Maharashtra cuts levies on real estate developers by 50%

A move that could lead to reduction in prices of houses in Maharashtra, the state government, on Wednesday, cleared a proposal to cut levies on real estate by 50% until December 2021. This will essentially result in reduction of several premiums that developers have to pay as part of development of a project. As on date 22 premiums are collected in Mumbai under various heads — including FSI, staircases, lift well, lobbies, etc. This is significantly higher compared to other cities in India. For instance, in Bengaluru developers have to pay 10 different premiums and charges, it is five in Delhi and just three in Hyderabad.

According to real estate industry experts, if these reductions are passed on to the homebuyers, the prices in the city may come down. Anuj Puri, chairman, ANAROCK Property Consultants, said, “Rationalising these premiums will definitely give a boost to Mumbai’s real estate industry. Reduced development costs to developers and therefore lower purchase cost to homebuyers can result in increased demand”. As per ANAROCK Research, the average property prices in Mumbai are a staggering Rs 17,845 per square feet, compared to just `4,955 per sq ft in Bengaluru, and Rs 5,487 per sq ft in Pune.

Mani Rangarajan, group COO, housing.com, makaan.com and proptiger.com, said, “High premium puts a financial burden on developers leading to higher costs for the homebuyers. In the current economic scenario, the step would ease the burden and soften the prices resulting in more sales in the coming months. Developers have welcomed the move as well. Niranjan Hiranandani, founder and managing director, Hiranandani Group, said: “The industry applauds this booster dose making many projects viable and we shall adhere to the rules laid down in lieu of availing these benefits. Also, the reduction in premiums for new launches will help the development at the lesser input cost and over a period of time there is a possibility of lower price for new inventories that shall come into the market”.

Manju Yagnik, vice chairperson, Nahar Group, said that the premium for construction of projects accounts for over 25% of the project cost in Mumbai, in some cases. “We saw the effect of reduction in stamp duty, it led to stellar sales from the month of September-December, with the sales data for last month hitting a multi-year high. The reduction in premium will lead to a revival of stuck projects, new launches, higher sales. It will more than offset the loss incurred to the state government in terms of higher sales like it did in the case of a reduction in stamp duty,” she said.