Maharashtra government has cleared a proposal to cut levies on real estate by 50% until December 2021. This move is certainly going to benefit homebuyers in the state. The reduction will also help developers who have to pay around 22 premiums as part of the development of a project in the state. These include FSI, staircases, lift well, lobbies, etc. The premium for construction of projects accounts for over 25% of the project cost in Mumbai.
Now the state government is certainly not doing a favour. It was charging a very high fee compared to all other cities in the country and thus was in fact instrumental in the problem of high prices of apartments in the city of Mumbai. If we compare it is just three in Hyderabad, five in Delhi and in Bengaluru developers have to pay 10 different premiums and charges. If these reductions are passed on to the homebuyers, the prices in the city may come down and will definitely give a boost to Mumbai’s real estate industry. The reduction in premiums for new launches will help the development at the lesser input cost. That will ultimately lower the price for new inventories.
A high premium was putting a financial burden on developers leading to higher costs for the homebuyers. In the current economic scenario, the step would in all likelihood ease the burden and soften the prices resulting in more sales in the coming months. This was the reason most of the developers have welcomed the move and the stock prices of realty stocks were up.
After the government’s move to reduce stamp duty this is the second step in this regard. It will certainly lead to a revival of stuck projects and higher sales.