Investment Opportunities in 'Real Estate' Sector

2 min read
Investment Opportunities in 'Real Estate' Sector

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There are two big reasons why investors must think about real estate sector now.

  1. Stamp Duty Reduction
  2. Allowance of Hotels to operate at 100% Capacity.

Stamp Duty Reduction

While buying a house, Possession of physical transfer of the property is not sufficient. You also need to have legal evidence of ownership. For this you will have to get the property registered in your name in the local municipal records, with the seller documenting that the property is being transferred to you.

At the time of registration, you will also have to pay a stamp duty which is a government tax levied on property transactions. So, Stamp duty is a legal tax payable in full and acts as an evidence for any sale or purchase of a property and collected on the basis of property value at the time of registration. Stamp duty’s amount varies from state to state.

On Aug 26, 2020, Maharashtra, India’s most expensive real estate market where government has decided to reduce this Stamp duty on property purchases which is expected to boost affordable housing the most.

The property transactions would be reduced in two slabs

  1. 3% reduction between Sept. 1 and Dec. 31, 2020.
    Effective rate : 5–3 = 2%
  2. 2% reduction between Jan. 1, 2021, and March 31, 2021.
    Effective rate : 5–2 = 3%

Present, stamp duty is 5% in Maharashtra and and 6% in other cities.

Of course, Adding government intervention in terms of tax rebates have helped revive the property market and developers who are into medium to affordable housing will get the maximum benefit.

Mumbai Metropolitan Region (MMR) and Pune have 18,500 units and 15,000 units, respectively, that are currently completed and unsold.

Developers That Stand To Benefit

Allowance of Hotels to operate at 100% Capacity.

Unlock 4.0 is here and as per “Mission Begin Again” announced by Maharashtra government that hotels can now operate at 100% from previous 30% capacity from September 2 will keep bars shut.

Prohibition on social, political, entertainment and religious functions and other large congregations across the state will continue. Other social and entertainment functions with effect from September 21 with a ceiling of 100 with mandatory social distancing protocols. Food and beverage (F&B) accounts for more than half of revenue for five star hotel chains, therefore the permission to operate at full capacity is critical for hotels.

Stocks who will benefit the most: Indian Hotels Co, EIH, Chalet Hotels, Lemon Tree Hotel, Kamat Hotels etc.

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Akshay Seth
Research Analyst (SEBI Regd.)
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