Delhi Government's decision to hike transfer duty rates meets with mixed reactions

The Delhi government has recently announced an increase in transfer duty on the transfer of immovable properties, which has sparked mixed reactions among various stakeholders. According to the official document issued by the Department of Urban Development, this enhancement applies to the registration of instruments with a value exceeding Rs 25 lakh. The notification, dated July 10, states that the transfer duty for females (including third gender) has been raised from 2% to 3%, while for males and other entities, it has increased from 3% to 4%.

The decision to raise the transfer duty on property transactions has drawn criticism from some quarters. Ashwin Chadha, CEO of India Sotheby's International Realty, expressed concerns about the impact on home buyers' sentiment. Chadha argued that with the existing transaction costs such as GST, stamp duty, and registration fees, the increase in transfer duty would further burden potential homebuyers. He emphasized that the cumulative effect of these costs could discourage buyers and potentially dampen the real estate market.

While Chadha acknowledged that the market might experience some initial setbacks due to the increased transfer duty, he also expressed optimism that the strong demand witnessed in recent years could help the market gradually adjust to this change. His perspective highlights the resilience of the real estate market and suggests that despite the additional cost, buyers may still be motivated to invest in properties, leading to a potential stabilization in the long run.

Contrasting viewpoints may argue that the increase in transfer duty is necessary to generate additional revenue for the government and fund development projects. They might contend that the burden on homebuyers is justified in light of the broader benefits it brings to society. However, this counterargument fails to consider the potential negative consequences of increased transaction costs on the real estate market.

The main flaw in the counter viewpoint lies in the assumption that buyers will readily absorb the additional costs without any significant impact on their purchasing decisions. Higher transfer duty, when combined with other expenses, could deter potential buyers from entering the market or even lead to a decrease in property demand. This, in turn, could have ripple effects on the construction sector, employment rates, and economic growth.

Moreover, the counter viewpoint fails to acknowledge that the real estate market is sensitive to changes in transaction costs. Even a slight increase in expenses can sway the decision-making process of buyers, especially in a competitive market. Therefore, it is important to consider the potential consequences of imposing additional financial burdens on homebuyers and to find a balance that supports both revenue generation and market growth.

In conclusion, the recent increase in transfer duty on immovable property transfers in Delhi has generated mixed reactions. While critics argue that it may negatively affect home buyers' sentiment and add to the overall transaction costs, others suggest that the market will eventually adjust to this change. It is crucial to carefully evaluate the potential implications of such policies to ensure a sustainable real estate market that benefits both buyers and the economy as a whole.

This story was earlier published in ET Realty

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Delhi Government's decision to hike transfer duty rates meets with mixed reactions

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