Gurgaon witnesses a surge in circle rates
The real estate industry in Gurgaon has faced numerous challenges in recent years. The escalation of circle rates is anticipated to pose a greater difficulty for individuals seeking to acquire property in the region
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Mumbai: The government's recent decision to increase circle rates for properties by 10 to 30 per cent has sent shockwaves through the real estate sector in Gurgaon. The rise in circle rates has resulted in a significant surge in the prices of residential, commercial, and agricultural land in Sohna, Pataudi, Manesar, and Wazirabad.
According to the district collector's directive, the Gurgaon tehsil has seen a 20 per cent increase in circle rates, while the Badshahpur tehsil has seen a 15-20 per cent increase. This surge in circle rates has had a far-reaching impact on all sectors of the real estate industry. The increase in prices has made it more challenging for individuals to acquire property in the district, which is likely to have long-term consequences for the real estate sector.
Talking to Bizz Buzz, Rahul Singla, Director, Mapsko Group, said, “The revision of circle rates in the regions adjacent to the Southern Peripheral Road (SPR), Golf Course Road, and Dwarka Expressway is an indication of the escalating demand for real estate in these areas. The surge in these regions has elevated their status as preferred locations for both commercial and residential properties, and the elevation of circle rates is an anticipated advancement in the development of the real estate sector. This confirms that these areas are now classified as prime real estate locations and are expected to entice further investment in the future. Nonetheless, we suggest that the government implements measures to prevent the hike in circle rates from inducing a decline in the industry.”
Property registration with the revenue department must adhere to the circle rates, which act as a minimum benchmark for a property's value. This means that the lowest value of a property must be determined based on the market rates, but it cannot be lower than the circle rate prices. This policy has imposed a significant burden on the real estate sector in the district, which was already struggling to meet the surging demand for property.
Vivek Singhal, CEO, Smartworld Developers, said, “The recent surge in circle rates in Gurugram is a move in the right direction by the government. The reduction in gap between the market value and circle rate will further boost the primary real estate market and will be a right step towards enhancing transparency and promoting the organised development in the real estate industry. We are confident that the recent surge in circle rates will not discourage potential buyers from investing in Gurugram's real estate market, which has shown tremendous growth potential over the years."
In recent years, the real estate sector in Gurgaon has experienced significant growth due to its advantageous location and rapid infrastructure development. However, the increase in circle rates is expected to impede the progress of the industry. This step has caught developers off guard, as they were not expecting such a substantial hike in prices.
Commenting on the same, Kunal Rishi, COO, Paras Buildtech, said, “While the recent increase in circle rates may catch homebuyers and property investors off guard, we as real estate developers believe that the district administration's decision is justifiable based on the current market conditions. The real estate market in Gurugram has experienced a significant upsurge in sales and property prices over the past year, resulting in a need for higher circle rates. These rates represent the minimum prices at which a property is registered with the revenue department during transfer, and the stamp duty collected is a significant revenue source for the state government.”
He adds, “Despite the higher taxes that homebuyers and property investors may face, we assure them that the increase is necessary to maintain a thriving and sustainable real estate market in the long run. Moreover, we are confident that the market can handle this adjustment, as evidenced by the recent sales and price hikes in the real estate sector.”
Many industry professionals have expressed concerns about the increase in circle rates. They believe that this measure is likely to have an adverse impact on the sector, as it could discourage potential investors from investing in the industry. The rise in prices is expected to render properties unaffordable for many, thus hindering the growth of the real estate market.
Adding to this, Santosh Aggarwal, CFO and Executive Director, Alpha Corp, commented, “The circle rates are only an indication of the pricing, not the actual value. We believe that increasing circle rates in the current scenario would be impractical. Due to the increase in circle rates, the buyers may not invest in any property in the short term and may like to hold off their buying decision for now, which will affect the realty market as a whole. Any decision to raise the circle rate undermines the recovery process and has a detrimental influence on the real estate sector. A higher circle rate correlates to a higher registration cost, which translates to a higher acquisition cost and has an impact on the property's transactability.”
The real estate industry in Gurgaon has faced numerous challenges in recent years. The escalation of circle rates is anticipated to pose a greater difficulty for individuals seeking to acquire property in the region. Despite this, several professionals in the field remain optimistic that Gurgaon's advantageous location and accelerated infrastructural expansion will continue to attract buyers and investors in the future.
