The Maharashtra government has decided to allow a 1 per cent increase in stamp duty on property transactions, an initiative that will increase overall costs for a home buyer in Mumbai that has the country’s most expensive real estate market.
The Cabinet had on Tuesday approved a proposal for the increase in stamp duty on property transactions to fund major transport projects such as the Metro and Monorail corridors. With this, the stamp duty in Mumbai will go up to 6 per cent, though senior officials in the revenue department admitted that the Centre had issued guidelines urging states to cap stamp duty on property transactions at 5 per cent. The new rate will come into effect once the government issues a notification.
Senior officials said the state was actively considering a move to levy cess on transferrable development rights (TDR) certificates to raise additional revenue.
Sources confirmed that the finance department was pushing for the move because increased revenue expenditure and below par collection were worsening the state’s overall financial position. In fact, the plan was discussed in details at a meeting convened by Finance Minister Sudhir Mungantiwar for mobilising additional revenue, sources said.
The sources also confirmed that the Urban Development and Housing departments have opposed this move for now, claiming that it would come in the way of the government’s plan of making housing more affordable in Mumbai.
The TDR or floating floor space index (FSI) is an important component for builders redeveloping suburban properties because it allow additional construction rights over and above the usual FSI permitted on the plot. “The move to levy cess on TDR, if approved, will hike construction cost for projects, impacting property rates in turn,” a senior official admitted.
Construction projects, including the ones for redevelopment, will be doubly hit with the Maharashtra government also approving a proposal for a steep hike in development charges- 100 per cent over the existing charges- to mobilise revenue for the major transportation projects.
Maharashtra had earlier decided not to follow the public-private partnership models for infrastructure project following “some bitter experiences.”
Further, like in the case of models proposed for Metro corridors in Pune and Nagpur, the government has decided to collect a betterment charge from construction projects within 500 metres of a transport corridor while offering them additional FSI on payment of premium at 100 per cent of ready reckoner rates.
The move to collect additional stamp duty, hiking development charges, and levying a betterment charge was part of proposals for approval to two new Metro lines in Mumbai- one from Andheri East to Dahisar East, and another from Dahisar to DN Nagar in Andheri West, that were cleared by the cabinet Tuesday. The revenue collection through these mean will be used to raise about Rs 1000 crore, which will be ring-fenced for urban transportation projects.
The government is also yet to take a decision on the demand for not increasing the ready reckoner rates in Mumbai in January 2016, which will further impact property prices. Even BJP legislators from Mumbai have raised the demand on account of the high property prices and sluggish market conditions in Mumbai.