Why is the Gurgaon Circle Rate Hike a Harsh Reality for the Realty Sector?

The real estate industry in Gurgaon was showing positive signs of recovery in the second half of 2020 which continued till March 2021, with buyers more inclined towards ready-to-move projects. Just as the residential market was witnessing a solid revival from the fourth quarter of 2020 with continued growth in demand, and sales were moving to the pre-Covid levels, the second wave of pandemic hit India like a tsunami, again making states force strict restrictions, night curfew, and week-long lockdowns. The uncertainty brought by the deadly second wave again slowed down the residential sales to near zero. And while this was all going on, it was the Gurgaon’s district Administration that further created a jolt in the micro-market by increasing circles rates by up to 88 per cent, which are effective from April 8, a move not welcome at all in this ongoing pandemic time.

For instance, in Wazirabad Tehsil, circle rates at Carlton (situated on Golf Course Road) have been raised from ₹ 8,000 per sq. ft. to ₹ 15,000 per sq. ft. – an increase of 88 per cent. This hike is among the highest announced by the district administration. The next biggest hike of 50 per cent was done at DLF Crest – raised from ₹ 8,000 per sq. ft. to ₹ 12,000 per sq. ft. Aralias, Magnolias, and Camellias have been raised from ₹ 20,000 per sq. ft. to ₹ 25,000 per sq. ft.—an increase of 25 per cent. At Laburnum, Unitech World Spa, Parsvnath Exotica, The Verandas, Palm Springs, Exotica, Park Palace, Belaire, Vipul Belmonte, Central Park, and Princeton, the circle rates have been increased by 12 per cent – from ₹ 8,000 per sq. ft. to ₹ 9,000 per sq. ft. Not only in the posh societies but in licenced Group Housing in sectors including 15, 27, 28, 30, 31 – 32A, 39, 40, 41, 42, 43, 45, 46, 50, 51, 52, 53, 54, 55, 56, 57, the circle rates have been increased from ₹ 5,000 per sq. ft. to ₹ 7,000 per sq. ft. – an increase of 40 per cent.

Thus, if you are looking to invest or buy a dream home in Gurgaon, these newly increased circle rates from 12 per cent to 88 per cent are very steep, which for consumers not only means that have to shell out more amount of money to buy the same amount of space as they could earlier, but the move will further create a negative sentiment among buyers in the ongoing pandemic era.

The circle rate hike in Gurgaon is a surprise move from the district authorities, which I believe could have been avoided. Few state governments have kept the circle rates unchanged or have reduced the stamp duty charges to keep the property prices low, and sales momentum going in the pandemic era. For instance, in Maharashtra, the state government has reduced the stamp duty charges, which has resulted in many fold increase in revenue for the state government.

If the Gurgaon district administration could have reduced the stamp duty charges, more people likely would have brought and registered property, which in turn would have resulted in more revenue for the state administration.

The increase in circle rate will increase the price of a property, which will make it hard for home buyers. We all know that many people have lost their jobs, there is less job security in the market, salary cuts (people are less confident of their future income flow), the real estate industry is already facing a tough time. The impact of Covid, and now circle rate hike has dampened the spirit of real estate in Gurgaon.

For the past few years, Gurgaon has been the hot spot for investors and for the working class looking to buy a residential property in Gurgaon. The reason being the availability of excellent residential properties from trusted developers and the continuous improvement in connectivity to Delhi and other parts of NCR, and yes of course the price appreciation. Now, given the new circle rates that are effective from April 8 in FY 2021 – 2022, a high circle rate means a buyer has to pay a high registration cost, which in turn means a higher cost per acquisition, thus ultimately property transaction. 

It would have been in positive sentiment if the circle rates would have been kept unchanged or the district administration would have announced new reforms to further boost the residential sales.

The author is Senior Vice President, Bestech Group.

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.