Status as on- 28/09/2020
The Covid-19 pandemic has caused an unprecedented drop in the demand in the real estate sector. Various agencies are trying to come up with solutions to revive the real estate sector. In this regard, the Uttar Pradesh Real Estate Regulatory Authority [“UP-RERA”] has requested the state government to reduce the stamp duty on the registration of property by 2%. Additionally, it has also been requested that the state government drop the registration fee for agreement-to-sale documents to INR 2,000, which is presently charged at 25% of the stamp duty charges paid for registration of the property.
Stamp duty is a tax levied by the State government on the sale of property. The payment of stamp duty is governed as per the provisions of the Indian Stamp Act, 1899 [“Stamp Act”]. Under the Stamp Act, liberty is given to the states to determine the rate of duty to be paid by the concerned person at the time of sale of property. In this regard, the rate of duty in Uttar Pradesh currently ranges from 5% to 7% of the value of the property. The UP-RERA has recommended that this duty be brought down to 2%.
The recommendation of reduction in duties comes after a lot of developers had lobbied to seek a reduction in stamp duty so as to leverage themselves against the demand shrinkage in the real estate sector. The purpose of reduction of stamp duty is to cause a reduction in the total cost of acquisition for the end-user, i.e., the homebuyer.
It is hoped that by these endeavors, i.e., by the reduction of duties to be paid at the time of registration, the real estate sector would witness the much-needed boost in demand. It is pertinent to note that similar steps had already been taken by the governments of Maharashtra and Madhya Pradesh.
Therefore, in this pandemic, UP-RERA’s proposal, if accepted by the State Government, could prove to be a much-needed relief towards the revival of real estate sector. It is in the best interest of not only the home buyers and developers but also for the economy that the demand in the real estate sector be boosted.
Disclaimer– The above article is based on the interpretation of the related laws and judicial pronouncements. The readers are expected to take legal advice before relying on this article. The author can be reached at firstname.lastname@example.org or call the IP expert at 8383011629.