Treading dangerous turf

Manoj Asrani 

The Indian real estate sector has become one of the fastest growing markets in the world. However, the sector is battling some extreme challenges that act as roadblocks and restrict the sector from yielding full benefits of the potential growth.  The recent proposal of the Maharashtra government to levy a surcharge on stamp duty of 1 per cent on property transactions will hurt the sentiment of potential homebuyers which was seen improving. The state government is putting Section 144 F in the Mumbai Municipal Corporation (Second Amendment) Act, 2018, to levy additional stamp duty on sale, gift and mortgage of immovable property. 

The move is neither welcomed by the buyers, nor by the developers. This would dampen the growth of the segment which is seen to be on the path of recovery. Government aims to generate more revenue through this and will use it to fund the rising infrastructure needs of Mumbai, such as metro, monorail, bus rapid transport systems, freeways and sealinks. The Bill is expected to be tabled during the winter session of the state legislature marked to begin on November 19, 2018. 

If this Bill is passed, it will be a big hindrance for the buyers, especially for the millennials, who have limited budget and plan to buy their first dream house. The consumer buying cycle will also become longer as delays are expected in the decision making by the customers, which would impact the sales volume. Thus, the realty sector which is suffering from diminishing sales, liquidity crunch and mounting NPAs, will further be burdened with the hike on the existing 5 per cent increasing the cost of real estate deals. Sales of both, affordable and luxury homes will be unfavourably affected by the additional stamp duty.   

Property rates in the financial capital of the country are already skyrocketing, making it one of the costliest real estate markets in the world. In such a scenario, instead of taking measures to moderate the property prices in the city, such new moves being introduced will add to the slowing down of the segment. 

We talk about affordable housing, but, in a scenario where the common man is already saddled with so many taxes such as GST, property tax, stamp duty, development charges etc; does it make sense to bring in further hike on the taxes. The government has to rationalise taxes in the real estate segment if it wants the sector to flourish. 

— The writer is first executive, BrickAsset