Real estate news on Gurgaon, Noida home sales fail to recover on high circle rates despite in prices

Commercial Properties, Land/plots, Price Trends, Real Estate services, Residential Properties, Delhi-Gurgaon
Posted on Jun 07, 2016
GURGAON: The property market in NCR is at its lowest ebb. Prices have either plateaued out or fallen over the past couple of years. Like any bear run, this ought to have got buyers looking for long-term returns interested. But that hasn't happened. As much as the trust-deficit has spooked investors, a devil hiding in the detail has further queered the sales pitch. It's called the circle rate.

By definition, circle rate is the minimum value at which a plot, house, apartment or commercial property can be sold. The rate is decided by a state's revenue department in consonance with market rates. But in hot property markets like Gurgaon and Noida, the circle rate has stopped keeping in touch with the market rate. So, while market rates depreciated due to bad buying sentiment, circle rates didn't.

What this created is an environment in which neither buyer nor seller is interested in making a transaction. Why? Say an apartment's market price is Rs 1 crore but its value, according to the circle rate, is Rs 1.5 crore. It means both the stamp duty the buyer has to pay to register the flat and the tax component of the seller will be calculated on Rs 1.5 crore, the circle rate. It's a transaction in which both parties lose.

Acknowledging this, the Gurgaon administration recently made the unprecedented proposal of cutting circle rates by a steep 15% for the 2016-17 fiscal year. The industry hopes the Delhi and UP governments will follow suit. Gurgaon divisional commissioner D Suresh said the proposal reflected the reality.

Praveen Sharma, a real estate agent in Gurgaon, said circle rates have acted as a catalyst in spoiling the mood. "There is negligible transaction in the market. Investors are holding on to their property with a hope for recovery and a circle rate correction," he said.

Manoj Kumar, a broker, said governments in NCR cities conveniently overlooked circle rates, hoping to rake in more revenue. "In last two years, due to the downturn in the real estate industry, market prices of have come down, yet circle rates were not changed," said Yadav.

Unlike in Gurgaon, where circle rates were not revised for the last two years, Noida continued to raise them despite the gloom. Updesh Bharadwaj, a resident of Sector 72, owns a shop in a mall in Sector 18 that he wants to sell. "The market price of the shop is Rs 1.5 crore but it's Rs 2.5 crore as per the circle rate. I have been looking for a buyer for two years. But no one is interested because of the huge gap in rates," he said.

Gautam Budh Nagar district magistrate N P Singh said the administration will conduct a survey of properties in June and July before deciding on the next revision in circle rates. "We will make suitable revisions if we find anomalies in certain sectors," Singh said. The revision will be made in August.

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