Revenue, finance depts oppose CM’s stamp duty slashing announcement
Maharashtra's CM Shinde faces opposition from finance departments over proposed stamp duty cuts, risking ₹25,000 crore in revenue amid populist spending.
MUMBAI: Although chief minister Eknath Shinde has announced reduction in stamp duty on registration of properties to give boost to the real estate sector, state’s revenue and finance departments have opposed the move saying it would lead to loss of upto ₹25,000 crore revenue which would not be bearable when the state is spending enormous amounts of money on populist schemes.
Shinde had made the announcement at an event of real estate and housing industry on October 13, 2022, which was seconded by housing minister Atul Save in another meeting.
The chief minister’s office, thereafter, sought the opinion of the revenue department which governs the registration of properties. The revenue department, and even the finance department, have opposed the move saying it will lead to heavy losses to the state exchequer. Slashing of the stamp duty by 1% will lead to a loss of nearly ₹9000 crore and reduction proposed upto 3% will result in the loss of over ₹25000 crore. Both the departments have now said that in the wake of the rolling out of populus schemes like Ladki Bahin, the loss of more revenue was not advisable, said an official from one of the departments.
While Shinde had assured the sop a year ago, Save had announced this in a conference organised by NAREDCO last month.
“Apart from the announcements by the CM and housing minister Save, the central government had recently sent an advisory to the state government asking to slash the rates of stamp duty to boost the real estate sector. In the backdrop, the CMO had written to us seeking our opinion on it. We have conveyed our opposition to the proposal,” said the official.
Another official from the Office of the Inspector General of Stamps said that the state government has not increased the ready reckoner rates for the last three years and in a way, it is a concession extended to the realty sector. “The natural growth in the rates of the properties in 5-10% and not increasing the rates for the last three years for various reasons is like extending monetary benefits to property buyers. We have conveyed this, too, to the CMO. The government seems to be convinced with our explanation.”
After collecting over ₹50,000 crore in the financial year 2023-24, the revenue department has set a target of collection of ₹55,000 crore from stamp duty. Collection from stamp duty is the second highest after GST collection in the state revenue. The stamp duty on property ranges between 5% and 7%, as some cities like Nagpur, Pune have 1% local body tax and 1% metro cess over 5% stamp duty while in rural areas, it is 5%. In Mumbai, it is 6% with metro cess of 1%. “It would be difficult for us to meet the target in the absence of amnesty schemes and hike in the ready reckoner rates. This is one more reason to oppose the proposal,” the official said.
Meanwhile, the revenue department on Tuesday extended the period of the second phase of amnesty scheme by one month till September 30, 2024. Through the scheme, the government has waived the penalty and interest on the dues of stamp duty for years.
Housing minister Atul Save said, “I have spoken to revenue minister and will also speak to deputy chief minister and CM about it. Reduction in stamp duty leads to rise in sale and, in turn, revenue, like we witnessed during the pandamic. Revenue department is opposing it, but we will convince them and bring the proposal before the cabinet. Our endeavour is to bring it before the assembly polls.”
Pankaj Kapoor, managing director of Liases Foras Real Estate Rating & Research Pvt Ltd, said, “There is no reason for any such slash in stamp duty as the market is in productive state unlike during the pandemic and 70% of the sales come from luxury and ultra luxury segment, which means it does not work in favour of affordable housing. The market is clocking good volume and unsold inventory is not unreasonably high. This could be a populist announcement to woo the sector but it has no valid reason behind it.”