(MENAFN- Khaleej Times) The Maharashtra government's bold decision to reduce premiums by 50 per cent under the new Development Control and Promotion Regulation (DCPR) rule 2034 across the board for on-going and new property projects upto December 31, 2021 has been hailed across the industry.
Dr Niranjan Hiranandani, President Naredco, said: 'This move will go a long way in expediting the project completion and the industry will witness new launches in the market. The industry applauds this booster dose making many projects viable and we shall adhere to the rules laid down in lieu of availing these benefits. 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.
The Mumbai Metropolitan Region (MMR) recorded sales of 22,407 residential units while new launches in the same period were recorded at 18,515 both registering a year on year growth. Residential sales grew 80 per cent in Q4 2020 over same period last year while sales were a modest 3 per cent above last year levels, according to Knight Frank's report.
'The industry will be injected with additional liquidity in the backdrop of cumulative policy reforms due to Covid pandemic, which has been considered as a ‘force majeure' situation by the government of India. This reduction in premiums will help in quick turnaround of projects and uplifting industry sentiments, added Hiranandani.
Endorsing similar view, Shishir Baijal, chairman and managing director, Knight Frank India for real estate industry, said: 'This will make the real estate sector attractive for investments from institutions. The reduction in premiums, coupled with the revision in stamp duty (that has helped catapult demand) will make real estate development in the state lucrative. Going forward, following the growth trend of demand, we expect new launches to increase accordingly.
Industry applauds
Ashok Mohanani, President, Naredco Maharashtra
After the stamp duty cut, Naredco Maharashtra welcomes yet another blockbuster decision of the Maharashtra Government to reduce the construction premium by 50 per cent. It will give a big respite to the developers, as the cost of premium as well as approval cost contribute 35 to 38 per cent of the project cost, whereby the project cost will come down substantially. Mumbai alone attracts around 22 premiums which is higher than other top metro cities. Higher premiums put additional financial burden on developers leading to higher costs for the homebuyers. Projects that wish to avail the benefit of concession will have to pay the full stamp duty on the sale of flats, whereby the consumers will get direct benefit of this concession, granted by the state government. The decision will also bring the relatively higher construction premium at par with other states and the lending institutions will find the project funding more viable. It will result in more funding into the state's real estate sector.
Srinivasan Gopalan, chairman, Unitern Advisors
Kudos to Maharashtra government to have given impetus yet again to the real estate industry by reducing premiums by 50 per cent thereby saving cash flows for the developer who may choose to pass on the same to the home buyer.. I anticipate home buyers to take advantage of the same and buy their dream home. Great time for NRIs to invest. This is the right time to buy properties in Mumbai thereby taking advantage of both the premium reduction as well as the benefit of lower stamp duty and registration fees given that home loans are at their all time low as even 6.8 per cent
Abhishek Jain, chief operating officer, Satellite Developers Private Limited
After being hit by the pandemic, the real estate sector has seen a solid recovery on the back of stamp duty reduction and a good festive season. Now this move of reduction in premiums by 50 per cent will help rationalise input costs for the developers and will go a long way in expediting project completion thereby keeping price escalation in control. The industry will also witness new launches in the market attracting investments from institutions. All in all a good move that will sustain the growth of the real estate industry in the coming months.
Bhushan Nemlekar, director, Sumit Woods Limited
This will give a much needed impetus to the real estate industry in the State. We will see a very positive response from the developers and the stakeholders. I feel that even the revenue of the State Government and the Corporation will increase because of this decision. This will also ensure a positive momentum going into the New Year after an effective last quarter for the industry on the back of lower interest rates, reduced stamp duty and festive offers by developers.
Shishir Baijal, chairman and managing director, Knight Frank India
After the recommendations of the Parekh Committee the cut of 50 per cent on premiums on real estate project will help the supply side to stabilise make development in the state more feasible. New supply has been restrictive due to many reasons including cost of raw material (land being raw material to real estate development) in the last many years, especially in large volume markets like Mumbai and Pune. This move will help rationalise input costs for the developers as well as help supply momentum, thereby keeping price escalation in control whilst striving towards the demand supply equilibrium in the market. However, since both the demand side as well as supply side measures are short term, it may prove beneficial to jump start the real estate sector giving it an orbital velocity for next level growth.
Kaushal Agarwal, chairman, The Guardians Real Estate Advisory
It's the much asked for and required icing on the cake for the real estate sector, especially in the state of Maharashtra. After the steep, temporary reduction in stamp duty charges, the 50 per cent reduction in premium payments until December 2021 will benefit the supply side immensely. It will also help developers pass on further benefits to homebuyers, invigorating demand for real estate projects that are under construction. This move is likely to propel developers to offer extended payment holidays and also give lucrative price proposals to buyers in projects where the inventory has been selling slowly. While the pandemic and subsequent lockdowns made developers focus on completing existing projects and largely postpone launching new ones, this move of halving the different kinds of premiums and levies is going to make developers contemplate going back to launching new projects.
Tanuj Shori, founder and CEO of Square Yards
The reduction in construction premium by 50 per cent till December 2021 by the Maharashtra Government will provide a much-needed propulsion to India's most expensive real estate market, battered by the pandemic, a liquidity crunch and shaky business sentiments. This welcome move will enhance the development of housing projects at lesser input costs, reduce working capital requirements for developers, ease financial strain on stressed realtors, expedite project completion and renew developer interest in new project launches. Besides softening the prices of new inventories, the rationalising of construction premiums will also make projects in prime locations viable via reduction in approval costs and boost redevelopment projects. Since realtors will pass on the reduced cost benefits to homebuyers, it will translate into exponential sales, with stamp duty cuts, low-interest rates and attractive payment schemes sweetening deals further. Increased project development will also help the state government cover up revenue losses through higher stamp duty and registration revenue collections.
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