HOW JUSTIFIED IS THE STAMP DUTY HIKE
The Maharashtra state government decision of increasing 1% on stamp duty to fund infrastructure projects in the state will surely hurt the real estate sector.
How rational is it to levy a surcharge of 1% on stamp duty, increasing it to 6% from the existing 5% at a time when the government talks about making housing affordable and providing Housing for All? In the name of generating revenues for the infrastructure projects like Metro project, Mono Rail, Sea links and Highways, the state government intends to milk the real estate sector which is still not over the impact of GST.
As a matter of fact, GST was supposed to subsume all other taxes but property buyers continue to pay stamp duty and registration fees in addition to GST. Farshid Cooper, Managing Director, Spenta Corporation rightly expresses his concern when he said, “While infrastructure development is crucial to the growth and prosperity of the city, the additional 1% stamp duty announced by the state government will certainly impact customers negatively. In addition to 12% GST, 6% stamp duty will start to raise concerns about the affordability of homes in the city. With sales velocity being impacted, this decision could delay the honorary prime minister’s vision of homes for all by 2022.”
Another major concern is the utilization of funds generated by increasing stamp duty for the infrastructure projects. Indeed, the city’s real estate market will get a boost with better physical infrastructure facilities but if the revenues are not deployed correctly, it might defeat the whole purpose and motive of the state government. According to the statistics presented by Rajan Bandelkar, President, NAREDCO West, this year, the Department of Registration and Stamps has a target of Rs 24,000 crore. The collections for 2016-17 were Rs 21,026 crore which was marginally lower than Rs 21,657 crore in 2015-16.
Also, the move seems unfair to those homebuyers who have already bought their flats taking into consideration their budget & affordability and will be severly impacted by the hike even pulling out of the under construction projects. Shishir Baijal, Chairman and Managing Director, Knight Frank India concurred that the biggest impact will be on 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. “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 4- 6 quarters,” he added.
It is a paradox that on one side the Government is offering multiple sops to boost affordable housing and on the other is adding to the tax burden of the home buyers. Taxes have been increased previously as well for the reason of economic & physical development but the positive impact on city realty is still elusive.