No Crash After Stamp Duty Hike, Mumbai Real Estate

On March 31, 2021 the Maharashtra government decided against extending the stamp duty waiver on property registrations. The waiver which existed from September 2020 to March 2021 has come to an end.

During that period, housing registrations saw a sharp uptick with the number in December 2020 and March 2021 setting new records as home buyers rushed to avail the benefit of lower stamp duty payment.

Not all the registrations done in this period were fresh sales. There has been a large number of old sales that have been registered in this period – especially in the September–December 2020 period when the stamp duty was 2% in Mumbai. Besides, there has been strong action in the resale market as home buyers preferred ready apartments.

The stamp duty waiver in the last three months was a 2% benefit to the customer. While not small in value to a buyer, it will be wrong to interpret that a 2% price difference separates a buoyant and a sluggish housing market.

Yet there will be a slowdown as a lot of pent-up and incremental demand has already been absorbed in this phase as all stakeholders operated cohesively to attract home buyers. The players or projects that didn’t thrive in this environment have almost no future in the business.

But the ones who operate in the intelligent framework will not see a sharp cut in volumes although the sales cycle will be longer as buyers take more time in their decision-making. Developers will need to further incentivise buyers with schemes to offset the stamp duty impact and many are likely to do that. Hence, volumes will not suffer radically although in value terms the impact will be greater given the configurations and prices in play.

Amid the pandemic when the sentiment was at its lowest, everyone chipped in to create a formula that caught the imagination of the customer. It meant thinking more about customer needs and affordability. And lesser about an imaginary profit margin or tax collections.

The government may have gotten carried away with this fleeting phase of success. For the developer, however, that means there is a long road ahead. But one that can be crossed.