Considering the number of individuals who pay property taxes, the increase would have to be so small that it would have had no impact on people’s daily lives. The collections might have been higher if there had been a larger basis.
Furthermore, it would be a more equitable method to handle the situation because the metro, if built, will eventually benefit everyone, not just those who buy houses.
What do the stakeholders have to say?
The real estate market has been hinting at a price increase. They also stated that it would be impossible to maintain existing prices for an extended period with growing inflation. The potential of interest rates rising in the foreseeable future has also begun to surface for similar reasons.
Overall, the industry indicates that real estate will become more costly. However, despite the pandemic, one of the main reasons property registrations climbed dramatically in important cities in mid-2020-2021 was an almost 15% drop in overall property costs.
Due to developer discounts, cheap mortgage rates, stamp duty decreases, and other factors, even the most expensive regions of Mumbai saw a decline. However, due to the expiration of most of these perks and growing inflation in building supplies, the overall cost of the property will rise, prompting some buyers to postpone their purchases.
