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Slashed circle rates

 Anup Verma |  2016-07-17 19:10:43.0  |  New Delhi

Slashed circle rates

Slowdown in the real estate sector across Delhi-NCR has not only forced developers to slash prices and come up with new ways to boost sales but it has also prompted state governments to intervene. Amid the slowdown, all efforts of government agencies and real estate bodies have gone down the drain as more than three lakh residential properties across the Capital region are yet to find their takers. 

This crisis has deepen more since last year, forcing not just the realtors to slash property rates upto a maximum extent but the governments as well to mull on the idea of cutting down circle rates. With this move, the government agencies hope to revive the ailing realty whose impact is yet to be visible on ground.

The Haryana government, in a first-ever move, had decided to cut circle rate by 15 per cent in neighbouring Gurgaon, to revive the real estate market and bring homebuyers back into the market. Experts have hailed the move and said that the government has recognised that there is a slowdown in the real estate sector. 

Whereas realty experts hope that the move will help in significantly improving overall sentiments. Prices of both new and resale properties are expected to reduce, especially for ready-to-move-in inventory and plots. Experts claim that the decision will not only reduce ownership cost but will lead property demand in near future and in festive season, it may turn to be a game-changer. 

Additionally, the government will generate revenue as more registry is expected to take place. Analysts say that Noida Authority’s plan to increase allotment rates by 15 per cent hints to increase circle rates by the district administration this year, which might shift market focus to Gurgaon and would lead to no further hike. 

This could have a positive effect on Gurgaon hence Noida agencies must think before announcing any hikes. Since Gurgaon has more offices, industries and institution in comparison to UP-NCR towns, people will attract more to this city.

The experts maintained view that the Haryana government has always been in the forefront whether it is spearheading the ‘Affordable Housing’ initiative or understanding the market circumstance. By implementing a historic 15 percent slash in circle rate, the government has created a multiple beneficiary effect for consumers and builders in Gurgaon who were suffering due to real estate slowdown.

 A cut in commercial rate is perhaps seen for the first time. While we have seen steep hikes in circle rates in NCR, the Delhi government did a 20 per cent hike earlier resulting a jump in property rates.
“This step towards lowering circle rates should be seen in context with the affordable housing push by the government. In north India, Gurgaon leads in the affordable housing segment, with maximum launches. 

Now the UP government, which has hardly taken any measures to promote affordable housing, should follow the line. Since majority of affordable houses were booked before 2012 in the twin cities- Noida and Greater Noida- we demand circle rates of that period,” said Indrish Gupta, co-founder of Noida Extension Flat Owners Welfare Association (NEFOWA), an organisation which represents a group of over 10,000 flatbuyers in Greater Noida (west).

The NEFOWA office bearer maintained that the circle rates are a significant factor in pricing of real estate deals. Circle rates are the rates set by the government at which a property can be sold. These rates become the minimum applicable rates as well. 

“With this positive rate-cut, the total cost of buying a property will come down. Thus, the lowered circle rate will make transactions more profitable for buyers and sellers in Gurgaon. In view of the development, all three authorities of the twin cities-NOIDA, Greater NOIDA and YEIDA- and the district administration must announce the similar move rather than announcing hike in allotment as well as circle rates. Even stamp duty should be same so the property takers could not bear more money while registering their properties,” he added.

In order to pressurise the authorities, the NEFOWA has also been planning to approach realtors, top officials and the UP CM. Similar announcements are also expected from other welfare bodies as they want prices to come down. “It will be the first time in recent history that Gurgaon, a premium real-estate market, will see the circle rate graph downwards. 

But in Noida and Greater Noida, where nearly five lakh residential units are under construction, some are yet to follow the same. If announcements were made, it will boost the bleeding industry,” said another office bearer.

“Gurgaon administration’s recent decision will push the UP government to cut circle rates in NCR cities of Noida and Ghaziabad. Noida market, due to all the controversies has been seeing a slowdown as buyers are looking for other avenues for safe investment. With rate cut in Gurgaon, Noida will also have to follow suit to stay in this further skewed competition. 

