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Property Sales Dip After Circle Rate Hike

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Property Sales Dip After Circle Rate Hike

Last updated: April 21 2011
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  • Property Sales Dip After Circle Rate Hike

    The euphoria over the city’s booming real estate sector is slightly wearing off with the government hiking the circle rates thrice in the last one year. Buyers now are wary as they have to shell out more on stamp duty and registration of properties. Interestingly, market watchers say the demand for high-rise apartments has not been affected much.

    According to revenue officials, the registration of plots in Gurgaon has come down from the average 150 per day to about 110 since October last year. As a result, the revenue of the state government has also gone down, they claim. The circle rates, also known as collector rates, in some areas have been increased by nearly 150%.
    While the government move has applied brakes in registration of plots, developers say the sale of apartments in condominiums has not witnessed a downward trend.

    Their logic is that executives, who prefer houses in high-rises, usually raise a bank loan and have transparent deals without limited exchange of black money.

    Sunil K Dahiya, managing director of Vigneshwara Developers, said, “Corporates who buy properties in societies mostly with a loan would not be impacted because they anyways have white-money transactions.”
    He added that the hike in circle rates would infact help boost the image of the Indian property market.

    In a bid to reduce the black money component in property transactions and avoid revenue loss to the government, Haryana had hiked circle rates last on March 31 by 20-30%.

    Dharmendar Bhandari, managing director, Bestech Group, said frequent and steep hikes in circle rates had affected the real estate sector as sales had dipped in the last few months.

    Anshuman Magazine from CB Richard Ellis too agreed property sales had come down because of the hike in circle rates mostly in case of plotted houses.

    Property sales dip after circle rate hike - Hindustan Times
    Last edited April 15 2011, 07:47 PM. Reason: .
  • #2

    #2

    Re : Property Sales Dip After Circle Rate Hike

    If the government is genuinely worried about black money in real estate, then they should lower the stamp duty while raising the circle rates.

    Raising the circle rates alone with no change in stamp duty means government is trying to raise taxes and hence its revenue but is trying to hide behind the logic of black money.

    Stamp duty at 7% in Delhi and similar rates in other states is a robbery in broad day light. If government is really serious about tackling the issue of black money in real estate then they should raise circle rates by 4-6 times in Delhi and lower the stamp duty to 1%.

    But then I don't believe that this maha-chor UPA or Congress government will want to do anything to stop the black money menance.

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    • #3

      #3

      Re : Property Sales Dip After Circle Rate Hike

      Somehow this is good for buyer who could not provide more % of black money while purchasing property. Increasing circle rate means more white money involved and buyer can get more loans from bank as per eligibility

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      • #4

        #4

        Re : Property Sales Dip After Circle Rate Hike

        the best way to curb black money would be to simplify short term capital gain and make it a flat 10% or something. This way people won't hesitate to take an all cheque deal.

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        • #5

          #5

          Re : Property Sales Dip After Circle Rate Hike

          well i dont think there has been any decline in the number of transactions taking place in the realty space. In fact with increase in circle rates the prices have gone up a bit more ( of already constructed properties in delhi) as sellers have to now pay tax on a higher amount therefore they have started asking more!

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          • #6

            #6

            Re : Property Sales Dip After Circle Rate Hike

            Administration puts its foot down on circle rates

            The representatives of Gurgaon Property Dealers Association who urged the deputy commissioner’s office to roll back an increase in circle rates, came back disappointed. Dealers argued that the rates were increased twice, after a recent hike in October 2010, though it’s conventionally done every Apr
            il after a gap of 24 months.
            They said the unreasonably high rates were putting an extra burden of stamp duty and taxes on buyers.
            However, deputy commissioner PC Meena countered them by saying: “We have increased circle rates to bridge the yawning gap between market prices and registered prices. The move was imperative to curb rising black money. An exercise was done by the administration to determine the circle rate.” Circle rate is the base price below which a property can't be registered.
            When circle rates are increased, the buyers have to pay a stamp duty on the increased circle rate.
            “We don’t mind the annual increase but why did they increase circle rates between 100-200 % in just one year’s time,” said Satish Kataria, president of Gurgaon Property Dealers Association.
            But, Meena justified the act by saying: “There is no rule which stops us to increase the rate more than once. We have increased the circle rates to keep pace with soaring market prices.” Calling the move reasonable, he added: “Those who oppose increase in circle rates justify black money. We are trying to curb it so that the ‘right’ taxes can be put into coffers.”

            Administration puts its foot down on circle rates - Hindustan Times

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