Gurugram is reckoned as the millennium city of India. Though there are many factors that contribute to the majestic title, the city stands up to its reputation by having the third largest per capita income after Chandigarh and Mumbai.
Gurugram, which is located in Haryana and 30 kilometers from Delhi forms the industrial and financial center of the state. Over the past 25 years, this city has seen examples of rapid development and set up of various businesses, ultimately contributing to fierce real estate progress.
The past year had seen longing signs of recession in the real estate market of the city that basically led the district administration to propose a reduction in the circle rates of the properties across all segments by a significant 5 percent for the financial year 2017 – 18. The reduction in circle rates that also took place last year, was seen unchanged for a long while. This cut in the circle rates in Gurugram is set to make the property of this region even more affordable and pocket-friendly.
For those who are unfamiliar with circle rates, these are the minimum registry rate for properties. It is also the minimum value at which the sale or transfer of plots, built-up houses, apartments or commercial property takes place in the market. Actually, it is the standard price at which the buyer pays stamp duty to the government while in order to get a property registered.
Circles rates are revised by the government from time to time and are also referred to as the ready reckoner rates (RR rates) in various states. Though there has been an upward trend in the circle rates, many cities including Gurugram witnessed a cut in circle rates. This can be credited to the different policies formed by the government in the real estate sector. The dramatic effect of slashing down circle rates is somewhat also attributed to demonetization, Real estate regulation Act (RERA), the Goods and Services Tax (GST), ordinance on NPAs (non-performing assets) along with the Benami Transactions Act, etc.
Impact on the real estate sector
The impact of this reduction in circle rates is seen as a relief for home buyers in Gurugram. “A 5% reduction in circle rates will create multiple benefits for consumers and developers, such as relief from high capital gains tax, stamp duty, and registration charges,“ said Ravish Kapoor, director, Elan Group.
It basically lays focus on the fact that the government or the concerned authorities of the region are showing active tracking of the real estate sector. The circle rates must be on par with the market value of the property in order to realize the full value of sales and payment of complete stamp duty. The real estate for the region is all set to see advantageous buyer-seller transactions in Gurugram, but the reduction in circle rates still cannot guarantee speedy transactions in the market.
Real estate pros have all their thumbs up for this reduction and believe that it is unlikely that any competition will be posted to the nearby property markets of the national capital region, NCR. This has been said because, the prices in Gurugram are already at a premium high and mostly hovering around Rs 5,500 per sq ft on an average, on the other hand, Noida and Greater Noida have a little more affordable prices of Rs 3,000 per sq ft on an average. Therefore, the consecutive two-year reduction in the circle rates for Gurugram will fringe benefits for the buyer and help them take property related decisions much quicker.
According to the reports, the president of National Real Estate Developers Council (NAREDCO), Praveen Jain, said in an interview that “It will help revive the market. Though circle rates were reduced last year, there still exists a difference between market rate and circle rate in some parts. Due to this, developers face difficulty in selling the property, while buyers are shy of buying the new property.“
Thus, the government’s initiative to slash down the circle rates is to rationalize the existing market rates with the circle rates that was hitherto not prevalent in Gurugram and was affecting the real estate region adversely.
Going by the statistics, it is observed that in most HUDA sectors of Gurugram, the circle rates have fallen from Rs 50,000 to Rs 42,500 (a reduction of 15 percent) per square yard. However, in other posh areas of Gurugram like the land in Sohna, the market price of land is Rs 50,000 per acre, while the circle rate is much higher than market rate and is Rs 90,000 per acre. Areas such as DLF, Sushant Lok, and other developers’ areas have seen no or slight changes in the rates while new sectors 58 -115 have witnessed a 5% deduction.
The impact of lower circle rates can also be seen on government expenditure as it also eases the land acquisition for the government. The reduction will also be much more impactful in the case of newly launched property in Gurugram because the cost of land procurement will be significantly less even to the developers for the region as compared to earlier scenarios.
This whole real estate scenario is going to impinge keen interest in the developers along with bringing a lot of fresh and affordable deals for the buyers. While the properties that had seen no buyers in the last couple of months will also be seen reviving and attracting more buyers as a result of low circle rates.
Thus, ultimately the circle rates are fixed to pay heed to the market rates. In other words, the market rates are said to be the deciding factor for the circle rates in any region. This move in the millennium city Gurugram has been taken on the efforts of the private builder lobby who were successful in pressurizing the Haryana government for circle rate cut in both residential and commercial sectors. So, relieving the crisis of the region this move is being seen as a sentiment driven step that is all set to attract a lot of buyers and real estate investors in the region.