Gurgaon district, being close to the capital of India is a leading commercial, residential, industrial and corporate hub of the country. It is flooded with social and civic utilities like top brand shopping malls, multiplexes, hospitals, educational institutions and big corporate offices and therefore has seen a remarkable growth in the real estate sector.
Till 2012, the property prices in Gurgaon district had been skyrocketing with the private builders and government agencies taking advantage of the situation.
But since last few years the Gurgaon property market had been very stagnant and in its initiative to provide momentum to the otherwise slow property market of Gurgaon, the Haryana government has decided to slash down the circle or the collector rates of immovable properties by 15% in Gurgaon district. This step has been taken with an objective to provide a boost to the realty demand in the city and act as a catalyst to bring back to life the otherwise stagnant property market.
The proposal for the same had been raised by Gurgaon administration and was shown a green signal by the state government.
Collector rates in a micro market reflect the prices and are normally pushed up in case of heavy transactions in the industry. The government slashing out on these rates would mean that there is some correction undergoing in the market. It also reflects that government is keeping a watch on the value of the properties being registered and the actual prices at which the deals are taking place. It will also help in reducing the black money margins in the industry in case of realty deals.
Explaining with example, if a property is worth Rs 60 lakhs, the stamp duty on the same would be something around Rs 4 lakhs (7or 8%). But a reduction in 15% of stamp duty would mean a savings of approx. 60,000.
Since the last two years, the rates were completely untouched but it was realized that this zero change failed to lift up the sentiments of potential homebuyers as there were hardly any transactions taking place mainly due to the recession. The builders even offered composite prices which included preferential location and parking charges to the authentic buyers. Hence it is for the first time that the rates have been reduced in the millennium city.
Since all the taxes are to be paid on the basis of the circle rates, the higher collector rates were badly affecting the market. In case the a person disposes off his property at rates lesser than the circle rates, he has to pay the capital gains tax at the dominant collector rates and similarly, buyers will have to shell out more even in case the sale price is lesser than the circle rate. Hence people refrained from buying or selling and the market was left in lurch. A cabinet lead by Mr TL Satyaprakash, Gurgaon Deputy Commissioner, was formed which put forward the suggestion to cut down and bring these rates in sync with the prevalent market rates. The cutting down of these rates shall bring down the costs of buying property in the city.
Mr Satyaprakash explained that since the market rates were lower than the circle rates in many of the areas of Gurgaon, there was a dip in the number of registries being done. The reduction in the circle rates have been done on the basis of property registration rates prescribed, market rates and also the rates decided by the private developers in the district for plots and flats. The revised list of the same shall be readily available on the official web page of Gurgaon administration and shall be applicable with immediate effect. Post deduction, the new rates for chief locales like Sushant Lok and DLF Phase 1 will drop down to Rs 65.450 as compared to previous rate of Rs 77,000. Similarly for areas like DLF Phases 2, 4, 5 the rates will trim down to Rs 61,200 from the earlier Rs 72,000.
However, in case of change of land use (CLU), the rates shall be different. Like in case of residential group housing, the rates applicable shall be four times of the agriculture circle rate, for commercial, 5 times the agriculture circle rate and in case of residential plotted colony, it shall be three times the agriculture circle rate. Land area smaller than 1000 square yards, for stamp duty collection purposes shall be treated as residential and similarly areas that are perfect for the size of a shop or lesser than 25 square feet-225 square feet shall be considered as commercial.
Overall this is a good step on the part of Gurgaon authorities and shall prove to be a win situation for both the buyers and developers and all the stakeholders. Since last few years, the drop in the real estate prices has created a difference between the collector rates and transaction value. But now the developers are optimistic that with this rate cut, the investor sentiments in the market will drastically improve as the total costs shall be reduced because all the tax calculations are done on the basis of these rates. Also since the rate cut is applicable for commercial spaces as well, the TDR, fungible FSI and stamp duty shall be driven by the circle rates, benefitting the developers. They shall no longer be muddled under the burden of huge stock of unsold inventory as more sales are anticipated resulting in rationalization of prices. It will be profitable for the buyers as well since they have to pay extra stamp duty and capital gains tax depending on the differential value which will mean an additional payout. Prospective homebuyers will have reduced obligation of paying the registration charges, stamp duty and property taxes thus addressing the issue of affordability.
Such an initiative had been taken earlier also in January 2014 in West Bengal by the Mamta Banerjee government which slashed the rates by 33% in locations like Park Street and 10.7% along Ballygunge Circular Road, which greatly benefitted real estate buyers.
