NEW DELHI: Shares of realtors with exposure to Maharashtra rallied up to 15 per cent in Thursday’s trade after the state government slashed stamp duty to 2 per cent from 5 per cent for the September-December period in a bid to revive the industry. The move was welcomed by both realtors and market analysts.
Stamp duty on sale deed documents in the state now stands at 2 per cent between September 1 and December 31. The relaxation will continue, but with a 3 per cent stamp duty rate from January 1 to March 31. The second stamp duty cut in 2020 is expected to aid Mumbai-centric players such as Oberoi Realty, Godrej Properties and Sunteck Realty.
Kotak Institutional Equities said registration activity had come off by 45 per cent in June quarter, even though some improvement was seen towards the latter part of the three-month period. The brokerage believes the move by the Maharashtra government could influence other states to follow suit.
“The move by Maharashtra could prompt other states to follow a similar path and give a temporary relief to the sector. The stamp duty reduction, coupled with historically low interest rates and the recent decline in prices may aid fence-sitters to make their purchasing decisions and help salvage demand in an otherwise lost year,” it said.
Following the development, shares of Oberoi Realty climbed 8.28 per cent to hit a high of Rs 397.95 on BSE. Sunteck Realty soared 14.61 per cent to hit a high of Rs 294.90. Godrej Properties advanced 5.61 per cent to Rs 897.65.
The pandemic-led slowdown has weighed heavily on real estate volumes, with demand for property in top Indian cities, including Mumbai, plunging 70 per cent YoY to 38 million square feet in June quarter. New project launches have come to halt and were at 20 million square feet, down 80 per cent YoY in June quarter.
The Mumbai Metropolitan Region (MMR), though, fared better than the rest of India and accounted for 24 per cent of new product launches. It was second only to Bengaluru (39 per cent) in terms of project launches. In case of demand, MMR contributed 40 per cent of total demand, followed by Pune (22 per cent) and Bengaluru (13 per cent).
“The Maharashtra government’s move will certainly boost sales as all those sitting on the fence will take the plunge. What’s commendable is that they also put a timeline to it, which would encourage buyers to purchase sooner rather than later,” said Ram Raheja, Director at S Raheja Realty.
Among the Mumbai-based stocks, Oberoi Realty is seen benefitting from the completion of several of its larger projects that will eliminate the incidence of GST. “We remain constructive on the listed real estate players, as we believe the current pandemic will further aid consolidation of the industry as weak players are struggling to survive the sales drough in a year of heightened economic uncertainty,” it said.
Ramesh Nair, CEO & Country Head (India) at JLL said it was is a much-awaited measure from the Government of Maharashtra as the residential real estate markets in the two cities of Mumbai and Pune are reeling under pressure.
“The rest of Maharashtra will also benefit from the stamp duty reduction. Undoubtedly, this will augur well for prospective home buyers, as it is expected to result in direct financial savings for them. It will act as an attractive incentive towards speeding up the time taken for several deal closures in the current market environment. Though temporary in nature, this is a strong inoculation into the dampened market sentiment and will help in reviving sales,” Nair said.
Nair said the residential market is unlikely to offer this palette anytime soon – rationalised pricing, lowest home loan interest rates, extension of credit linked subsidy scheme and developers doling out lucrative schemes and now this is topped with lower stamp duty rates.
Manju Yagnik, Vice Chairperson, Nahar Group and Vice President NAREDCO (Maharashtra), said the stamp duty cut was the second this year. “The 3 per cent cut combined with the 1 per cent stamp duty cut announced earlier in the year will help attract investment into the housing sector,” she said.