The sector has been facing a slowdown for the past few years which has been exacerbated by COVID-19 led nation-wide lockdown.
The residential real estate’s volume and price growth are closely integrated with the GDP growth rate. Given that India’s GDP growth rate has been sagging and is likely to witness historic lows in FY21, it is highly unlikely that temporary measures such as one-time reduction in stamp duty for a limited period will revive confidence in the real estate markets. Income slowdown amid levered households’ balance sheets may only intensify the slowdown in the residential real estate in the near term.
The two key residential real estate markets of Maharashtra – Mumbai Metropolitan Region (MMR) and Pune may react differently to this measure, given the structural difference between these two markets, said Ind-Ra.
MMR and Pune have seen a decline in weighted average prices (across ticket sizes) at a CAGR of 3% and 0.5%, respectively, while all India prices increased about 1% during FY16-FY20.
MMR particularly has almost 75% of its inventory in ticket size upwards of Rs 50 lakh and may thus require a little more than stamp duty reduction to encourage prospective buyers.
On the other hand, Pune has equal split between Rs 50 lakh and upwards and Rs 50 lakh and below ticket size; and thus, lower ticket sizes may still see some uptick, given that the capital values in that segment have remained more or less stable.
Thus, anticipation of a further decline in prices may offset the benefits offered by temporary reduction in stamp duty.
The state government had proposed to reduce stamp duty by 3% for the period 1 September to 31 December 2020, and thereafter to 2% between 1 January to 31 March 2021, from the present 5%, across Maharashtra.