Teji Mandi: Maha govt cuts stamp duty from 5% to 2% - How will it benefit homebuyers?

The situation couldn't be more ideal for homebuyers in Maharashtra. The loan rates are already at a historical low following the repo rate cut of 250 bps and its subsequent transmission by banks over the last one and half years. In addition, the government has now decided to reduce stamp duty from 5% to 2% till December 31.

The decision is a desperate attempt to revive the real estate market which has fallen to a new low post coronavirus outbreak. As a result, cost of buying a home will see a major reduction in the state.

The reduction has come at a time when builders are reeling under high inventory piling. The problem is even more serious in pockets of Mumbai and Pune which provides negotiation power to the buyer. As per the research by ANAROCK Property Consultants, Mumbai Metropolitan Region (MMR) and Pune together have approx. 35,200 ready to move unsold units, which are collectively worth Rs 37,550 crore. This accounts for 57% of the total value of ready unsold homes across all top 7 cities.

The stamp duty reduction, coupled with benign interest rates could significantly lift the mood of the buyers. It, in turn, could correct the inventory levels which remains specifically high in cities like Mumbai and Pune.

Key takeaways:

While cutting the stamp duty is a welcome move, it only addresses a part of the problem. It does not help solve the concerns related to incomplete projects. Hence, if at all stamp duty reduction revives the demand, mostly the larger players are going to be the beneficiaries of it while smaller developers are most likely to be left out.

Despite that, stamp duty reduction could make property purchase a very attractive proposition, especially in the affordable housing segment. It could also fasten the time taken for several deal closures in the current market environment.

While the plight of smaller developers is going unaddressed, we believe it to be a #Teji move for the real estate market in Maharashtra and set a template for the rest of the states to follow, especially in the pockets with high inventory levels.

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