Real estate developers wary of Haryana govt's proposed circle rates

The proposed circle rates for locations in Haryana have left developers wary of its probable implications on the state’s housing market, which is struggling with poor demand. In its latest round of revision of collector (circle) rates, the state has proposed to hike rates by up to 220 per cent. In the Golf Course Road area of Gurugram, a new rate of Rs 17,000 per square-feet has been proposed. This is a rise of over 210 per cent from the existing Rs 8,000 per sq ft.

While the new rates have been proposed for several locations in Sohna, Manesar, Wazirabad and Harsaru, market experts pointed towards steep hikes in Gurugram as a matter of concern. Apart from subdued demand scenario, what has amazed many is the proposed hikes are way higher than the usual 8-10 per cent increase in recent years.

Santhosh Kumar, vice-chairman, Anarock Property Consultants, said: “Both demand and liquidity in the market are tepid. This hike would further dampen end-user and investor sentiments. Both the primary and secondary housing markets will be hit.”

According to Nayan Raheja, executive director, Raheja Group, in many of the locations projects property prices have fallen in the past few years, because of poor demand. “Yet the demand has remained subdued. In such a scenario, raising circle rates so sharply is the last thing that is required and is out of sync with current market dynamics. If implemented, the move will adversely impact government’s aim of providing ‘Housing for All’ as it will make housing dearer for customers.”

Raheja said given the adversity the sector is facing, both circle rates and stamp duty should be reduced. Realtors, through industry bodies, have already made several representations to state officials, opposing the steep hike in rates.

According to Anarock, Gurugram has 58,000 unsold units — the highest in the national capital region. In Gurugram, unsold stock increased by 12 per cent in 2019 — from 51,840 units at the end of 2018 to over 57,950 units in end-2019. The increase in rates, more than double in major areas, will only worsen the situation, it said.

Parveen Aagrwal, chairman of Signature Sattva, a realtor that focuses on affordable housing, sees no impact of the hikes. With fixed circle rates set for locations in Gurugram — no such revision in rate is applicable on affordable homes. However, thousands of homebuyers under the Haryana government’s Deen Dayal Jan Awas Yojana — an affordable plotted housing programme launched in 2016 — might have to bear the additional burden. Unlike, the central government scheme, revised rates will be applicable on these units. The scheme was aimed to providing 200,000 affordable homes by 2022.

Market experts like Harinder Singh Hora, chairman, Realistic Realtors, an advisory firm, said proposed rates, if implemented, could drive buyers away from prime locations like Golf Course Road towards comparatively cheaper areas like Golf Course Extension or Sohna. “It has the potential to initiate a churn that may benefit the mid-level projects,” he said.

Kumar from Anarock says this hike could boost the real estate market in Noida and Greater Noida, which had seen a decent uptick in 2019. Last year, unsold inventory in these two areas went down by 17 per cent and 20 per cent, respectively.