Eye on revenue, govt to revise circle rates twice a year in Haryana

In order to keep real estate and land prices in urban and rural areas in tune with market rates, the Haryana government has decided to revise collector rates twice in a financial year.

According to revenue department officials, the step has been taken to ensure that there is no major gap between market price and the collector rate of properties. The real estate industry is, however, guarded in their reaction as they do not want the government to revise the rates upward as it could hit them hard at a time when both demand and liquidity is quite low.

The decision was announced by Haryana chief minister Manohar Lal Khattar during the special session of the state assembly on Tuesday.

Collector or circle rate is the minimum price at which a property is registered when being transferred and it is a major source of revenue for the government in terms of stamp duty. The earlier practice was that these rates were revised only once a year, but experts said the sustained slowdown in the real estate industry has forced the government to fine tune the levies on real estate.

As per the norm, the circle rates are less than the market rate and in Gurgaon, these are around 50% to 80% of the prevailing property prices. However, with the current focus on reducing the role of cash in real estate, property experts said this move was aimed at mopping up maximum revenue and bridging the gap between the two rates.

“The smaller the gap between circle rate and market rate, the lesser is the role of cash in real estate deals. This is a Catch 22 situation — if the administration decreases the gap, it is putting the real estate market under stress, while at the same time increasing the possibility of making the payments through cheques. If the gap is increased, the market will get a boost but cash transactions would be predominant and this has to be avoided,” Sanjay Sharma, a real estate consultant based in Sector 23, said.

Read I For the first time, circle rates reduced in Gurgaon

This year, the circle rates were revised in May 2017. But given the slide in demand, colonies such as DLF, Sushant Lok I, DLF phases 1, 2, 3, 4 and 5, South City-1 and Palam Vihar did not see any change in circle rates.

The rate was also not revised in Huda sectors, barring sectors 10, 10A, 9 and 9A. What was surprising is that rates in urban villages and in colonies in Old Gurgaon along Sadar Bazar, Rajiv chowk and railway station saw an upward revision of 2% to 5%.

Circle rates in Gurgaon remained unchanged in 2014-15 and 2015-16, but were reduced by 10-15% in 2016-17.

Senior officials in the revenue department and the department of town and country planning said this move comes amid signs of recovery in the market.

There is an upswing in sale of plots, ready-to-move-in houses and built-up houses. It is because of this reason that the government wants the circle rates to be in sync with market rates.

“This is a positive decision as the market rates are in a state of flux. Increasing the rates in some areas will help in boosting revenue, whereas bringing it down in other areas will help buyers,” Hari Om Atri, district revenue officer, Gurgaon, said.

In the light of the government’s direction to revise the rates twice, Atri says revenue officials, including patwaris, tehsildars and other officials, will be asked to submit a proposal wherever they find that the circle rates need revision.

The real estate industry, however, reacted cautiously to the move.

“Instead of twice-a-year review, the rates should be revised quarterly and a balance has to be maintained. The industry hopes that rates are not increased to get more revenue, as there is a spike in delivery of projects. We need support from the government,” Praveen Jain, vice-chairman, Naredco, a real estate body, said.

Real estate developers also opined that the previous and the present governments have seen looking at circle rates as an easy option to generate revenue, but it has hit the industry hard.

“Circle rates need to be brought down as they are high and not in tune with market dynamics. Buyers should be made comfortable with regard to taxes, and stamp duty should be such that sales are encouraged,” Navin Raheja, chairman, FICCI’s real estate committee, said.