Sentiment-driven real estate market will be hit as the burden will be passed on to buyers
MUMBAI, Mar 8 (The CONNECT) - Realty prices in Pune and Mumbai markets are set to rise with the Maharashtra state government planning to impose Metro cess from April 1 this year. An additional 1% cess will be levied on all property purchased from April 1 in Mumbai, Pune and Nagpur.
The stamp duty on property registration in Mumbai would go up to 6% from the current 5% of the asset's value after the metro cess is introduced. It would be 7% of the property's value in Pune, Nagpur and Thane from April 1, after the additional cess comes into effect.
The 1% metro cess would be a transport surcharge. It is intended to be used for funding transport infrastructure projects like Metro, bridges and flyovers in the state. The 1% Metro cess is expected to augment revenues of the Metro rail services and service the loans that funded the Metro project.
Here is what the real estate developers have to say:
Sandeep Runwal - President, NAREDCO Maharashtra and Managing Director, Runwal Group appealed the government to reconsider the cess as the burden might be shifted to the homebuyers resulting in a flunk in the sales of the properties and will have a direct impact on the momentum that has been carried out for the last few months. Also, with uncertainty in markets owing to the ongoing conflict between Russia and Ukraine war, there is a possibility of a significant impact on the Indian market, which will eventually affect the real estate industry, he said.
The upcoming quarter might see a hike in housing prices due to a probable upsurge in rates of raw materials due to the current world conditions. The industry has witnessed high sales in the last few quarters and the decision will only put brakes on the recovery of the sector, Runwal pointed out.
Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty and Treasurer, CREDAI MCHI, said after the pandemic, we have had a strong recovery in the real estate sector thanks to the favourable Government policies supported by developer discounts and attractive payment plans. Now, the decision of charging metro cess of 1% will crumble the budget of the prospective homebuyers, who will, in turn, delay their purchase. This along with the steep rise in the raw material prices due to the current global scenario will impact the property prices in a big way, spoiling the home buyers' dream of buying a property. Going forward, if the prices don't drop, the developers will have no option but to pass the additional cost to the consumers as is happening in all other industries, he said.
“We at CREDAI-MCHI are constantly reaching out to the State Government to reconsider their decision so that the momentum in the housing sales sustains," Chivukula said.
Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory felt that the idea to charge 1 percent Metro Cess on property registration is a good move to fund some of the critical Metro rail projects and transport-related projects in the state. The timing of the decision, however, could have been deferred as home buyers have become very price-savvy in recent past, and an increase in the form of a 1 percent Metro Cess, especially at a time when the current 1 percent stamp duty waiver is ending this month, will severely impact the decision-making power of home buyers.
Pointing out that India's real estate market is largely driven by sentiments, he said home buyers are very cautious about their investments. The cess decision like this happens it will certainly affect positive sentiments. An additional 2 percent in the form of a new 1 percent cess minus 1 percent stamp duty exemption will delay the decision-making time of a home buyer by at least two to three months which in turn will affect the demand-supply dynamics in the MMR and Pune markets, Agarwal argued.