The Maharashtra government on Wednesday slashed premiums and levies charged on construction by 50 per cent till December 31, a move that is expected to give a boost to the real estate sector in the state.
The cut, under the Development Control and Promotion Regulation 2034, will apply to both ongoing and new projects. Municipalities charge this premium on floor space index (FSI).
“This move will go a long way in expediting project completion and the market will witness new launches. 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,” said Niranjan Hiranandani, Chairman at Hiranandani Communities.
The cut will reduce the input cost, and over a period of time, he said, there is a possibility that the new inventories may have reduced prices, he said.
According to the Deepak Parekh committee, as many as 22 types of premiums are collected in Mumbai under various heads such as FSI, staircases, lift well, lobbies, etc. This is significantly higher than in all other top cities in the country. For instance, in Bengaluru developers have to pay 10 different premiums and charges, and in Delhi five and in Hyderabad just three.
“Reduced premiums can help developers avoid project delays due to funding issues. A significant reduction in these premiums will give a massive boost to developers’ execution capacity, and this will result in more projects being developed and completed,” said Anuj Puri, chairman of Anarock Property Consultants.
These premiums, levies and cesses are paid to the municipal corporation. While reduced premiums would mean that the state government rakes in less revenue, this would to some extent be compensated for by the increased number of project developments. The government will also generate more stamp duty and registration revenue from increased housing sales, he said.
The state government had in September lowered stamp duty from 5 per cent to 2 per cent till December 31, 2020. From January till March, a duty of 3 per cent will be charged, it had said. This led to jump in property sales in Mumbai and other cities.
Home sales in the Mumbai Metropolitan Region saw growth of 10 per cent year-on-year (YoY) to 30,042 units in the second half (H2) of 2020, propelled by the stamp duty cut, according to a Knight Frank report, released on Wednesday.
Sales picked up from September and grew stronger towards the end of the year. Sales in Q4 jumped 80 per cent YoY, it said. Apart from the stamp duty reduction, other factors aided sales growth in H2, such as a cut in interest rates to historic lows, demand for upgrading to larger homes, festive period of Navratri-Dussehra-Diwali, developers offering a host of discounts and increase in household savings during the lockdown.