In a beleaguered market, shares of real estate companies heavily invested in Mumbai faced significant declines today as media reports emerged indicating that the Maharashtra government is considering a substantial increase in stamp duty for properties.
Specifically, shares of prominent realty firms including India Bulls, Oberoi, and HDIL experienced drops of up to 6 percent following these revelations regarding a potential hike in stamp duty by as much as 160 times. For example, India Bulls Real Estate saw its shares plunge by 4.53 percent, settling at a low of Rs 65.25, while Oberoi Realty slid down by 2.32 percent to Rs 250 compared to its previous trading level. Similarly, Housing Development and Infrastructure Ltd (HDIL) recorded a notable decrease of 6.64 percent, dropping to Rs 89.15 on the Bombay Stock Exchange (BSE).
Market analysts are predicting a significant impact on both residential and commercial leave-and-licence property prices should the proposed hike come into effect, claiming it would exacerbate the existing sluggish demand in Mumbai’s real estate sector. “This news is going to be negative, and stock prices of realty companies with exposure in Mumbai took a hit. The cost of property in Mumbai will move up; it will worsen the situation as there are already very few takers at the present interest rate regime,” commented Paras Bothra, Research Head at Ashika Stock Brokers.
In addition, broader market weaknesses further pressured these stocks, as reflected in the performance of the 30-share benchmark index Sensex, which was trading at 17,113.62, down 248.12 points by 1321 hours.
According to various media sources, the Maharashtra government has proposed raising the stamp duty on leave-licence agreements to 0.1 percent of the market value or 1 percent of the average annual rent or deposit paid, whichever amount is higher, specifically for residential properties. In terms of commercial properties, the proposed duty for lease agreements extending beyond 60 months is set at 0.4 percent.
This represents a staggering hike from the previous fixed amounts of Rs 25,000 and Rs 50,000 for residential and commercial properties for 60 months, respectively.