Causing the share markets to tumble, the recent proposal to hike stamp duty on leave and license agreements has once again created a rift between the state government and the builder community.It’s really ironical that while the state government claims its intentions to restore Mumbai to its past glory of being the country’s financial capital, its actions speak otherwise. The government’s recent proposal to amend the Maharashtra Stamp Act, 1958, thereby hiking the stamp duty for leave-and-licence agreements for residential and commercial properties has cast clouds of darkness over the market’s future.Seeking to increase its kitty, the government proposed 0.1 per cent stamp duty on the market value of the residential property or 1 per cent of the premium plus average annual rent paid for up to 36 months. For commercial lease agreements, the duty for 60 months would be 0.4 per cent of the property value.Impact of the hikeIf this proposal is accepted, it would impact the rental market in the residential, commercial and retail asset classes. “The corporate commercial property market would be less affected, since this asset class typically operates on leases locked in for longer tenures, which can extend up to 3-5 years. However, retail property leases would feel the pinch, since this sector typically works on annual leases in the form of leave and license,” affirms Subhankar Mitra, Head-Strategic Consulting (West), Jones Lang LaSalle India.Driving away investorsOne of the significant impacts of the hike will be that of driving away the investors from the city, as reiterated by Paras Gundecha, Chairman and Managing Director, Gundecha Group of Companies and President, MCHI. “They will naturally shift their business to other cities like Pune. Already, Mumbai suffers from high land and rent costs; now, if the government is going burden investors with additional taxes, things might get more difficult for them. The government is only interested in making money, and real estate is the only sector from which they can squeeze as much as they want.”Kumar Gera, Chairman, Gera Developments, on his part, believes that “the impact of this hike will mainly depend on the magnitude of transactions. It will have a significant impact on the smaller properties.”Whatever may be the case, the fact is that the proposal has once again created a rift between the government and the builder community. Now, whether the government lends a ear to the builders’ woes or maintains its attitude remains to be seen.