Leave-licence: State plans 16,000% hike in stamp duty

Move Will Hit City's Realty Market Hard

Mumbai: The cash-strapped Maharashtra government says it wants to restore Mumbai to its past glory of being the country's global financial capital. But the way it is going about is bound to leave many investors gasping. Seeking to increase its kitty, the government has proposed an up to 160 times hike in stamp duty for leave -and-licence agreements for residential and commercial properties. 

    The government has proposed 0.1% stamp duty on the market value of the residential property, or 1% of the premium plus average annual rent (deposit) paid (whichever is higher) for up to 36 months. 

    For commercial lease agreements, the duty for 60 months would be 0.4% of the property value. The maximum stamp duty payable now for commercial premises is Rs 50,000 for 60 months and Rs 25,000 for 60 months for residential ones. 

The govt will earn 

1,000cr a year, but at what cost? 

• A bank or an MNC that has signed a leave-and-licence agreement for one lakh sq ft for 60 months in BKC will now have to pay Rs 80 lakh as stamp duty. Currently, the maximum stamp duty payable is Rs 50,000 

• An individual renting a flat in Nariman Point for 36 months will have to pay Rs 41,000 as stamp duty. If the agreement is for 60 months, he will have to shell out Rs 82,000 against the prevailing maximum stamp duty of Rs 25,000 High rates will make stamp duty dearer 

    If the proposal to amend the Maharashtra Stamp Act, 1958—which is likely to be tabled in the state legislature soon—is accepted, it is bound to have an impact on the city's already sluggish commercial market. 

    For individual leases between 36 and 60 months, the rate proposed is 0.2% of the market value of the residential property or 2% of the premium, plus average annual rent paid (whichever is higher). For commercial leases, the proposed duty is 0.4% of the market value of the property. So a bank or corporate entity that has signed a leave and licence agreement for one lakh sq ft for 60 months in the BKC would have to fork out Rs 80 lakh on the property valued at Rs 200 crore. Similar is the case with residential premises. An individual will have to pay Rs 41,000 as stamp duty for a Rs 4 crore flat taken on leave and licence for 36 months at Nariman Point. If the agreement is for 60 months, the lessee will have to shell out Rs 82,000. Pranay Vakil, chairman of Knight Frank, says on the face of it the impact of the hike seems tremendous as property rates in the city are high. Of the state's total tax collection, nearly 60% comes from VAT and 20% from stamp duty. The balance 20% is mobilized from state excise tax, electricity duty and vehicle tax. The government hopes to mobilize at least Rs 1,000 crore annually from its proposed revision.