Industry reacts with enthusiasm at Maha premium cut
Real Estate

Industry reacts with enthusiasm at Maha premium cut

In a move that is widely seen as a strengthening of green shoots of post-pandemic economic recovery via the real estate sector. The Maharashtra state government cleared a proposal this week to cut levies on real estate premiums by 50% until December 2021 under a new DCPR 2034 for ongoing and new projects.

This will mean developers will pay less premiums while developing a project. Currently, that would mean they will benefit from a whopping 22 premiums in Mumbai under various heads, including FSI, lift well, staircases, lobbies, and so on. The premiums are considerably higher compared to other cities in India. In Bengaluru, developers are required to pay 10 different premiums and charges, five in Delhi, and just three in Hyderabad.

According to real estate industry experts, if these reductions are passed on to the homebuyers, the prices in the city may come down.

Here are some of the reactions from industry practitioners to the decision by Maharashtra government:

Will expedite project completion

Niranjan Hiranandani, President, NAREDCO, and MD, Hiranandani Group

It is a great bolstering move made by the state government. This move will go a long way in expediting the project completion, and the industry will witness new launches in the market. The industry applauds this booster dose making many projects viable, and we shall adhere to the rules laid down in lieu of availing these benefits. Also, the reduction in premiums for new launches will help the development at the lesser input cost, and over a period of time, there is a possibility of lower price for new inventories that shall come into the market.

It is a move expected to meet the urgent need for economic activity and generating employment. The industry will be injected with additional liquidity in the backdrop of cumulative policy reforms due to Covid pandemic, which has been considered as a force majeure situation by the Government of India. This reduction in premiums will help in quick turnaround of projects and uplifting industry sentiments.

Project funding will be more viable

Ashok Mohanani, President, NAREDCO Maharashtra

After the stamp duty cut, Naredco Maharashtra welcomes yet another blockbuster decision of the Maharashtra government to reduce the construction premium by 50%. It will give a big respite to the developers, as the cost of premium as well as approval cost contribute 35-38% of the project cost, whereby the project cost will come down substantially. Mumbai alone attracts around 22 premiums which is higher than other top metro cities. Higher premiums put additional financial burden on developers leading to higher costs for the homebuyers. Projects that wish to avail the benefit of concession will have to pay the full stamp duty on the sale of flats, whereby the consumers will get direct benefit of this concession, granted by the state government. The decision will also bring the relatively higher construction premium at par with other states and the lending institutions will find the project funding more viable. It will result in more funding into the state's real estate sector.

Will help developers pass on benefits to homebuyers

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory

It's the much asked-for and required icing on the cake for the real estate sector, especially in the state of Maharashtra. After the steep, temporary reduction in stamp duty charges, the 50% reduction in premium payments until December 2021 will benefit the supply side immensely. It will also help developers pass on further benefits to homebuyers, invigorating demand for real estate projects that are under construction. This move is likely to propel developers to offer extended payment holidays and also give lucrative price proposals to buyers in projects where the inventory has been selling slowly. While the pandemic and subsequent lockdowns made developers focus on completing existing projects and largely postpone launching new ones, this move of halving the different kinds of premiums and levies is going to make developers contemplate going back to launching new projects.

Will boost demand.

Kamal Khetan, CMD, Sunteck Realty

The reduction in the construction premium on real estate projects by 50% till December 2021 is a significant decision taken by the state government to boost the real estate sector. The decision, coupled with reduced stamp duty cost, would help the sector to witness accelerated sales due to the feasible home prices in the upcoming time. It would incentivise the purchasing decision of the homebuyers and boost the residential real estate demand.

Will help rationalise input costs

Abhishek Jain, CEO, Satellite Developers Private Limited

After being hit by the pandemic, the real estate sector has seen a solid recovery on the back of stamp duty reduction and a good festive season. Now this move of reduction in premiums by 50% will help rationalise input costs for the developers and will go a long way in expediting project completion, thereby keeping price escalation in control. The industry will also witness new launches in the market, attracting investments from institutions. All in all, a good move that will sustain the growth of the real estate industry in the coming months.

A year of healing

Vikas Chaturvedi, CEO, Xanadu Realty

After a turbulent, tumultuous 2020, the Indian real estate sector is looking at 2021 as the year of healing. In this context, the Maharashtra government’s recent decision to reduce premiums charged on real estate projects by 50% is an extremely welcome move. It will strengthen the supply side, reduce project timelines, and rationalise input costs for developers in the state. Moreover, since the direct benefits are being passed onto the end-consumer, it will stimulate the regional market in Maharashtra by bolstering consumer purchase sentiment and investor interest. We are looking forward to the impact that this development will have in revitalising the real estate market in Maharashtra, as it can provide the template for similar deployments across the country.

State revenues may increase

Bhushan Nemlekar, Director, Sumit Woods Limited

After the stamp duty cut, this decision of the Maharashtra Government to cut premiums by 50% is a masterstroke. This will give a much needed impetus to the real estate industry in the state. We will see a very positive response from the developers and the stakeholders. I feel that even the revenue of the state government and the Corporation will increase because of this decision. This will also ensure a positive momentum going into the New Year after an effective last quarter for the industry on the back of lower interest rates, reduced stamp duty and festive offers by developers.


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