Stamp Duty Cuts, Low Interest Rates Pave the Path for Real Estate Growth

Real estate has been reeling under a slowdown for the last few years, thanks to the indirect impact of many policy changes and lack of implementing many more that has been repeatedly requested by the developer fraternity. This year the world was affected by Covid-19 pandemic, where real estate was unarguably the most suitable investment product. The pandemic depicted in India and the whole world that at the time of crisis, it is real estate which stands rock solid as an investment as compared to other asset classes and thus the segment started to show growth.

The Forward Step

The upward curve of the segment sets off in Q2FY21 and this has been consistently growing, breaking the jinx of all these years. In fact, all through the nationwide lockdown implemented, realty transactions continued to happen virtually. This positive development can be attributed to reasons like the RBI pumping liquidity in the segment, increased significance of home ownership among the buyers, deferred payment scheme in favor of RTMI properties and the sales incurred during festive season. The home buyer’s comprehension that capitalizing in real estate is the most secure long-term investment in a fluctuated market has also created a strong base for the sector to grow. Apart from these welcome measures, one of the biggest catalysts for real estate sales is the stamp duty cut, slashing of repo rates and an all-time low interest rates on home loans. 

Stamp duty rate cuts

It is no secret that many potential home buyers are fence sitters owing to the huge financial obligation involved in property buying. In addition to paying the down payment and availing of home loans where one would be paying an EMI every month, fringe charges like registration charges, stamp duty charges, etc. hurt home buyers by shaking up their entire budget, especially now when the entire world is battling a pandemic. Any respite in these charges is a big relief and gives a push of confidence to the customer. Aptly understood by the Maharashtra government, stamp duty reduction from 5 per cent to 2 per cent in this state has been a game changer. The same will become 3 per cent from January 1, 2021 to March 31, 2021.  The results of this slash were to be seen immediately with Mumbai recording registrations that increased significantly. Similarly, Pune’s property market has been witnessing healthy green shoots which has brightened the hope for better real estate sales for the upcoming quarters. Pune has now recorded sales of 9,412 units, which is a significant jump from the 5,503 sales the city had registered in the second quarter. The recovery of pent up property demand coupled with proactive government measures like lowering of stamp duty have been the main reasons for the cities bullish sales.

Low interest rates on home loans

Global exposure has resulted in people taking realty investments seriously for both self-consumption and as an asset. This has also led to more people between the 25 to 35 years of age because they can leverage on the home loan financing option. However, the rate of interest on the home loans was a huge matter of concern for home buyers that is tackled now. Interest rates have come down by a 15-year low currently, making it one of the most lucrative times to borrow a home loan. After the RBI reduced the repo rate to 4 %, most leading banks in India offer home loans below 7 percent annual interest. Resultantly, more and more home enquiry leads translated to sales. 

Additionally, developers are offering bespoke payment schemes like 10:90, 20:80 etc., waiver of stamp duty/registration charges/ GST (8% of the property cost have to be paid as GST on under-construction properties) and cash-back schemes that is reducing significant financial burden of home buyers.

Finally, with all desirable measures in place, realty investment is a win-win situation for both end-users who are experiencing significant reductions in monetary burden and the realty sector which is marching up.