Circle rates hike may not 'immediately' hit Mumbai realty market

Across the state, the RR rate has been increased by 3.9 per cent, on average

A 3.4 per cent hike in Mumbai’s ready reckoner (RR) rates or circle rates for 2025-26 (FY26) is unlikely to have any “immediate” impact on the market sentiment, according to experts who say the hike is logical considering the price rise in the city’s real estate market.

 

The Maharashtra government’s department of registration and stamps issued a notification of the rate hike on Tuesday.

 

Across the state, the RR rate has been raised by 3.9 per cent on average. Thane’s average RR rate increased by 7.7 per cent, Navi Mumbai’s by 6.7 per cent, and Pune’s by 4.2 per cent. The rate changes come into effect Tuesday night.

 

RR rates or circle rates are the minimum property values set by the government for taxation and registration which also decide the stamp duty, several premiums for developers, and registration fees for properties. 

 

A hike in these rates may result in increased input costs of developers, including the cost of floor space index (FSI), various premiums that are paid to municipal authorities, stamp duties, and registration fees, which will be passed on to homebuyers, eventually leading to an increase in housing prices.

 

According to industry leaders, the hike will affect the pricing in the markets where properties were being sold below RR rates, while in the markets where the properties were already being sold well above the RR rates, the hike will impact the developers’ margins.

 

“It is a marginal increase in rates. Most projects in Mumbai are being sold at higher (prices) than the RR rates anyway. The overall cost of the project will go up, and the prices will go up marginally and be passed on to homebuyers,” said Bamashish Paul, cofounder, managing partner and chief executive officer at Etonhurst Capital Partners.

 

“The regional impact of the hike will differ – Mumbai, with a 3.4 per cent hike, could see more measured adjustments given its high real estate values. While this revision aligns RR rates closer to market values, it also increases the overall cost of home-ownership, potentially influencing sales dynamics in coming months,” said Arpit Jain, director, Arkade Developers.

 

Paul said that the market will understand how buyers react to the increment in the prices in about 12 to 15 months.

 

According to Ashutosh Limaye, regional director – strategic advisory and valuations, Anarock Group, the hike is reasonable, given that in the past two years, market prices for residential real estate have gone up by 8-10 per cent in Mumbai, 15-18 per cent in Thane, 14-23 per cent in Navi Mumbai, and 13 per cent in each of the past two years in Pune.

 

“The revision in RR rates is not unprecedented. The last hike was in 2022, and the market absorbed it well. Given Mumbai’s rapid price appreciation in recent years, this adjustment is unlikely to disrupt momentum,” said Ritesh Mehta, senior director and head (north, west and east), residential services, India, JLL.

 

The hike has come at a crucial time when Mumbai’s real estate upcycle is showing signs of cooling.

 

“With Mumbai’s real estate market witnessing a surge in redevelopment activities, this upward revision in rates will escalate construction costs, as development expenses, additional FSI, and municipal charges are directly linked to it,” said Niranjan Hiranandani, chairman of the National Real Estate Development Council (Naredco) and cofounder and managing director of Hiranandani Group.

 

Mumbai, Thane, and Navi Mumbai together forming the Mumbai Metropolitan Region – the powerhouse of India’s real estate – saw a decline of 26 per cent in housing sales in the first quarter of 2024-25, according to Anarock. Pune too witnessed a decline of 30 per cent in sales in that quarter.

 

Prashant Sharma, president, Naredco Maharashtra, said, “While we understand the government’s intent to align RR rates with market realities, this hike comes at a time when the sector is moving steadily, and affordability plays a key role in driving demand. This increase may deter fence-sitting buyers and put pressure on developers already grappling with high input costs.”

 

The hike may hit the lower end of the market rather than the premium and luxury segments. “The impact would be felt only in lower-priced markets where buyers are more sensitive to total cash outflow,” added Limaye.

 

Last week, the district administration of Noida, Greater Noida, and Jewar proposed an increase of 20-70 per cent in circle rates, which is also estimated to lead to property prices rising in these areas, as stamp duty charges levied on the sales and registration fees would go up for homebuyers. The proposed rates will be fortified after inputs from stakeholders after April 5.