Maharashtra: CM set to cap real estate premium incentive, no benefit to builders after December 31, next year

The revised proposal will soon be tabled before the Cabinet, officials added.(Representational)

The Maharashtra government’s proposal for slashing construction premiums for building projects is set to become applicable for payments made till December next year only. According to sources, Chief Minister Uddhav Thackeray has instructed officials not to extend the benefit beyond December 31, 2021.

Acting on findings of a committee led by HDFC Chairman Deepak Parekh, the state urban development department had earlier formulated a proposal of lowering construction premiums and levies by 50 per cent for all building projects sanctioned before the December 31, 2021 deadline, where the first installment of such premiums was paid.

The sop, once availed, was originally proposed to be continued till its completion, which could take anywhere between four to five years or more.

But the CM is not in favour of giving the builders a carte-blanche.

Sources said that Uddhav, who reviewed the proposal on Monday, has directed senior officials to fine tune it, capping the benefit only for payments made until December 31, 2021. Additionally, to ensure that some of the benefits of the concessions were passed on to flat buyers, the government has decided to make it mandatory for all those availing the benefit to pay stamp duty and registration fee in first sale transactions, officials said. The state has already lowered stamp duty levy.

Facing a liquidity crunch due to a prolonged slowdown in real estate, construction majors prefer paying premiums using the installment facility offered by most civic agencies upon payment of a low interest fee.

In Mumbai, for instance, high-rises, opting for this deferred payment model, are required to pay just 10 per cent of the premium amount during the first year of construction, while committing to pay the remaining sum in five equal annual installments. In other words, the department proposal was to allow a sanctioned project to avail benefit of the one-time special scheme till 2025.

Sources, however, said that Uddhav, during the meeting, made it clear that the concession was a stimulus package to help the sector recover from losses suffered due to the lockdown and will not be applicable post December 31, 2021.

Income from construction premiums and levies is the third largest revenue grosser for the Shiv Sena-controlled BMC and also one of the major sources of income for the state exchequer.

At the meeting, the CM highlighted the concern of the negative impact extending the benefit beyond a year would have on the earnings of the government and the civic body. A section of the state’s bureaucracy is also wary that allowing the benefit beyond a year will witness cases where builders pay the first installment and avail the sop but default on payment of further installments.

Following Uddhav’s directives, the urban development department has been asked to suitably revise the proposal, said officials. While construction premiums will also be lowered by 50 per cent for ongoing projects, even these would be applicable only for payments made until December 31, 2021. The revised proposal will soon be tabled before the Cabinet, officials added.

Industry captains have been demanding a sector-specific stimulus contending that the slow down and the liquidity freeze, worsened by the lockdown, was eroding wealth and causing job losses besides delaying completion of construction projects.

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