How Haryana Govt move to impose 2% additional duty on transfer of property will impact realty market

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March 19, 2021 4:36 PM

The proposed duty will be applicable on transfer of properties in the secondary market and the two per cent duty shall be imposed in addition to the already applicable charges in such transfers.

Developers are also of the view that this move would be a setback for the realty sector in the region.

The Haryana government has planned imposition of an additional two per cent duty on transfer of immovable properties located within the Municipal Corporations limits across Haryana. The proposed duty will be applicable on transfer of properties in the secondary market and the two per cent duty shall be imposed in addition to the already applicable charges in such transfers, thus adding onto the cost of transaction.

“This move would imply additional landed cost for a secondary purchase, thus bridging some gap in the landed cost to buyer that presently exists between a primary purchase and the secondary market purchase. This will add to the lucrativeness of property purchase in the primary market from developers, which might boost ready-to-move primary sales for developers,” says Ashutosh Kashyap, Associate Director, Advisory Services at Colliers India.

However, the additional duty might marginally affect the lucrativeness of investment in real estate via the primary market as the 2% extra charge applicable at exit, when the investor plans to monetize the property in the future, would imply some adjustment in the pricing at sale. Secondary market transactions would be significantly affected, as the additional charge would dent the return realizations of investors.

On the other hand, “the money collected on account of this duty would be paid equally to the respective municipal corporation and consolidated account for all municipal corporations of Haryana, implying better funds with Urban local bodies to undertake betterment of infrastructure and civic services within the city. This move, however, comes at a time when the markets are still recovering from the COVID-inflicted slowdown and this surely would hurt the sentiment of buyers and dampen the momentum of recovery,” Kashyap.

Developers are also of the view that this move would be a setback for the realty sector in the region.

For instance, Akshay Taneja, MD, TDI Infratech, says, “After the challenging year 2020, the real estate market has started to rebound, which was evident from the increasing sales across the country. However, the recent announcement of additional taxes on the sale of immovable property by the Haryana government would hurt sales as it will increase the cost of property. Developers have been demanding measures to boost the sector, but this decision has arrived as a shocker. With this, Haryana’s property markets would crash due to the additional financial burden being imposed on buyers.”

Haryana in fact should take inspiration from the decisions made by other states such as Karnataka and Maharashtra, which are easing the pressure on buyers to ensure the sector’s growth. The sector is already facing multiple problems and is looking for favorable policies, but this move will be a setback for the sector.

Mohit Goel, CEO, Omaxe Ltd, says, “The 2% additional duty on the transfer of immovable properties in Haryana over and above the stamp duty will raise the cost of home ownership in the state and hit the festive season momentum in the housing market. However, with more funds available to the municipal bodies, this move may help in the creation of better infrastructure for an enhanced livability for the people of the state.”

Pradeep Aggarwal, Founder & Chairman, Signature Global Group, and Chairman, ASSOCHAM, National Council on Real Estate, Housing and Urban Development, says, “The move is detrimental to the overall health of the realty sector as certain states have reduced stamp duties. Though the move will increase interest in the primary market, the secondary market is also critical for real estate development. Many people purchase properties as an investment tool, but with the extra duty, the cost will rise, potentially reducing people’s interest in the secondary market.”

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