The unified Municipal Corporation of Delhi’s decision to hike transfer duty by one percent on properties priced above Rs 25 lakh across the city is expected to increase the overall cost of acquisition for property and this additional burden along with the recent hike in interest rates will impact the overall sentiment of homebuyers.
Following the hike, the transfer duty will be 4 percent for men and 3 percent for women. The decision was taken on May 31. Currently, the transfer duty on sale and purchase of property in the national capital is 3 percent for men and 2 percent for women.
The hike of one percent of transfer duty on properties valued above Rs 25 lakh is certainly a dampener for the real estate market which has been doing very well over the last two years since the pandemic, said Anuj Puri, Chairman - ANAROCK Group.
This will be in addition to recently hiked home loan rates and the overall property rates amid rising input costs. All in all, it will further increase the overall cost of acquisition for the property seekers. And even a marginal hike does impact the overall sentiments of buyers. The hike was unwarranted at a time when Delhi’s real estate market was seeing an uptick in housing sales as against the previous years, and the overall cost of acquisition of properties is already spiralling, he added.
Real estate experts expressed surprise at the move.
“We are surprised by the decision of the unified MCD to increase transfer duty by one percent on the purchase of properties priced above Rs 25 lakh at this juncture. This move puts an additional burden on the property buyers. At a time when home loan interest rates have already started inching up and the Reserve Bank has indicated further increase in policy rates to tame the stubbornly high inflation, the decision to enhance transfer duty will jeopardise the much-needed recovery of the sector,” said Amit Goyal, CEO, India Sotheby's International Realty.
The proposed increase in the transfer charges is also expected to increase the incidence of transaction cost on transfer cases.
"This move would imply an additional landed cost for secondary purchase. This move will marginally add to the lucrativeness of property purchases in the primary market from the developer, which might slightly sweeten the purchase in the primary market,” said Ashutosh Kashyap, Director, Advisory Services, Colliers India.
On the other hand, the money collected through the duty hike will imply better funds with urban local bodies that need to undertake the betterment of infrastructure and civic services within the city, he added.