Buying a property in Noida, Greater Noida area and Yamuna Expressway could get expensive if the district administration goes ahead with its proposal to increase the circle rates, which homebuyers and builders say will deliver another blow to the pandemic-hit real estate market.
The Gautam Budh Nagar administration has proposed to bring the circle rates, which are used to calculate the stamp duty on property transactions, on par with market prices and impose an additional surcharge of 5 percent to 12.5 percent on properties along the Metro route or near the expressway.
“This is only a proposal. This has not been implemented yet. The idea is to bring allotment rates at par with circle rates. The final decision will be taken by the collector,” said SS Pal, assistant inspector general of stamp and registration department, Gautam Budh Nagar told Moneycontrol
Future course of action would be taken on the basis of objections received, he said.
Stakeholders that include residents and builders have a window of 15 days to register their objections. The new rates will be notified only after objections have been received. The UP government currently charges 7 percent of the property value as stamp duty.
The Yamuna Expressway Industrial Authority had increased the land allotment rate two months ago by 5 percent; the Greater Noida Authority had hiked its rates by 4.5 percent in June. Noida Authority had also increased the allotment rates by almost 20% in some sectors.
In Noida’s category A sectors such as 14A, 15 A and 44, the circle rate is proposed at Rs 1,94,250 per sq m against the existing 1,03500 per sq m which is more than a 85 percent hike in rates, which have been due for revision for four years.
Category B sectors include 11, 12, 22, 70, 71, 72, 73, 74, 75, 76, 77 and 78 where most of the housing societies are located and the rate proposed in these sectors is Rs 72,000 per sq m. The current rate in these areas is Rs 52,500 per sqm. This is an over 35 percent increase.
Circle rate, or ready reckoner rate, is the minimum price at which the property sale is registered. This rate is determined by the state government and is generally reviewed to align it with the market rate. The stamp duty and registration charges on property transactions are calculated on the basis of the circle rate or the actual value of the property, whichever is higher.
The increased circle rates would result in an increase in stamp duty and registry charges, which would make the properties costlier.
Both homebuyers and developers’ bodies have opposed the move and are planning to file objections. They are of the view that this may have a negative impact on the real estate market during COVID-19 times.
Manoj Gaur, CMD, Gaurs Group and vice president north at Credai National said that if the proposal is implemented it may have a negative impact on the real estate sector which is already facing difficult times. Instead, the government should follow the Maharashtra model and decrease stamp duty rates by half to increase revenue.
The rationale seems to be that wherever the potential of an area is higher, circle rates should be high in that area. “Credai strongly opposes the proposal to increase the stamp duty in these areas. Ultimately, it will be the buyer who will get impacted. The Authority has already increased stamp duty by 1 percent, if you increase sector rates that would further enhance the cost of property in these areas. Maharashtra has halved the rates and revenues have shot up. UP ought to follow the Maharashtra model. This is a wrong approach. The Central government has also provided a 20 percent waiver on property transactions. Transactions will only decrease if this proposal is implemented,” he told Moneycontrol.
Shravan Govil, CEO, Omaxe Heritage, said the proposal would dampen home-buying sentiments in Noida and Greater Noida region.
“ The NCR market is already struggling with inventory overhang and low sales. An increase in circle rate at this stage will push the fence sitters away from the housing market and delay the recovery of real estate in the region," he said.
Abhishek Kumar, president of Noida Extension Flat Owners Welfare Association (Nefowa) told Moneycontrol that the association is planning to file its objections to the proposal as thousands of buyers are still awaiting possession of their flats for more than 10 years.
“It’s always the homebuyers who have to bear losses. Several buyers have died or lost their jobs during COVID-19 and inflation has touched the roof. This will impact the middle class more than ever before. Why is it always the homebuyers who have to suffer?” he asks.