What's really unfortunate is that the proposed hike in circle rates is untimely as it comes ahead of the festive season. It may be mentioned that due to unreasonably high home prices, residential sales have been consistently falling since the September 2024 quarter. So much so that even the last festive quarter (October-December 2024) could not stem this decline. Now that after the cumulative 100 bps cut in repo rate, the buying sentiment was looking up, further increase in property prices due to upward revision in circle rates, will dampen the spirits of homebuyers.
Significantly, for the last about 5 years, housing prices have been continuously rising and Delhi-NCR including Gurgaon has been in the forefront of this price escalation, with over 80% hike. Along Dwarka Expressway, home prices almost doubled during this period. Further, as per Anarock data, average residential prices in Gurgaon shot up by about 30% YoY in 2024. Other leading cities saw a price rise of almost 50% compared to Gurgaon. While Bangalore registered about 13% price increase, both Pune and Chennai clocked 16% increase each. Mumbai (Metropolitan Region) and Kolkata respectively recorded 18% and 3-5% price increase.
The sharp rise in residential prices had made it really challenging for middle-class homebuyers of affordable and mid-priced housing, to afford a home. This was clearly reflected in the significant decline in the sales share of affordable homes at 27% to the overall housing sales share of 43% in the first half of 2024. What's further a matter of concern is that in Delhi-NCR, the share of new housing supply in the affordable segment dropped from 41% in 2022 to 11% in 2024. The share of affordable and mid-income housing fell by 45%. All this, coupled with a proposed hike in circle rates, does not bode well for residential real estate.
Real estate experts are equally concerned about the slackening of sales in view of the substantial hike in circle rates in Gurgaon announced by the district administration.
Niranjan Hiranandani, Chairman, Naredco National
Any hike in duties, premium charges, or tax levies, such as the revision in circle rates-directly dents the affordability equation, particularly in a price sensitive market like housing. While Gurgaon has recently witnessed a healthy revival in sales velocity, driven by quality project launches, robust bookings and a strong pipeline in both mid and luxury segments, a sharp increase in circle rates risks reversing this momentum. It pushes the acquisition cost of homes, impacting overall sentiment and stretching the budgets of aspiring homebuyers. In a market where confidence and affordability drive demand, such moves should be calibrated.
At a macro level, the situation is exacerbated by the imposition of recent 25% US tariffs.In times of economic uncertainty, real estate demand often becomes sentiment-driven, impacting first time buyers and NRI investments. To protect demand velocity, authorities should consider a staggered or targeted approach rather than sweeping hikes to keep the real estate sector resilient.
Ashwinder R. Singh, Chairman CII Real Estate Committee & Vice Chairman, BCD Group
The proposed revision in Gurgaon's circle rates comes at a sensitive time. While aligning official rates with market values is understandable, the timing, just ahead of the festive season and amidst signs of early demand revival warrants caution. A sudden hike may impact affordability, particularly in the resale and mid-income segments where sentiment is still stabilizing. Gurgaon has long been a benchmark market and its policy decisions carry wider implications. A phased, consultative approach that considers current market signals could help balance both revenue objectives and housing momentum. The goal should be sustainable growth-rooted in market confidence and long-term clarity.
Santhosh Kumar, Vice Chairman,Anarock Group
The proposed hike in Gurgaon's circle rates could not have come at a less auspicious time. Already, market sentiment is subdued because of lower sales velocity and this move would reduce it even further. Raising the cost of acquisition will especially impact the affordable and mid-priced housing segments. Increased circle rates will throttle back transactions and this will not only affect developers but also government revenue.
Ankit Kansal, MD, 360 Realtors
Increase in circle rates in Gurgaon might not be the best decision at this time of the year. This can stall the property market sentiment, especially in the mid-segment. In Gurgaon, average property prices for a 2BHK unit have reached INR 2-3 crores. For many property buyers, Gurgaon is already out of reach. Any further hike can soften the demand. However, the impact will be minimal in the premium segment. Gurgaon has plenty of premium property buyers who can comfortably pay around INR 5-7 crores for housing societies, penthouses, branded homes and villas. For such buyers price is not paramount, value is. Such buyers and investors will remain unperturbed with any possible hike in circle rates.
Vineet Nanda, Director Sales & Marketing, Krisumi Corporation
The recent hike in circle rates in Gurugram is clearly the government's attempt to increase transparency in the property market and bring property valuations closer to market realities. However, the steep rise comes at a time when consumer sentiment has only just begun to improve, following the RBI's three consecutive rate cuts totalling 100 basis points. This move could temporarily slowdown the growing interest among buyers. However, in the long run, the demand for properties is poised to remain strong, driven by Gurugram's robust infrastructure development, growing commercial activity, and its appeal among end-users and investors alike. As the market adjusts to the revised rates, transparency and realistic valuations will ultimately support sustainable growth in the real estate sector.
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