Overall, we can say that the circle rates for north Indian markets are too high, without any research on ground. This needs to be reduced if the governments want to see a boost in the market sentiments. The lowered circle rate in Gurgaon, which is implemented with immediate effect, is likely to generate demand for property and the market can now operate on a more realistic scale,” said Ann Khan, Noida Extension Flat Members Association (NEFOMA).

The Haryana government has provided the highest relaxation in private colonies, HUDA sectors and other residential colonies coming under the older city. In plotting societies, there is a direct benefit to consumers. Suppose they had a 10 lakh property and they had to pay seven percent stamp duty, around Rs 70,000, which will be reduced to a mere Rs 55,000, after the rate cuts. 

The circle rates for some prime residential areas like DLF Phase 1 and Sushant Lok will go down from Rs 77,000 per sq yard to Rs 65,450. Similarly, for DLF Phases 2, 4 and 5, it will fall from Rs 72,000 a sq yard to Rs 61,200. 

Apart from raising buyer sentiments, which was on the downside, the circle rate cut by the Haryana government sets a precedent for other state governments to follow if any meaningful change is desired on the real estate scene. Other state governments are likely to think over their prevailing circle rates and how it can be used as a tool to revive the market.

Gurgaon will have a unique edge over other NCR regions where prices are going up and circle rates are being revised. Amidst this, it will be seen in a much favourable position. Certainly, if consumers were to choose a region, they would prefer Gurgaon over others because of the lower overall cost of purchase of a property, which could be the deciding factor for most.

Sector 15A and Sector 44 in Noida are the costliest, the district administration has given some relief to flat and shop buyers. The circle rate is now Rs 90,500 per sqm as compared to the earlier rate of Rs 86,000 per sqm for ‘category A’ property. In Greater Noida, the residential property in Jaypee Greens (Rs 35,000 per sqm to Rs 47,000 per sqm) and the commercial property in the Alpha commercial belt have witnessed the highest increase. The agricultural land has seen a hike of an average rate of 10 per cent.

“Multi-storeyed and group housing buildings in Noida and Greater Noida have witnessed a rapid growth in the region. The builders have been extracting a huge amount from homebuyers on account of facilities such as lifts, swimming pool, security, etc. There has been no increase in the circle rates for industrial plots measuring up to 4,000 sqm last year. For plots above 4,000 sqm, the allotment rate and the lease rent would be added to arrive at the circle rate. But if the prevalent circle rate is higher, then that would be applicable”, a district official said.

“With rate cut in Gurgaon, Noida will also have to follow suit to stay in this further skewed competition. The recent decision will force the UP government to cut circle rates in NCR cities of Noida and Ghaziabad. Noida market due to all the controversies has been seeing a slowdown as buyers are looking for other avenues for safe investment. 

Here, we can say that circle rates for North Indian market is too high without any research on ground. This has to come down if governments want to see boost in the market sentiments in near feature. The lowered circle rate in Gurgaon, which is implemented with immediate effect, is likely to generate demand for property and the market can now operate on a more realistic scale,” said a Manoj Kumar, a Noida-based realty expert.

Investment Invictus 

When the new government took charge in 2014, it was expected that the real estate market would get revived, but property prices remained low. As a result, the urgency that usually surrounds the decision to buy a house-for investment or residence alike-abated. What replaced this urgency was complacency; would-be home buyers began to feel that since prices are in a downward spiral, they should delay the purchase of a home until prices fall even further.

But data suggests that the realty market has remained stagnant, and it is unlikely that property prices will fall even in the latter half of 2016. Thus, these delays may very well be in vain.
Further, experts from JLL India and Cushman and Wakefield suggest that prices of real estate are likely to rise in 2017 and beyond, confirming that 2016 may be the last year that homeowners can enjoy reduced rates.

Deciding where to invest

Even if you’ve made the decision to invest, choosing a location to buy property can seem like shooting in the dark. For people who bought houses in Gurgaon 20 years ago, for instance, the property price appreciation would have been a life-changingly pleasant surprise. 

Similarly, Powai wasn’t always the buzzing entrepreneurial hub that it is today. But with massive investment in infrastructure and setting up connectivity with Mumbai and other suburbs, it now boasts of being the birthplace of pioneering startups such as Housing and Olacabs and one of the most sought after real estate locations.

Anup Verma

Anup Verma

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