NCR Expected Slumps in Property Prices

With the Delhi Cabinet making circle rates official on Monday, an immediate slump is expected in the Capital’s real estate market. Realtors in the National Capital Region (NCR) hope this will make investors look more at the suburbs.

Circles rates are already effective in NCR areas, and with Delhi joining the ranks there is likely to be a short-term slump in Delhi’s real estate market as the flow of “unaccounted for” money will stem somewhat.

Gurgaon realtor R K Yadav said a slump in Delhi is inevitable because high-end buyers and big realtors are more comfortable trading in cash. “The first few months will be difficult," he said. “People who can afford to pay more in black will now have to pay more in white. Registration fees will thus be higher.”

As a result, buyers will move to NCR, where prices are lower, he said. “So, even with circle rates in place, the amount one has to pay in white (for property in Gurgaon) will still be less than what one has to pay legally for a property in Delhi."

When circle rates were first introduced in Faridabad in 1991-92, the real estate market there saw a similar trend to what experts are now predicting in Delhi. Harish Arora, who owns Link Estates in Faridabad, said the market was stable when circle rates were introduced, like the present Delhi market.

"If Delhi’s real estate market was bullish, the introduction of these rates would not have made a difference," Arora said. “But the market is stable, which means there will be an inevitable slump in the next six months or so."

Arora said circle rates in entire NCR are not more than 40 per cent of the existing market rates. "With circle rates, buyers will pay a lot more in stamp duty, so the actual cost in white rises."

Sanjeev Makhija of Gaylord Builders in Delhi said circle rates would not make much of a difference in upscale Delhi neighbourhoods. “This is because the money demanded in cheque in such areas is much more than what circle rates specify. In middle class or emerging areas, it has been a trend for the last couple of years to buy property more with bank loans."

Source://Expressindia