The Gurgaon administration has proposed to slash circle rates of properties by 15% this year to help revive a slumbering real estate market that is in the grip of a prolonged downturn.
If the Haryana government approves the proposal, it will be the first time in recent history that Gurgaon, a premium real estate market, will see the circle rate graph slip downward. In the previous two financial years – 2014-15 and 2015-16 – circle rates in the city were kept unchanged but failed to lift buyer sentiment.
Though it’s not the only factor responsible for the realty industry’s current problems, a senior government official said the proposal to cut circle rates is a course correction, in consonance with the prevailing ground realities, and is expected to help recharge the market.
“It (the proposal) reflects the reality,” said divisional commissioner D Suresh, who has sent the proposal to Chandigarh for approval. Suresh said in some areas, existing circle rates are higher than current market rates of land and need to be rationalised. Circle rate is the minimum value at which sale or transfer of a plot, a built-up house, an apartment or a commercial property take place. Buyers also pay stamp duty according to the circle rate.
Gurgaon deputy commissioner TL Satyaprakash, who led the committee that proposed the reduction, said there was a dip in flat registries, leading to loss of revenue for the government. “Market rates have come done in certain areas but circle rates are still high, so we have to rationalise the rates,” said Satyaprakash.
One of the changes suggested by the administration is a graded circle rate for commercial properties between Ambience Mall and Sector 39, which is currently uniform. “We want different circle rates for different areas on this stretch, the highest rates for commercial properties near Ambience Mall and Galleria Market but different ones in the remaining areas,” said Satyaprakash.
Developers were confident that investor sentiment would significantly improve with the rate reduction. “The circle rate cut will reduce overall cost as these rates are the basis for tax calculations,” said Pankaj Bansal, director of M3M Group.
Manoj Goyal, director of Homestead, said, “This is good move as property prices have dropped over the past couple of years, creating a gap between the transaction value and circle rates. Buyers are forced to pay additional stamp duty and capital gains tax on the differential value as well. This results in an extra payout.”
Huda, which is having trouble finding buyers for its land parcels because of the high circle rates, is also expected to gain from the move. “In March, we had put on auction 96 commercial properties in Gurgaon, Dharuhera and Rewari. But we managed to sell only 10 properties,” said a senior Huda official.