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The reduction in premiums would help the Mumbai market, said analyst (MINT_PRINT)
The reduction in premiums would help the Mumbai market, said analyst (MINT_PRINT)

Maharashtra cuts real estate premiums by 50%. Buying homes to become cheaper

  • The reduction of premiums will be applicable till 31 December, 2021
  • The Maharashtra government earlier slashed the stamp duty charges to boost real estate sector hit by coronavirus pandemic

To boost real estate sector hit by the coronavirus pandemic, Maharashtra government on Wednesday decided to reduce all premiums related to the sector by 50%. It will be applicable till 31 December, 2021. All projects which want to avail of the premium concession will have to pay full stamp duty for the customers till 31 December. High premium puts a financial burden on developers leading to higher costs for the homebuyers. The reduction in premium cost will help softened prices and renewed buyers' interest, said experts. The concession will be considered for premium rates whichever is higher, 1 April 2020, or the current annual market price table.

The coronavirus pandemic has severely affected the real estate sector last year. With several measurements from the central government, state government and the Reserve Bank of India, the real estate sector saw an uptick in the state. The reduction in premium will benefit all stakeholders — developers in terms of the reduced construction cost for projects. For customers, it will help reduce prices and boost demand. For the government, it will help increase premium and levy collection as the move is likely to revive stuck projects.

"The reduction in premiums would help the Mumbai market as the city collected as many as 22 premiums under various heads, which is higher than other top cities. In the current economic scenario, the step would ease the burden and soften the prices resulting in more sales in the coming months," Mani Rangarajan, Group COO, Housing.com, Makaan.com and Proptiger.com said.

How this move will benefit the developers and homebuyers

The number of premium and amount is the highest for financial capital – Mumbai, it amounts to almost 25-35% of project cost for the developers. The state government was the first to provide relief to the industry.

"This step will be a direct incentive for homebuyers waiting for the right time to invest in real estate. The move is a win-win for developers and end-users. It will lead to a reduction in the project cost for developers," said Manju Yagnik, VCP, Nahar Group and Senior Vice President, NAREDCO Maharashtra.

"While the pandemic and subsequent lockdowns made developers focus on completing existing projects and largely postpone launching new ones, this move of halving the different kinds of premiums and levies is going to make developers contemplate going back to launching new projects," said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory..

The Maharashtra government earlier slashed the stamp duty charges. Usually payable on the sale agreement, the stamp duty rate is fixed by the state governments. The stamp duty from 1 January, 2021, until 31 March, 2021, will be 3%. Residential sales in Mumbai, India’s most valuable property market, saw a sharp surge in December.

"The premium reduction, coupled with the stamp duty charges which will also be borne by the developers, will lead to reduced cost for homebuyers thereby increasing their purchasing power - further underlining the opportune time for them to buy a house in MMR," said Deepak Goradia, president, CREDAI MCHI.

"Look forward to further extension of stamp duty waiver for next few months to revive the demand," Housing.com CEO added.

"The Maharashtra state government has been the first to provide relief to the industry and other states tend to follow it," said Krish Raveshia, CEO, Azlo Realty.

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