Perspective on Maharashtra’s government on slashing premium for construction by 50% by Mr. Shishir Baijal, Chairman and Managing Director, Knight Frank India for real estate industry

Great Boost to Supply side as Maharashtra cuts construction premiums by 50%

 by Suman Gupta

Today’s announcement by the Maharashtra State Government is a landmark in boosting the real estate sector. After the recommendations of the Parekh Committee the cut of 50% on premiums on real estate project will help the supply side to stabilise make development in the state more feasible. New supply has been restrictive due to many reasons including cost of raw material (land being raw material to real estate development) in the last many years, especially in large volume markets like Mumbai and Pune. This move will help rationalise input costs for the developers as well as help supply momentum, thereby keeping price escalation in control whilst striving towards the demand – supply equilibrium in the market. However, since both the demand side as well as supply side measures are short term, it may prove beneficial to jump start the real estate sector giving it an orbital velocity for next level growth.

This will also make the sector attractive for investments from institutions. The reduction in premiums, coupled with the revision in stamp duty (that has helped catapult demand) will make real estate development in the state lucrative. Going forward, following the growth trend of demand, we expect new launches to increase accordingly.

As per Knight Frank’s report released today, MMR recorded sales of 22,407 residential units while new launches in the same period were recorded at 18,515 both registering a Year on Year growth. Residential Sales grew 80% in Q4 2020 over same period last year while sales were a modest 3% above last year levels