There might be some good news in store for home buyers in Maharashtra. After reducing stamp duties in the state from 5 percent to 2 percent until December 31, 2020, to boost residential sales, the Maharashtra government is now considering reduction in the premiums on real estate projects by at least half, following recommendations of the Deepak Parekh Committee.
This decision by the government will reduce the expenses on real estate projects which in turn will reduce the prices of the real estate projects for the home buyers.
The reduction in premium and cess will bring huge relief to the builders. Premium refers to the multiple charges that are levied by the state with respect to approvals for initiating, progressing, and completing the area or additional area in a project.
These could include the fungible premium, premium paid for FSI (floor space index), open space deficiency premium, premium paid for more ground covered for construction, lobbies, lift wells, and staircase premium among others.
These premium charges form as much as 30% of the total cost of the flat. According to Rajendra Sawant, chairman of Nirman Realtors, the premium charges are very high right now and if there is a cut, the builders will get a lot of relief and the home buyers will also benefit if the cost is reduced.
“Maharashtra government has given a lot of convenience by giving premiums in installments and this has increased the cash flow of the builders,” Sawant said.
In order to speed up new projects and constructions, the state government is also considering giving relaxation in the condition of 12 meters and 16 meters of road required in the construction. The state government is also preparing to approve the construction of 9 meter roads.
A senior Maharashtra government housing department official said that the state government is taking several major decisions to give a boost to the real estate industry, from paying premiums in installments to 12 and 16 meter road conditions, and 9 meters will also be approved.
The Deepak Parekh Committee had also suggested the state government to cut the premium, according to the committee’s report. Mumbai has 22 types of premium charges, whereas builders have in Bangalore have to give 10, in Delhi they have to give 5 and in Hyderabad they have to give 3 types of premium charges.
Every year BMC earns revenue of around Rs 2000 to 2500 crore from collection premium and cess. However, in 2020, this revenue has come down to just Rs 600 crore.
BMC Commissioner Ikbar Chahal has also written a letter to the city development ministry to give 50% rebate in premium and cess charges to give relief to the real estate sector.