If you are amongst these searching to invest or obtain their dream residence in Gurugram now or in the close to future, here’s terrible news for you. Gurugram’s district administration has improved the circle prices for the fiscal year 2021-2022, effective from April 8, by up to 88%, which will have a cascading influence on the house costs in the micro marketplace.
For instance, the circle price at upmarket Aralias, Magnolias and Camellias has been raised by 25%, from Rs 20,000 per sq ft to Rs 25,000 per sq ft. The circle price at Crest has been hiked from 8,000 per sq ft to Rs 12,000 per sq ft, a hike of 50%, when at Carlton it has been improved by 88%, from Rs 8,000 per sq ft to Rs 15,000 per sq ft. The circle prices for Unitech World Spa, Laburnum, Palm Springs, Park Place, Central Park, amongst other individuals, have been hiked from Rs 8,000 per sq ft to Rs 9,000 per sq ft.
The move, surprisingly, has come at a time when a lot of other state governments have for some time either kept the circle prices unchanged or have even gone for a reduction in prices in order to preserve the house costs low in the present occasions of the pandemic.
Industry specialists say that at a time when states like Maharashtra have kept their prepared reckoner prices unchanged in order to preserve the housing sales momentum going and for improved housing affordability, it is detrimental to boost circle prices for FY2021-22 (the minimum worth under which a house can’t be registered). Doing so is terrible for the general housing demand which saw some new momentum, specifically in the final two quarters. Moreover, improved prices have an effect on housing sales by adding to the current inventory of unsold stock.
“As per ANAROCK research, Gurugram saw total sales of nearly 7,050 units in the last three quarters post the lockdown period – Q3 2020 to Q1 2021. Despite the jump in sales q-o-q, data indicated that Gurugram’s unsold housing stock had jumped up by 3% in the previous quarter as compared to the corresponding period a year ago – from 60,130 units as on Q1 2020 to nearly 62,170 units as on Q1 2021-end. Among all cities in NCR, Gurugram has the maximum stock. Hence, it is best if the rates are at least kept the same, if not reduced,” says Anuj Puri, Chairman, ANAROCK Property Consultants.
The reality is when the government has completed a slightly larger boost in the tony places of Gurgaon, circle prices have improved in other sectors as effectively. This will have a cascading impact on costs.
“The only question is timing. The NCR market, including Gurugram, has only recently started showing signs of a recovery. While other residential markets across the country like Mumbai had given stamp duty reductions earlier to inject momentum, the current announcement could be counter intuitive. However, given that the municipal body needs development funds, there wasn’t much else the government could have done. It is likely that the buying momentum may be impacted for the mid segment projects and independent floors,” says Dr. Samantak Das, Chief Economist and Head of Research & REIS, JLL India.
It may possibly be noted that circle price of a actual estate asset is the minimum price of house that the authorities set region-sensible at which properties are registered in case of a sale or transfer. The authorities preserve on revising the circle prices from time to time in order to benchmark these prices with the prevailing marketplace situations.
A preliminary assessment of the proposed revision in the circle prices reveals some essential points:
# For some areas, the circle prices breach the limits of fair marketplace prices by a fair margin, which is not in line with the marketplace and such a step could fail to meet the actual goal of revision.
# In some of these proposed revisions, the new proposed circle price is extremely higher as compared to the current circle price, which has not been the case of appreciation of such properties.
# Also, the revised bracket nonetheless fails to issue in differentiated positioning of the projects, hence placing projects of differentiated positioning beneath very same cost bracket.
# In some situations, the revised circle prices are drastically larger than the current marketplace prices of such properties. In such situations, transactability of such properties requires a critical hit.
Thus, “the abrupt increase in some of the cases seem quite divergent from the market scenario and would be detrimental to transactability of these properties. Also, a higher circle rate translates into higher registration cost, which further translates into a higher acquisition cost and impacts transactability of the property. Although the notion of upward revision is pragmatic (helps in eradicating the cash component for secondary transactions), the extent and consistency of this revision in some cases fails to capture the average rates in the market,” says Ashutosh Kashyap, Associate Director-Advisory Services at Colliers India.
For some areas, the administration has proposed a blanket price applicable for all assets in that place. This, having said that, will fail to address the inconsistency in prices/pricing of assets in that place. By applying a blanket price, the government could overvalue some assets and undervalue other individuals.
“Higher acquisition cost owing to higher circle rates might dampen the already struggling residential real estate domain, with secondary market facing more severe repercussions. A reconsideration into the approach adopted to determine circle rates for different projects with differentiated positioning is the need of the hour for a city like Gurugram in order to capture the market rates of properties more objectively,” advises Kashyap.