Delhi Property Circle rate hike way to go: Experts

Nov 1, 2011

New Delhi: Hike in Delhi Property Circle Rate Will Initially Burden Consumers But Prove To Be Beneficial In Long Run .

With the Delhi government hiking the circle rates substantially on Monday, the city's realty market is expected to be impacted somewhat. It's going to be a twopronged impact, say property experts. While the “white" component of the transaction will be going up as circle rates try to catch up with the grossly deflated market prices, the good news is that more genuine buyers are now expected to enter the market with financiers taking a backseat. Said real estate analyst Pradeep Mishra: “The reason for the impact on the property prices is that the component of the price that was white, comprising the stamp duty that was usually undervalued, will now go up." It's not going to be a huge jump though, say experts, despite the staggering 250 per cent hike in circle rates of upmarket colonies in Category A. Said Harish Sabharwal, a Mayur Vihar broker: “The circle rates are finally becoming more realistic, reflective of the market. Since this means that the stamp duty is going up, there will be a short-term impact." The hike will be passed on to the buyer, who will bear the additional load, said experts. Both Mishra and Sabharwal, however, feel the impact will be absorbed in the next few months. “Transactions will be affected only for a couple of months and then it'll go back to normal. The increase will also be absorbed," added Mishra.

In fact, properties in the region of more than a crore may see a rate correction, feel market watchers. That is because of the larger role of genuine buyers in this market. “With the revision in circle rates, the financier will not invest as heavily now. There are several reasons for this, like the stricter general power of attorney norms as well as higher stamp duty. The financier's profit margin is smaller in this scenario," added GP Tiwari (name changed), who invests in real estate. The impact of financiers taking a backseat, added Mishra, will be felt the most in properties in the range of Rs 1.5-2 crore and above. “A 5-10 per cent rate correction may happen in this category of properties," said Mishra.

In a market already impacted by rising interest rates, the hike in circle rates will play spoilsport, rue most industry watchers. “While Delhi's circle rates are comparatively lower than that of the other NCR areas, it's a substantial hike - between 100-250% in all the upmarket colonies. Even G and H will have a 15% increase. Property rates will obviously be affected," said Sabharwal. The hike however, isexpected to be beneficial in the long run, as it will check transactions in black money and undervaluation of property, add experts.

Source: Times of India