MUMBAI: After dilly-dallying for over three months, the state cabinet on Wednesday approved the proposal to reduce real estate premiums by 50%.
However, the approval came with some riders after the Congress raised some queries on the scheme and leader of opposition (LoP) Devendra Fadnavis alleged that the scheme was drafted to favour only big builders.
According to the revised scheme which was approved on Wednesday, builders will have to pay premiums based on the 2019 ready Reckoner (RR) rates or the 2020 rates, whichever is higher. All real estate premiums and charges are calculated on the basis of RR rates. Developers who opt for the 50% reduction in premiums will also have to pay the entire stamp duty when they sell flats to buyers. Builders will have to give an undertaking to the local bodies that they will pay the entire stamp duty and not charge any stamp duty from home buyers.
“The cabinet has approved the proposal to give a 50% discount in premiums to construction developers. Builders who opt for this scheme will have to pay full stamp duty and can’t charge any stamp duty from home buyers. It will give a boost for development projects,” said Prajakt Tanpure, minister of state (MoS) for Urban Development.
However a senior bureaucrat pointed out that builders will have to pay premiums based on either the 2019 or 2020 RR rates, whichever is higher. In 2020, the RR rates of several land parcels in the city were reduced by almost 70%.
Last month opposition leader Devendra Fadnavis had accused the Maha Vikas Aghadi (MVA) government of offering huge sops to a preferred set of developers under the garb of boosting demand in the economy.
Fadnavis had said the Deepak Parekh panel’s recommendations, which were discussed at the last state cabinet meeting, would result in a “windfall” of as much as Rs 2,000 crore in the specific projects of five developers. He had alleged a substantial decrease in RR Rates such that it benefitted certain plot holders to the extent of a 70% reduction in payment. These plots are owned by developers in the western suburbs by the seafront, in the eastern suburbs and in the island city, he claimed.
In addition to the reduction in RR rates, Fadnavis said the government was further proposing to decrease premiums, levies, cess imposed by the municipal corporations. Fadnavis had said that if the state government doesn’t take corrective action then he would file a PIL in the Bombay high court against this scheme.
At the last cabinet meeting, the Congress’s Aslam Shaikh had said that the scheme was too builder friendly and that the Congress wasn’t consulted while the proposal was drafted.
Dr. Niranjan Hiranandani, President NAREDCO said, “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. 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 possibility of lower price for new inventories that shall come into the market. This reduction in premiums will help in quick turnaround of projects and uplifting industry sentiments.”
Anuj Puri, Chairman, ANAROCK Property Consultants, said, “Rationalizing these premiums will definitely give a boost to Mumbai’s real estate industry. Reduced development costs to developers and therefore lower purchase cost to homebuyers can result in increased demand.”