Maharashtra: State cabinet clears 50% cut in premiums for builders

After dilly-dallying for over three months, the state cabinet finally approved the proposal to reduce construction premiums paid by builders by 50%. This reduction will only be for a year and is meant to give a fillip to the building industry, hit hard by the lockdown.

However, the approval came with some riders after the Congress raised questions about the scheme and opposition leader Devendra Fadnavis alleged it was drafted to favour some top builders.

According to the revised scheme, builders will have to pay premiums based on the Ready Reckoner rates for 2019 or 2020, whichever is higher, and those who opt for it will have to pay the entire stamp duty that they cannot pass on to homebuyers.

To that end, builders will have to give an undertaking to the local bodies that they will pay the entire stamp duty and not charge any stamp duty from homebuyers. The scheme will be valid till December 31, 2021.

Prajakt Tanpure, minister of state for urban development, said, “The cabinet has approved the proposal. Builders who opt for this scheme will have to pay full stamp duty and can’t charge any stamp duty from homebuyers.”

Fadnavis said, “This decision will help some select builders make windfall profits. The gain they will make is much more than the stamp duty they will pay on behalf of homebuyers. This entire discount scheme must be regulated and monitored by Maha Rera. There must be a mechanism to ensure every single penny saved by a builder by availing premium discount must be passed on to homebuyers. In the current format, this scheme is only for helping builders, not homebuyers.” He added, “There are a lot of rumours on how a deal was brokered for approving this scheme. To ensure homebuyers and not just builders benefit, Maha Rera regulation is a must.” In 2020, the RR rates of some land parcels in the city were reduced by almost 70%. “The Government Resolution will be issued soon,” a senior bureaucrat said.

Niranjan Hiranandani, president of National Real Estate Development Council, said, “This reduction will go a long way in expediting the project completions and the industry will witness new launches in the market. Over a period there is possibility of lower property price for new inventories that shall come into the market.”

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