In an exclusive interview with Free Press Journal, Dr Niranjan Hiranandani, the National President of NAREDCO explains how the Maharashtra Government’s decision to reduce stamp duty will be a win- win situation that fares for all the involved stakeholders.
Q: What will be the impact of the Maharashtra government's decision to temporarily reduce stamp duty on the ailing realty sector?
A: Till now all the fiscal measures announced by the government machinery have been focused on supply side creation and lacked demand booster. The stamp duty relief announced by the Maharashtra government against the backdrop of the festive season has rightly addressed the simmering issue of demand shock creation to bolster consumption. The liquidity and labour strapped real estate sector will get some respite with an increased housing demand. The booster dose shall augur well across the Metro cities and Metropolitan regions wherein the pent up demand shall witness the actual sales closures along with resale deals notching up too. The lower home loan interest rate now coupled with reduced stamp duty should nudge fence sitters to convert into the actual home buyers. The fiscal advantage leads to good savings which should entice the discerning homebuyers to close the deal.
The festive season with Ganapati, Dussera and Diwali is around the corner and discerning home buyers will be compelled to make a purchase decision to grab the relief benefits leading to increased property registrations. The surge in property registrations will increase government revenue treasures as we witness an uptick in housing sales. The enhanced sales will draw much needed liquidity for the developers -- a sigh of relief. Hence, it is a win- win situation that fares well for all the involved stakeholders.
Q: What we understand is that the stamp duty cut is only for agreement for sale and not for land or lease or gift or development agreements. What is your take?
The announcement mentioned home buying, so it is not very clear whether land or lease or gift or development agreements are included. If not, one hopes that the state government, after seeing the positive impact on home sales, will consider extending it so that the remaining are segments befitted too. As I understand it, the whole idea is to create a ‘demand push’ which is much needed to encourage consumption.
3) The government has not yet addressed concerns over high ready reckoner rates. What is your comment?
Maharashtra’s real estate seeks and welcomes any further support extended to the ailing sector, as its revival is imperative for job creation and economic growth. Any positive measures by further rationalizing the duties, levies and taxes will foster demand creation -– the need of the hour. Industry pegs hope on long pending demand to rationalize ready reckoner rates in the state which will further persuade fence sitters to make the right decision of buying.
4) The realty sector is also voicing against the high premium rates and land charges. How can the government address these issues?
High premium rates and land charges are among the mandatory costs that have to be incurred, and these play an important role in the overall cost of the project. Logically, we need to reduce/suspend these for a stipulated time frame. Apart from these, the wish list would include freezing the unified DCR which will help developers restart the stalled and delayed projects so as to deliver homes to the buyers. Similarly, handing over salt pan lands across Mumbai for affordable housing would be among the ‘wish list’.
Q: Union ministers Nitin Gadkari and Piyush Goyal and HDFC chief Deepak Parekh have time and again suggested that builders and developers should sell flats at reduced rates without waiting for lucrative prices. Why has there been opposition? On the one hand there is unsold stock of more than 2 lakh in MMR alone, but on the other, real estate developers are sitting on the inventory...?
A: There is a need to understand that these are not blanket remarks applicable to the entire industry or all the developers. It was largely aimed to address the stark issue of piled up unsold inventory from the past couple of years making the situation dark and grim. The observations were precisely highlighted for the over leveraged developers' communities who immediately required to streamline its financial position by cutting down the debts straight. The company needs to stay afloat as a positive net worth company without getting converted into NPA’s under unprecedented financial implications scenario. Hence, selling off such long term unsold inventory at corrected prices will help to maintain liquidity influx and help them turnaround stalled and delayed projects.
Q: How will the state government's decision to give concessions and development of a stress fund for developers in slum rehabilitation projects help complete the projects on a fast track basis?
A: It is the paradox of our times – the Megalopolis of Mumbai is among the richest cities in Asia, and yet over half of its citizens live in slums. Efforts to make Mumbai slum-free have not been as successful as would have been expected. With over 50% land under slums, regularizing and redeveloping those land parcels will be a positive move, the stress fund will facilitate ‘last mile funding’ and help these projects see the light of completion and handover to the residents for whom these were being constructed.
Q: How do you look at the government's decision to set up the independent SRA for MMR?
A: It is a positive move, which simplifies governance. Such decisions which are about decentralization will obviously help expedite the process and yield quick results.