Is Mumbai real estate being overtaxed?
New surcharges likened to sin taxes
Just when it looks like Mumbai is recovering from the double whammy of India’s demonetisation drive and new housing law, property developers in the city are faced with a new levy on home sales.
Under a bill passed Tuesday by the Maharashtra assembly, buyers will be required to pay a surcharge of 1 percent on the value of the property sold, leased, mortgaged and gifted in the city.
The Mumbai Municipal Corporation Act (second amendment), pending governor’s assent, will compel the Maharashtra government to contribute a grant-in-aid to the company. The funds, equivalent to revenues from the surcharge, will be used to defray the municipal corporation’s plans to build a metro, monorail, freeways, and sea link.
The government decided to levy the surcharge as it has limited resources to raise money, an official of the Urban Development Department had admitted to BloombergQuint.
The surcharge will be on top of the 5 percent stamp duty and 1 percent registration fee currently in place on ready properties in Mumbai as well as the 12 percent goods and services tax (GST) levelled on under-construction apartments.
“Housing is a basic need but the government has taxed it like alcohol and cigarettes,” said Niranjan Hiranandani, co-founder and managing director of Hiranandani Group, and president of National Real Estate Development Council.
“The bill goes completely against the government’s affordable housing push.”
Despite a 128 percent year-on-year rise in fresh projects, sales inched forward by just 1 percent in the first half of 2018 from the same period a year ago, according to Knight Frank India.
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