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Fillip for real estate sector: Construction premiums set to be halved till Dec 2021

Industry captains have been demanding a sector-specific stimulus contending that the slowdown and the liquidity freeze, worsened by the lockdown, was eroding wealth and causing job losses, besides delaying completion of construction projects.

In Mumbai, construction premiums and levies account for more than 30 per cent of the total project cost. (Representational)

Builders in Maharashtra are set to get a one-year special payment window where construction premiums and levies payable by them will be halved. Government sources said that the state finance department has given a go ahead to a proposal for lowering of construction premiums and levies by 50 per cent till December 31, 2021.

Industry captains have been demanding a sector-specific stimulus contending that the slowdown and the liquidity freeze, worsened by the lockdown, was eroding wealth and causing job losses, besides delaying completion of construction projects.

Acting on the findings of a committee led by HDFC Chairman Deepak Parekh, the state urban development (UD) department had earlier proposed the lowering of the charges by offering the special one-year window. While the Shiv Sena-controlled Brihanmumbai Municipal Corporation (BMC) has already backed the idea, the UD had submitted the file for the finance department’s consent.

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Following the latter’s go ahead, sources said that the file has now been sent to the Chief Minister’s Office (CMO) for a final approval. While the CMO has called for a presentation on the issue, sources said the state’s fiscal managers are not in favour of applying the perk even for infrastructure and development charges payable by builders.

A formal announcement regarding the lowering of the premiums for a year is expected after the lifting of the ongoing code of conduct for the December 1 polls for five Legislative Council seats, said sources.

In Mumbai, construction premiums and levies account for more than 30 per cent of the total project cost. The Deepak Parekh committee had argued that the premium and charges, especially in Mumbai, were significantly higher as compared to other big cities – a factor that heightened costs and increased working capital requirement in a market where lenders were risk averse and reluctant to fund developers.

Before the lockdown, the BMC had estimated collections of around Rs 3,000 crore from construction premiums and levies in 2020-21. But with construction activity almost at a standstill, the civic body has so far garnered just over Rs 300 crore or so under the head. Besides bringing down construction costs, the government is hoping that the one-time window will result in more submissions for project approval, raising its own revenues.

Sources said that the perk will be available for construction projects across the state. Also, it has been decided that the concession will be extended for ongoing developments, including those where part installments of the premium have been paid. The government is set to impose a rider that the facility in such cases will be applicable only for those who stick to the installment schedule. It, however, remains wary of cases where builders will avail the sop but default on payment of further installments. The sop, once availed, is proposed to be continued till the project’s completion, a condition that some government town planners, too, have objected to.

While the Deepak Parekh committee had also suggested the deferment of premium payments till the time of granting of occupation certificate to projects, the government has shot it down, said sources.

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