Published on: Jun 30, 2016 @ 19:43
The Haryana Government announced on Monday to reduce circle rates of property in Gurgaon by 15 percent. The decision to reduce the circle rate is expected to boost the sentiment of the sluggish property market of Gurgaon.
The new reduced circle rates will be effective from the 28th of June. For the first time in the last 10 years, the circle rates have been reduced in Gurgaon.
Circle rates are the minimum rates at which sale or transfer of a plot, built-up-house, an apartment, a commercial property takes place. The property can not be registered below this price. The buyers pay stamp duty and registration charges according to the circle rate. Also, it determines capital gains tax a seller is charged.
The realty sector in Gurgaon has been passing through a tough time for the past few years. In fact, the city has been witnessing the slowdown in the real estate market. So, this has significantly reduced the property transactions and brought down the revenue to the State exchequer.
Moreover, higher circle rates badly impact the market because all taxes are paid on the basis of circle rates. Therefore, if someone sells his flat at a rate lower than the circle rate, he will have to pay capital gains tax at the prevailing circle rate. The same applies to buyers who pays an extra amount for stamp duty even when the actual sale price is lower than the circle rate.
The new rate list is now available on the official Gurgaon administration website. Now, the circle rates for residential areas like DLF Phase 1 and Sushant Lok has come down from Rs 77,000 per sq yard to Rs 65,450. DLF Phases 2, 4 and 5 has seen a reduction of almost Rs 10,000 per sq yard.
In fact, these reduced rates will have a direct impact on the property markets. It can revive the real estate market and bring homebuyers back into the market. Besides, the lowering of circle rates will bring down the cost of buying property in Gurgaon.
Moreover, the overall cost will come down as these rates are the basis for tax calculations. Buyers were paying additional stamp duty and capital gains tax on the differential values as well. That resulted in the extra amount of payment by buyers.
The Haryana Government’s decision to cut the circle rate is a good move as property prices have dropped over the past couple of years, creating a gap between the transaction value and circle rates.
This reduction is unlikely to have an immediate impact on property prices in Gurgaon market. But some realtors, dealers and even buyers feel that the cut in circle rates will bring a substantial change in market conditions.
With this move, prices of both new and resale properties and plots are expected to be reduced and become realistic. The cut may also help sell the land parcels meant for commercial properties. This can help in significantly improving the overall market sentiments.
Property registration had dropped significantly in Gurgaon due to the buyers opting for General Power of Attorney over Sale Deeds leading to revenue loss to the government. But with the reduction in circle rates, it is also expected that it will bring in more revenue to the state government. In fact, the decision to cut circle rates is a course correction in accordance with the ground situation.
Ajay Verma, founder and writer of TheHousingWorld, a real estate and mortgage news website. He has over fifteen years of rich experience in the above mentioned industries.