PAAA Agreement - Stamp Duty on Hardship Accomodation

Dear Client,

Stamp duty in Maharashtra is generally not applicable to Hardship Compensation (Rent) mentioned in a Permanent Alternate Accommodation Agreement (PAAA), as this payment is viewed as compensation for inconvenience, not a transaction involving the transfer or creation of property rights.

The developer's claim of a 6% stamp duty on this amount is highly questionable and contradicts the established legal position, particularly the Bombay High Court rulings (such as the Adityaraj Builders case) which clarify that PAAAs, if a main Development Agreement has already been stamped, are typically only liable for a nominal stamp duty of Rs.100 under Section 4(1) of the Maharashtra Stamp Act.

Stamp duty at the regular percentage rate is only levied on the additional carpet area a member may purchase for a stated consideration, not on the area received in replacement of the old flat, nor on incidental compensation like transit rent.

Dear Client,
A Permanent Alternate Accommodation (PAA) Agreement is a legally binding document executed in course of redevelopment of buildings. It must be registered with the jurisdictional Sub-Registrar paying requisite stamp duty to make it legally valid and enforceable. The hardship allowance/rent for temporary accommodation is part of the overall arrangement for displacement during redevelopment. In Maharashtra, the prevalent stamp duty varies between 5 % to 7 % of the total agreement value, depending on the city and district. However, the Maharashtra government in a circular issued in the year 2023 has notified that a housing society that undergoes redevelopment need not pay stamp duty on the allotted permanent alternate accommodation (PAA) as part of the project. Following the said order, homeowners who get new apartments post redevelopment will have to pay only Rs 100 as nominal stamp duty on PAAA, while development agreement between the developer and the housing society will be charged as per the value of the transaction. If a member acquires any additional area in the new building beyond their original entitlement, stamp duty on that extra space is charged at the prevailing market rates (typically 5-7% depending on the location). Thus, the stamp duty rate associated with the "hardship compensation (rent) is integrated into the nominal fee structure for the PAAA in Maharashtra's redevelopment schemes post that circular of the State Govr.