Monday, August 31, 2020

"Stamp Duty Reduction" named Maha Sale Offer!

Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it... Ronald Reagan.

No need to introduce this name yet for few ignorant to the world, Ronald Wilson Reagan was an American politician who served as the 40th president of the United States from 1981 to 1989 and became a highly influential voice of modern conservatism. Prior to his presidency, he was a Hollywood actor and union leader before serving as the 33rd governor of California. And I am happy rather most of real estate related people will also be happy that finally our country’s rulers started singing the same tune as Mr.Reagan. Yes, I am referring to probably biggest & positive news (read as step) regarding stamp duty of land/flats/shops or any such immovable property which we call real estate. And more important is not just about the biggest news; more is about later part i.e. positive step or news which has been rare with the real estate for some time now!
And no wonder it’s like a breeze in hot summer for many real estate people (read as builder) & as usual media hailed it as boon to real estate & step taken for them i.e. builders. Indeed 2% stamp duty is a big thing but all those who are rejoicing keeping due respect this is just for three months & post that it will be 3% that too till March 21 end, so in all nearly six months to make hay day for home or land or any property buying! I am not a citric yet let me share this is just one of the incentive govt has given & it’s not for builders but for the flat holders though in a way it will make more home buyer to go for the kill (read as the deal) & finalize it when its home or commercial premise buying is true but saving will be of the home buyer & not the builder, mind it! 

Again many (even my fellow builders) will say why I am crying, well I am not, I am just sharing about the facts of trade, as this will definitely increase the turn-over which also was one aspect of the slowdown (read as lockdown). Agreed the step is welcomed by the State govt as it’s a big dent on their pocket but it’s a calculated step just the way when some big brand announces “Three Day Sale”, only here, the brand is Mai Baap Govt itself. As we all know by now the stamp duty which is a surcharge (its not a tax, mind it) or fee or service fee whatever you call it charged by the State Govt on any immovable property deal which happens between two parties, they can be builder-builder, builder-land lord, builder-flat buyer or even flat buyer-flat buyer i.e. resale flat deals. This was nearly 7% of the transaction cost or ready reckoner rate whichever is higher. Means you buy a land or flat or shop worth Rs 1 Cr then if you will have to pay nearly Rs 7 lakh rupees to the State govt as stamp duty on the deal. And now with this “Maha Sale Offer”, it will be just Rs 2 lakh till Dec 20 & Rs 3 lakh post that till March 21!  (* Well, till I started writing this as ususal new GR came ie Govt Rules or regulation whatever & for PMC/PCMC means Pune & Pimpri-Chinchwad, PMRDA the stamp duty “Maha Sale Offer” has been again increased to 3% from the anounced 2%; and post Dec 20 it will be 3.5%, well thats how the govt works!)

And it is a big saving especially for the genuine flat or office buyers in these times where every single rupee counts! But then the home buyer must understand (read as property buyer) that this is bonus to him or her directly by the govt & the builder is not going to get a single rupee out of this “Stamp Duty Discount Sale” by the govt! As many aspiring clients including media are portraying like "Achhe Din" to real estate thinking it’s only the builders which will be benefitted by govt’s this decision of reduction in the stamp duty; no sir, it’s not & even the builders also must understand it it! This stamp duty reduction will help in making people to conclude on their decision to buy the home or office or shop & save on buying cost of the property & this will generate or say create momentum in the real estate market & the money will roll-in, which will be of the use of the builders, is the logic! I am deliberately warning this to the builders who usually end up considering sales as their profit! And the customers are no more ignorant fools the way they were earlier, they sense the blood just like the sharks now & nothing wrong as for years it was reverse so the game has changed. So now the customer will negotiate to get most out of the deal saying if govt can take on the losses to their income why the builder can’t further reduce their rates! So it’s a test of nerves of the builders as well the clients because one needs desperately to sale his product while others knows that desperation & till now wasn’t in hurry but if he (read as the buyer) wants to earn from the savings via govt then there is time limit, this is warning to the clients.

I think this is good move by the govt for the one of its first in many years considering real estate as their revenue earning source also as from the stamp duty registration the State govt gets yearly approx Rs 30,000 crore (estimated for 20-21) & sure its "Baniya” (i.e. Marwari thinking, no offense guys in good spirit) that more turnover is better way to earn by reducing sale price than no turn over with higher sale price for the govt on the stamp duty front! Best part about reduction in stamp duty decison is first time the Mai Bapp govt has thought wisely or say logically & accepted that real estate industry ( read as builders) are their partner in actually in earning revenue because if the real estate makes losses so will the govt!

Now the real estate (both flat buyers & builders) should expect more such bold & logical moves on other fronts also of the industry & one of the most important is infrastructure development. Time & again we have put forward for the consistent & balanced physical development like roads, water, drainage, power & public transport (basics) like infrastructure, in all the suburbs of the cities & not just few locations or areas. As then the home buyer gets choice as well it helps in boosting confidence  of him or her for having a own home with all above things in place, which builder alone can’t ever develop around the project. The infrastructure helps making more land available for the development & thus keeping rates of the finished product i.e. a home in control for both i.e. builder & the home buyer. Agreed just like any private organization the govt also has limitations on funding & a dent in stamp duty income was the first sign it recognized the threat of entire real estate going in loss. But as I said other steps are also equally important & with infrastructure another thing is curbing illegal homes or slums as they damage two ways; one they add zero revenue to govt’s kitty but adds only burden on infrastructure & second they are direct threat to genuine revenue generating real estate. So, keeping all this in mind, hope for the good the line of thinking which govt has chosen will continue.

Same way reconsidering policies like No GST on completed home is a big hurdle as home buyer delays his decision to buy a home in making as rates are not increasing anyway, so there has to be GST in same format on any type of home, ready or in making. At the same time the home buyer now must understand if they wait for ready possession home to save GST they will end up losing on Stamp Duty as this offer of reduction in the stamp duty is for limited period! I will never say hurry, stock limited types thing when its real estate, rather take your time & chose wisely is the way when its real estate! But don’t forget “Pahale aap, pahale aap, karate karate, Lucknow ke do Nawaboki train, unhe platform pe chodkar nikal gayi thi”; it’s a famous phrase in Hindi to explain importance of deciding things in right time, sorry can’t translate it in English!

Lastly along with thanking to the Govt for stamp duty reduction decision lets accept that real estate is a three legged race of the builder, the home buyer & the govt; and if we want to cross the finish line in good time then all the three entities should run together & in one direction by supporting each other & not by pulling individually in their individual direction, mind it & all the best!
Sanjay Deshpande 
Sanjeevani Dev.

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