The new year is off to a promising start for the realty sector and all its parties, as the Maharashtra state government announces a 50% cut on real estate premiums, valid till end of this year. The industry stalwarts welcome the move, anticipating the up drive in demand and sales, brought on this much-needed relief.

This move comes in the trail of the reduced stamped duty prices in the state and is designed to boost the slump in the sales that the sector grappled with, amid the pandemic. What this roughly translates into is that developers are now expected to pay only half of what they used to, as premiums on the projects they were building. The benefit will now be passed onto the homebuyers, who will enjoy a reduction in home prices - an appealing incentive to buy a home.

This move won't just benefit developers and homebuyers alone. Even the state government will witness an increase in premium and levy collections - owing to the feasibility of making these payments. In addition to this is that any developer who opts to avail this concession will have to pay the full stamp duty charge, on behalf of their customers, till the 31st of December, 2021.

WHO STANDS TO RECEIVE THE BENEFITS?

Leading industry spokesperson, Anuj Puri claims that the reduction in premium prices could be the game-changer, the real estate market had been waiting, after 2020. Foreseeing the upward trend in sales, he says that the reduction in prices will prove to be an important catalyst in reviving Mumbai's realty market. While we have established that the move is imperative for the health of the sector, let's dive into how it will impact sales, growth and who stands to make the most out of it.

Developers: The direct impact of this falls on the developers, who are required to pay a plethora of premiums on the constructions they help develop. High premiums are a burden that is borne by developers and passed on to homebuyers, to mitigate its crushing effects to an extent - doing both a financial disservice. Nearly 22 premiums are collected from the average developers under various pretences including FSI, the elevator clearance, staircases, lobbies and other structures - chalking up the total amount of premiums paid, to no less than staggering. With that cost cut into half, developers now enjoy a reduced cost of construction - giving them the financial liberty to soften property prices, allowing homebuyers to take advantage of it - eventually driving up the sales. The reduced outflow of cash also means that many stuck projects now stand a chance for revival.

Homebuyers: In the larger scheme of things, homebuyers are the end demarcations of how well the realty sector is doing - if homes are being bought, then demand goes up - ensuring a steady supply of houses, keeping everyone paid and employed. The Maharashtra government's move to slash premium prices down by half will most impact homebuyers who have put off buying a home, discouraged by the state of uncertainty in the economy, all through the pandemic. The renewed reduced home prices and the newly revised stamp duty acts as a double incentive for potential buyers - by bolstering their purchasing power.

State Government: The government also stands to make up for the losses it incurred through unpaid premiums and uncollected levies. By offering a concession, developers will be better positioned to pay the premiums and drum up the drained coffers.

Allied Industries: The pandemic brought on an uncertain pause overall constructions, rendering not just the real estate sector immobile, but all its allied industries. This move enables developers to revive old constructions that were left incomplete due to cash crunches. This would also mean that more materials, resources and manpower would be required, ensuring that employment in these areas is also driven up - owing to the spike in demands.