How the new metro cess will affect realty prices in Mumbai and Pune

Homebuyers in Maharashtra have to gear up for an increase in property prices from April 2022.

The state government will be imposing a 1% metro cess from 1st April. The order has drawn varied reactions from citizens, particularly industry bodies and property consultants.

What does it mean for property prices in the state? We break down and analyse this move in the article. 

State government announces 1% metro cess: What does this mean?

Industry bodies found themselves in a frantic state when the Maharashtra government announced the metro cess. The Principal Secretary of the Urban Development Department, Bhushan Gagrani shared the plans for the metro cess. This will primarily affect Nagpur, Pune and Mumbai. The metro cess will apply to property purchases in these cities from the first of April.

Why the sudden move? The state government hopes that the cess will fund the Metro rail and other transport projects in Maharashtra. The waves will affect homebuyers and real estate investors. It will lead to an increase in property prices. 

The price hike will affect realty hotspots like Mumbai, Pune and Nagpur. The cess will simultaneously increase the stamp charge in these cities. 

The current stamp duty charge in Mumbai is 5%. It will increase to 6% after the cess. Pune, Thane and Nagpur will witness a 2% increase, and their charges will rise to 7% after the cess. This amount will be clubbed with any property transactions that take place in the state.

Impact on Property Purchases in Maharashtra

Industries are discontent about the recent price hike in Maharashtra. They are concerned that the price will adversely affect the homebuyers. While the revenue is useful for the metro rail project, it will have different consequences for real estate. It will especially affect the small-time buyers and mid-segment buyers.

Property prices in cities like Pune and Mumbai are already sky-rocketing. With the pandemic shutting down businesses, it was difficult for the real estate market to gain back its buyers. Most developers are still recovering the losses of Covid. However, cities like Mumbai have seen a sudden boom in property transactions. It seems as if homebuyers too are making up for the economic stagnation brought about by Covid.

One possible advantage of this change will be the boost to infrastructure growth. Any revenue earned from this cess will be allocated to further developing the metro rail project. It will also fund transport-related projects in Maharashtra like the Mumbai Urban Transport Project. This was after all the motivation behind increasing the charges. 

However, is the infrastructure growth enough to balance the impact sustained by real estate? That remains to be seen.

The bottom line: An unwelcome move for homebuyers in Maharashtra

Shantilal Kataria, the vice president of CREDAI National has said the body will plea with the state to reconsider. For homebuyers and investors too, this decision does not bode well. Since prices of properties are already high in Maharashtra, the stamp duty makes the cost out of budget.

It is only recently that registrations for properties in Mumbai have surpassed the pre-pandemic level. In February 2022 alone there were about ten thousand registrations for property in Mumbai. As per JLL property consultants, Pune recorded 252% of pre-covid sales in real estate. The rise in stamp duty charges may put a halt to these registrations and slow down the market again.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.


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