Realty stocks surged on Thursday after the Maharashtra government cleared a proposal to cut levies on real estate by 50 per cent until December 2021. Nifty Realty index also jumped over 3.5 per cent, with Oberoi Realty and Godrej Properties shares hitting their respective 52-week highs. Until now 22 premiums were collected in Mumbai under various heads such as floor space index (FSI), staircase, lobbies etc. According to the experts, the decision to slash premium is likely to provide impetus to the real estate industry in Maharashtra. “After the stamp duty cut, Naredco Maharashtra welcomes the decision of the Maharashtra government to reduce the construction premium by 50%. It will give a big respite to the developers, as the cost of the premium, as well as approval cost, contribute 35 to 38% of the project cost, whereby the project cost will come down substantially,” said Ashok Mohanani, President, NAREDCO Maharashtra.
Earlier in August 2020, Maharashtra government slashed the stamp duty on sale deed documents from 5 per cent to 2 per cent between September 1 and December 31, 2020. Today, Indiabulls Real Estate share price soared 11.5 per cent to Rs 87.4 apiece, while Sobha Limited shares jumped 7.4 per cent in the trade. Mohanani added that higher premiums put additional financial burden on developers leading to higher costs for the homebuyers.
Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory said that the decision to cut premiums by 50 per cent is likely to propel developers to offer extended payment holidays and also give lucrative price proposals to buyers in projects where the inventory has been selling slowly.
Besides, according to the Knight Frank India report released yesterday for July-December 2020, real estate across India’s top eight cities has become more affordable with property prices correcting up to 9 per cent and interest rates falling to multi-decade lows. Meanwhile, sales in the top eight cities increased 60 per cent during the period as compared to the first half of last year, with sales of 94,997 units.
Shishir Baijal, Chairman and Managing Director, Knight Frank India said following the recommendations of the Parekh Committee, the cut of 50 per cent on premiums on real estate projects will help the supply side to stabilise and make development in the state more feasible. Baijal added that this reduction in premiums, coupled with the revision in stamp duty (that has helped catapult demand) will make real estate development in the state lucrative.