Gurugram's Proposed Hike In Circle Rates May Double Property Prices
At a time when real estate developers in the city are struggling to find takers for their unsold stock amid muted buyer sentiment, the Gurugram district administration has proposed an increase in circle rates that would double the cost of buying plot-based and apartment properties in some micro-markets in the city.
Circle rates are the government-specified rates below which a property cannot be registered at the time of change of ownership. Stamp duty for a transaction, which is one of the biggest revenue generators for states, is calculated based on the circle rates of a specific locality. Since 2017, the district administration has been reviewing these rates, which account for a large portion of their annual revenue generation, twice a year. Stamp duty for property purchase in the city is eight per cent of the transaction value for men and six per cent for women.
In a circular dated December 27, 2019, the district administration announced a hike in the circle rates of plot-based developments and flats in several micro markets, and sought public opinion on the proposal, till January 10, 2020. If the government decides to go ahead with the proposal, property purchases in Golf Course Road, MG Road, Sohna Road and Delhi-Dwarka Expressway would be twice the current rate.
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As it is, Gurugram is the most expensive real estate market in the National Capital Region, a key reason why this market remained one of the worst-affected ones during a nation-wide slowdown, which is still far from over.
Meanwhile, the developer community, which has been expecting the government to reduce circle rates, in order to boost buyer sentiment in a market where housing numbers have been on a falling spree, has shown strong displeasure over the proposal.
Housing sales in Gurugram declined 31 per cent in the quarter ending September 2019, while property prices increased four per cent annually. Housing inventory at the end of the quarter stood at over 45,000 units.
The entire task would prove futile if the administration expects to earn higher revenue through the increase, say experts. Considering that buyer sentiment is already low, the circle rate hike would only dampen sentiments further.
It is worth mentioning here that circle rates in Gurugram were revised three times in 2018. The increase made property in some markets twice as expensive.