Home sales across the top eight cities in India rose 7 per cent year-on-year in the December quarter, ICRA said in a report. Considering that sales had slumped by 62 per cent in the June quarter following the covid-19 outbreak, the recovery in sales will boost sentiment in the Indian residential market. Stable prices and falling home loan rates during the pandemic supported the recovery in the real estate sector. The repo rate-linked home loan rates are at a historic low of around 7 per cent. The central and state governments have also taken several measures to improve affordability and stimulate demand. “In recent quarters though, reduced home loan rates, attractive payment schemes, or discounts, and reduction in stamp duties in certain key states on the back of covid-19 has significantly brought down housing costs and stimulated housing demand,” he added.
Last May, the government had extended the credit-linked subsidy benefit for the middle housing segment by a year to March 2021. Some states, such as Maharashtra and Karnataka, have also extended the 2-3 per cent cut in stamp duty for a limited time, which helped housing registrations reach all-time highs.
To further improve affordability, the Maharashtra government also reduced construction premiums for developers by 50 per cent up to December 2021. In order to avail of this benefit, the developers must pay stamp duty on behalf of buyers. This will reduce the stamp duty charges to 0 per cent for the buyer.
As per an ICRA estimate, the reduction in stamp duty from 5 per cent (pre-covid) to 0 per cent will result in savings of Rs 10 lakh for someone who is buying a house worth Rs 2 crore. This could help boost demand further in the region.
“Mumbai has among the highest construction premium levies in the country, with such premiums typically amounting to 10-15 per cent of the selling price. As per ICRA estimates, even after paying stamp duty on behalf of buyers, the developer will still gain by up to 4.5 per cent of the selling price, which would result in improved project viability,” said the ICRA report.