Property developers in the Mumbai Metropolitan Region (MMR) are hopeful that a waiver of stamp duty and the festival season will boost demand for new homes, especially in the affordable segment.
While home prices are expected to drop 10-25% from October onwards, developers and consultants said this will help a stagnant market to finally gain traction.
On 16 August, the Maharashtra government announced a cut in stamp duty on buying new homes to 3% from 1 September to 31 December, and to 2% from 1 January 2021 to 31 March 2021 to boost market sentiment. Prior to the decision, stamp duty charges were 5% in Mumbai, Pune, Nagpur and Nashik, and 6% in others.
“While the first few months of covid had its impact on the residential property market, the industry is starting to recover as demand returns from earlier fence-sitters,” said Gaurav Sawhney, president – sales and marketing, Piramal Realty. “The festive season will act as a stimulus to homebuyers. We expect many end-users to finalize on their decision of buying an apartment during the next couple of quarters.”
Property prices in Mumbai and MMR have performed the worst globally in the past year. A July study of 28 of the most expensive real estate markets in the world showed that residential property prices in Mumbai saw the steepest fall in value.
According to the Savills Prime Index World Cities H1 2020, homes in Mumbai lost 13.7% of their value in the year to June, and 5.8% of their value in the first half of 2020.
Even though it has only been a week since the stamp duty waiver, Bhavin Thakker, managing director (Mumbai), Savills India, said the real estate consultancy firm is already seeing an increase in enquiries, particularly in the affordable housing segment ( ₹50 lakh to ₹1.5 crore).
“Since the reduction is for a limited period of time, customers have to respond quickly,” Thakker said. “Overall, we expect a positive impact on sales during the festival season, especially since the prices have further reduced post-lockdown in the range of 10-25% depending on the location, stage of the project and of course, the total inventory available in that project.”
“I believe over the next four quarters, unsold housing inventory in MMR will come down to a great extent, simply because customers on the fence will now take a decision quickly and also because the slowdown in construction activity has delayed new inventory supply coming to the market,” Thakker said.
According to Rohit Poddar, managing director at Poddar Housing and Development Ltd, customers are coming back to assets like property as they are looking at the security provided by home-ownership.
“With pay cuts and job uncertainty, people have realized that they don’t want to continue renting but want to own the houses they live in. Because of these two factors, the demand revival in MMR is primarily in the affordable housing category, and it is coming from customers who work in sectors such as pharmaceuticals, FMCG, agriculture, e-commerce – where their industries have performed better than the rest through the lockdown,” he said. He said the government and the central bank should encourage banks to offer loans on easy terms.