‘1% surcharge on stamp duty may restrict real-estate growth’
The Indian real-estate sector is a rapidly growing market. However, it’s battling challenges that act as roadblocks and restrict the sector. 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 has been welcomed neither by the buyers nor by developers. This will dampen the growth of the segment which is seen to be on the path of recovery. The 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.
If passed, it will be a big hindrance especially for young buyers, who have limited budgets. The consumer buying cycle will also become longer as they may delay decision-making, which would impact the sales velocity of the real-estate companies.
Also, the industry which is suffering from diminishing sales, liquidity crunch and mounting non-performing assets will further be burdened with the hike on the existing 5 %, 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 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 where the common man is already saddled with several taxes such as GST, property tax, stamp duty and development charges; does it make sense to bring in further hike on the taxes?
The government needs to rationalise 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.
The author is first executive of Brickasset, a realestate consulting services company