Maharashtra government’s move to extend stamp duty waivers from one year to three years for resale properties is expected to bring some investor interest back into the real estate market, as they get a longer hold period.
As of now, if an investor bought an apartment and sold it within a year, the stamp duty was charged only on the price difference between the purchase and the selling price. However, the bill passed in the state assembly on Wednesday said that the one year period did not help earn profits as the resale of properties became difficult during the pandemic, which is why the time of availing the stamp duty waiver is being extended to three years.
To be sure, the move is aimed at benefiting retail investors who invest for longer tenures, looking to buy second homes and gain from rental yields.
At its peak in 2010-2011, investors formed 50-60% of the residential real estate market, which has come down to a trickle at about 20% now. Over the years, investor participation in India’s real estate has diminished with overheated prices, delays in project completions, cases of fund diversions by developers and rampant corporate governance issues.
Shishir Baijal, chairman & managing director, Knight Frank India said the direct result of this step will be increased investor participation as this move provides greater flexibility to the investors for an elongated period. “It will allow investors longer hold period and realise better returns on their home investments. This will keep the secondary sales market buoyant and maintain the registration momentum,” he said.
Kapil Gandhi, convenor PR, Credai Maharashtra said, “Real estate is historically the safest and best investment, and we have about 20% of purchasers who buy flats for pure investment and rental yield. This move will give a boost to such homebuyers and help in increasing their share again.”
Ritesh Mehta, senior director & head (west), residential services & developer initiatives, JLL India said the step will provide a boost to housing demand from investors over and above the existing end-user home buying. “Retail investor fraternity would make a comeback in the top residential markets in Mumbai and Pune,” he said.
Residential sales have already witnessed a smart recovery during the latter part of 2021. The sales in Mumbai and Pune have seen a year-on-year growth of 40% and 156% respectively during October to December 2021 quarter.
Harresh Mehta, chairman and managing director, Rohan Lifescapes said, “This decision is surely going to benefit the sale purchase chain and will pave that way for more employment and revenue generation.”
According to developers, the move will also help in bringing down the transaction cost of residential properties in the secondary market — another deterrent for investors. Gautam Thacker, president, NAREDCO (Progressive Neral-Karjat Unit) said that since the service tax and value-added tax (VAT) was introduced into real estate, the transaction cost drastically increased for the retail investors for real estate investments.
“At present, a residential transaction comprises of 5% GST, 7% stamp duty and 1% registration charges, taking it to 13%. With this move, the net transaction cost will be down to half at 6% and even lesser in the affordable segment to about 2%. This ensures a good return on investment to the investors who can now invest for long term tax gains,” said Thacker.