UP Government’s New Mandate Sparks Concern Among Buyers and Developers

Delhi NCR, November 08, 2024: The UP Government’s recent decision to mandate the registration of builder-buyer agreements upon payment of 10% of the flat’s price has sparked significant concern among buyers and developers. Homebuyers have to pay some percentage of the property’s value as stamp duty to get it registered in the government’s records. They also have to pay 1% of the property value as the registration charge for completing the paperwork in Noida and Greater Noida. This approach contrasts with practices in other states, where the agreement to sale typically involves a nominal stamp paper fee between Rs 1,000 to Rs 10,000.

Currently, buyers and builders enter into an initial agreement on a ₹100 stamp paper, and the Authority enters the scene only after the developer has obtained an occupancy certificate and completion certificate for the project.

Experts say that the move is aimed at safeguarding flat buyers and enhancing revenue collection through stamp duty. The tripartite agreement will include property details, the total cost, payment terms, and the possession date. However, industry leaders express the implications of this mandate, explaining how it affects both homebuyers and the broader real estate market.

Manoj Gaur, CMD of Gaurs Group and Chairman of CREDAI National, says, “This would not be a favourable practice, as it imposes an unnecessary financial burden on buyers, who already have to arrange a significant amount at the time of booking. In other states, the sale agreement is processed on a nominal stamp paper valued between Rs 1,000 and Rs 10,000, which is not the case here. The proposed 1% non-refundable registration fee that is part of the provision is also a direct loss for buyers. The lack of clarity on the refund policy in case of cancellation adds to the unease. 6% of the builder-buyer cost in stamp duty at the agreement signing stage is a big amount. Typically, 15-20% of bookings in any project are cancelled due to various reasons, which is also mandated by RERA. However, the new rule will cause a huge dent in finance for buyers seeking to cancel their booking as they are already burdened by unforeseen circumstances. The sector is of the view that the present provision would significantly deter the sector in Noida, Greater Noida, Yamuna Expressway, and, in fact, the entire state, where real estate has emerged as a prominent part of the state economy. Therefore, we believe this provision should not be considered as it will impede the growth of the state’s real estate sector.”

Sanjay Sharma, Director, SKA Group, says, “We believe this new mandate by Noida-Greater Noida authorities may create a significant financial strain for homebuyers in Uttar Pradesh. Paying a 6% stamp duty to the government at the agreement signing stage adds to the already high initial costs that buyers face when booking a property. This makes homebuying harder and more expensive for buyers, especially those in the middle-income bracket. With substantial costs already involved in securing a home, this additional burden is likely to discourage potential buyers. Further, the imposition may also affect PM Modi’s vision of Housing for all segments, which addresses the longstanding housing needs of buyers by providing them with safe, secure, and quality housing. Thus, we look forward to the authorities reconsidering this decision, as it could stifle growth in the real estate sector and limit homeownership opportunities for many.”

Under the old norms, the buyers sign an unregistered agreement to sale with the developer for a unit without payment of any stamp duty over the total cost of the builder-buyer agreement. They pay 5% of the total property cost as stamp duty charges when the flat is ready to move and the registry is executed.

Neeraj Sharma, Managing Director, Escon Infra Realtors, says, “The recent stamp duty imposition on sale agreements could have a stifling effect on real estate transactions. Buyers are already burdened with substantial costs at the time of booking. Buyers require flexibility and clarity in their transactions, and this imposition may bring additional financial pressure and deter them from going forward with purchases. In light of these concerns, we respectfully urge that the government reconsider making this provision applicable within Uttar Pradesh’s real estate sector.”

Mr. Jitendra Goyal, Sales Director, Trisol RED, says, “The financial burden of this policy is likely to make homeownership unattainable for a large segment of the population, thereby hindering the dreams of many families to own a home. Many middle-class families, especially first-time homebuyers, could be priced out of the market by the 6% stamp duty imposed at the initial stage of property transactions. With the Noida, Greater Noida, and Yamuna Expressway regions experiencing a robust surge in sales, we believe this policy may act as a major deterrent to potential buyers. Simplifying procedures and reducing costs would encourage more buyers to enter the market, ultimately benefiting the sector as a whole.”

The government’s decision to mandate flat registration upon a 10% payment has raised significant concerns within the real estate sector. While the move aims to protect buyers and enhance revenue collection, industry leaders urge the government to reconsider the provision to ensure the continued growth of Uttar Pradesh’s real estate sector.