How Residential Real Estate in Gurgaon Will Be Impacted by Lower Circle Rates?

The price of residential real estate in Gurgaon may fall as authorities have proposed to lower circle rates in this suburb of New Delhi. This proposal is an attempt to jumpstart Gurgaon's property market which has been in a slump over the past few years. Gurgaon authorities are considering lowering circle rates for the years 2017 to 2018. Another proposed reason for lowering circle rates, in addition to providing a boost to the cities real estate market, is that rates are too high today and should be lowered in order to reflect market fundamentals. Hence lower circle rates will rationalize property rates and also provide Gurgaon's real estate sector with much needed momentum.

History of Circle Rates

In the past circle rates were raised to keep pace with the higher prices charged by builders for property in the city. Hence as the price of property went up in Gurgaon, so did the circle rates in the city. Eventually prices soared to so high as to make it impossible for the common man to buy a house or flat in Gurgaon. Because of lower demand for housing units in much of Gurgaon, there was a pile up of inventory in the city and the real estate market in Gurgaon lost much of its momentum.

In the end buyers and developers suffered due to higher prices for housing units in Gurgaon. The reason why builders suffered is that they had to pay a higher capital gains tax and buyers suffered because they had to pay a higher stamp duty and a higher registration fee on the previously continuously hiked circle rates.

Gurgaon's Real Estate Market Today

Nearly every real estate expert agrees that the real estate market in Gurgaon today is muted. The number of property transactions in Gurgaon has fallen dramatically over the past few years. Additionally those who may be considering investing in Gurgaon or in buying a house for end use here are deterred from doing so by the poor quality of the cities infrastructure.

Experts also believe that Gurgaon authorities need to find a way to make Gurgaon's property more affordable. Authorities themselves realize the need to create more affordable homes in Gurgaon and one way of doing so is by lowering circle rates.

Last year the circle rate in Gurgaon was lowered by 15 percent yet even this large correction was not large enough to make property attractive to buyers in Gurgaon. Hence, after a 15 percent drop in the circle rate last year, the price of the land was still too high and the market was unwilling to buy even at this discounted rate. Gurgaon authorities believe that lowering the circle rate further will provide the right incentive to buy property in Gurgaon.

Why Authorities Want to Make Property Cheaper?

Today the number of ready to move in units in Gurgaon stands at five hundred thousand, however because of the shortfall in demand from buyers the government loses revenues that it expects to earn when a newly bought property is registered.