The government of Maharashtra gives an impetus to the real estate sector with a one-year special payment window where construction premiums will be halved for the builders.
The state finance department in Maharashtra has given a go-ahead to the proposal for slashing the construction premiums and levies by 50 percent. This special concession is valid till the month of December 31, 2021.
Given the current market conditions, the sector needed this stimulus as the freeze in liquidity resulted in big-time job and wealth losses. Moreover, the COVID-19 led lockdown had also caused a delay in a lot of construction projects.
The proposal was put forward following the findings of a committee led by the HDFC chairman Deepak Parekh. Therefore, the state urban development department had proposed a one-year special window for lowering the construction premiums. The Ministry of Urban Development had submitted the file for the Finance Department’s approval after the idea received support from the Brihan Mumbai Municipal Corporation (BMC).
After the State Finance Department’s go-ahead, the file has now landed in the Chief Minister’s Office for final approval. According to sources, the state’s fiscal managers do not approve of slashing the construction premiums be it either for the development or infrastructure charges.
Current Construction Premiums and Levies in Mumbai
The current construction premiums and levies in Mumbai accounts for more than 30 percent of the total project costs. HDFC Chairman Deepak Parekh’s Committee had already argued over premiums and charges being significantly higher in Mumbai in comparison to the other cities. This is one of the reasons that raised costs and increased working capital requirement in Mumbai.
The BMC estimated a collection of ₹3,000 Crore from the construction premiums and levies in the year 2020-21 before the COVID-19 led lockdown. However, the BMC could only garner around ₹300 Crore since the construction activity came to a halt. Reducing the construction costs and introducing the one-time special payment window will raise revenues and increase the submissions for project approvals.
This perk will be available for construction projects across the state. However, the concession will be applicable for ongoing projects including those where the partial installments have already been paid. The government also plans to impose a condition that says the facility is only available for those who follow the installment schedule.
The Deepak Parekh Committee had suggested postponing the premium payments till the time of granting occupation certificates. However, the government disapproved of the proposal. Nevertheless, this move by the Maharashtra government will provide the required fillip to the real estate sector.
