A Guide to Understanding Stamp Duty and Registration Charges in Mumbai

It’s no secret that buying a house is lengthy and requires due diligence and a plan of action, especially in big metros like Mumbai, which is, by far, the most expensive city in the country. Nonetheless, the demand in the real estate sector continues to increase, coupled with the growing prices that witnessed an average increase of 13% over the last seven years. 

Known as the Populous City, the average price per sq ft for a property in Mumbai is well above ₹11,000. For example, buying a 1BHK house in the city could cost you between ₹80 lakhs - ₹1.5 crores, with the standard size being 400-500 sq ft. Therefore, owning any land in the country’s financial capital requires a significant sum. 

Buying a house in the Maximum City would involve a series of the following steps

• The intent behind buying the house
• Finalising the correct budget
• Location, neighbourhood, connectivity
• Necessary documentation
• The final step involves signing the purchase

Speaking of a city like Mumbai, it is necessary to understand the documentation and paperwork involved in purchasing a house. The most common terms used when buying a residential property include stamp duty and registration charges. Now let’s dwell deep into this.

What is stamp duty?

A government tax levied on a property based on its value is covered under section 3 of the Indian Stamp Act 1899.

When is it payable?

It is payable before, on, or the day after the document's execution.

Why is it important?

It acts as evidence for the purchase or sale of a property. A physical revenue stamp duty must be attached to reflect payment and be legally permissible.

What are the consequences of not paying (Maharashtra)?

In cases of non-payment, a penalty of 2% per month on the deficit amount of duty is levied, calculated from the date of signing, which cannot exceed 400%.

How is it calculated?

It is calculated on the Ready Reckoner Rate, which is -0.6% in Maharastra.

Stamp duties vary from state to state and are based on the value of the individual properties. For stamp duty-related issues, one could refer to Maharashtra Stamp Act 1958. Starting 2023, the stamp duty has been increased by 1%, the additional fee is due to the metro cess on properties.

What are registration charges?

Post purchasing a property, it is compulsory for the buyer to register their name at the registrar’s office. During this process, the government charges a fee. 

When is it payable?

Payable at the time of registering the property with the government, usually implemented a few weeks after the purchase agreement is signed.

Why is it important?

The registration document certifies the buyer as the legal owner of the property, protecting them from any untoward event.

What are the consequences of not paying?

The property may not be legally recognised by the government, with the new owner not having the title in his name. Fines and penalties are to be enforced on both the seller and buyer, followed by legal action. The parties may be unable to obtain loans and mortgages against them.

How is it calculated?

It is calculated on the percentage of the property value or sale price.

No doubt, buying a house is a lengthy process, however, hiccups on the way can be avoided with thorough research and study.