Everything you need to know about Maharashtra’s 50% reduction in real estate premiums


Almost every industry took a hit due to the wide spread of the coronavirus in 2020. One of which was real estate. Thus, to boost its growth and re instigate development rate as projected before the pandemic, state and central governments are taking numerous measures.

The latest of which was taken by the state government of Maharashtra which has reduced premiums for builders by almost half. The new scheme, which comes after three months of deliberation and received criticism from the opposition, will empower the industry in several ways. From what this scheme is to how it affects homebuyers, this guide will equip you with everything you need to know about this decision.

What is the builder premium that has been slashed?

There are several costs associated with the construction of a project apart from the construction itself. One of these is premiums and taxes that are to be paid as per the FSI – the ratio of the entire floor area to the size of the land that is to be built upon. As per new scheme by the DCPR, builders can now opt for 50% reduction on these FSI-associated premiums till 31st of December, 2021. 

What does the new rule entail?

As per the scheme, builders will now have to pay building premiums as per Ready Reckoner (RR) rates of 2019 or 2020 whichever is higher. However, builders who go for this scheme will have to pay the entire stamp duty when they sell to homebuyers. Moreover, builders cannot charge extra stamp duty to buyers if they opt for this scheme. 

How do reduced premiums affect builders?

By reducing costs associated with building projects for a year, real estate developers will be able to influx more finances into developing their projects for home buyers and investors. The new scheme, which is valid till the end of this year, will also bring more liquidity to the industry. Overall, we will see more projects being started and completed given the impetus the real estate sector will receive from reduced premiums.

Also, RR rates play a vital role in determining the pricing of a property. Given builders will now be paying a trimmed premium, property prices, on the whole, may also witness a discount. 

That’s why top names and governing bodies in the sector like the National Real Estate Development Council (NARDECO) have hailed this as a boon and praised this civic body. 

In conclusion, this move aims to uplift the downward graph of the real estate sector by creating provisions for developers to construct at lower costs. Also, in the long run, this move will also enable homebuyers to purchase their dream home at a lower rate than before.  

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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