Maharashtra government’s decision to reduce real estate premium by half is expected to generate economic activity worth Rs 10 lakh crore in MMR, real estate industry body Credai MCHI has said.
CREDAI MCHI also estimates that the premium reduction will help residential real estate new launches make a comeback in Q1 of 2021, to almost 100% of pre-Covid level (Q1, 2020). Premiums and approvals attribute to approximately 30% of project cost, according to CREDAI MCHI research.
The move is also expected to make housing more affordable for homebuyers in the region.
MMR witnessed over Rs 5 lakh crore worth of real estate being sold and registered in the quarter ending 2020, according to CREDAI MCHI research.
The last quarter also witnessed a growth of more than 50% in terms of number of units sold as compared to the corresponding quarter of 2019, signifying the increase in demand for residential properties in MMR.
“Maharashtra Government’s decision to reduce the real estate premiums by 50% in the state is a monumental decision for not just the real estate sector but also in the bid to revive the state’s economy as different industries try to find their feet in the post Covid-19 era.
“Reducing the premium for real estate will not only make houses more affordable for homebuyers but it will also make a number of projects more viable for developers – underlining the vast significance of this move. With a strong multiplier effect in play, we project a cascading effect for over 250 industries – providing a fillip to the overall economic activities in MMR and spearheading its revival,” said Deepak Goradia, president, CREDAI MCHI.
After reducing stamp duties in the state to boost residential sales, the Maharashtra government on January 6 approved the proposal to cut the premium on real estate projects by half till December 31, 2021. Developers availing of the scheme would have to pay full stamp duty and registration charges on behalf of homebuyers.
Premium typically refers to the multiple charges that are levied by the state with respect to approvals for initiating, progressing, and completing the area or additional area in a project.
On the recommendations of the Deepak Parekh committee, the Maharashtra government had been weighing a reduction in the premiums on real estate projects under the Development Control and Promotion Regulations (DCPR). The committee had also proposed that the reduced premiums be paid at the time of granting the occupancy certificate, without any interest being levied.
According to the committee, as of date, there are as many as 22 premiums collected in Mumbai under various heads – including FSI, staircases, lift well, lobbies, etc. This is significantly higher than in other comparable top cities of the country.