What does 10% to 30% hike in circle rates mean for properties in Gurgaon

Buying a property is a significant decision that impacts your finances. Whether you're buying your dream home or investing in a property, certain factors demand careful consideration—one of the most crucial being the circle rate. This rate, also referred to as the reckoner rate or guidance value, sets the minimum price at which a property can be sold. It plays a key role in ensuring transparency and streamlining the property buying process.

Circle rates are periodically revised based on factors such as location and prevailing market trends. They are determined by the state government, and therefore, vary across different states in India.

Circle Rate vs Market Rate

Circle rates are comparatively lower than the market rates. Government authorities set the circle rate as a legal minimum for property transactions. Whereas, market rate is determined by sellers based on market conditions and buyer demand.

The stamp duty and registration fees are calculated on the basis of circle rate and market rate represents the tentative price at which a seller is willing to sell and the buyer is willing to buy.

Another key difference is that the circle rate guarantees revenue for the government based on the price that has been set and market rates reflect the current value of properties, influencing buyer-seller negotiations and investment decisions.

Why Understanding Circle Rate Is Crucial for Homebuyers?

Circle rate helps homebuyers to assess if the property is reasonably priced as it provides a benchmark for the minimum value of a property. It also helps buyers to plan their budget as stamp duty and registration fees are calculated based on the circle rate.

In Gurgaon, for properties valued exceeding Rs 25,00,000, the registration charge is usually around Rs 15,000.

It also helps buyers to engage in fair and legal property transactions, by preventing underreporting of property value.

What Makes Circle Rates Tick?

Factors such as location, ownership, market demand, and  government policies affect the circle rate of a real estate property.

1. The economic value of a metropolitan area would be higher than that of an area which is at a developing stage, leading to a higher circle rate. As the area of the property gets bigger, so does the circle rate.

2. A property owned by a real estate developer is more expensive than the property owned by the government.

3. High demand for a property can lead to revision in the circle rate by the state government and the areas having lower demand can experience minimal changes in the circle rate.

4. State governments periodically adjust circle rates to match market realities and curb undervaluation in property transactions as higher circle rates help increase government revenue from stamp duty and registration fees.

How 10 % to 30 % Circle Rate Hike Could Transform Gurgaon’s Property Market?

Following an increase in the circle rate from 10 % to 30 %, the cost of buying a property in Gurgaon has increased, from December 01 and will remain in place until March 31, 2025.

High-demand areas, such as Golf Course Road, are seeing a significant hike of up to 30% in circle rates, especially in luxury residential projects. In 2023-24, the minimum price set by the state government was Rs 27,500 per sqft, but now the rate has increased to Rs 35,750 per sq ft.

In Farrukhnagar, circle rates for residential, and commercial properties are set to increase by 10% to 20%. Meanwhile, residential properties along Sohna Road will experience a rise of 10% to 15% and the circle rate of commercial property has increased by 9%.

Similarly, gated communities in prime locations like the Dwarka Expressway have experienced a 21% increase in their circle rates.

With higher costs associated with premium properties, there may be a shift towards more affordable housing options as buyers seek value amidst rising expenses.

These areas are poised to maintain robust demand due to limited supply and sustained investor confidence.

As demand continues to rise, the state government is prioritizing infrastructure development, with major projects like the Manjhawali Bridge and the Faridabad-Noida-Ghaziabad Expressway set to be completed soon, further boosting the appeal of these regions.

Implications for property buyers, sellers and investors

An increase in the circle rate is likely to raise registration costs for property buyers, leading to higher overall expenses when purchasing land, which could push the buyers to reconsider their budget. It can further increase the overall property prices across Gurugram as sellers may adjust their asking prices to align with the new valuation benchmarks.

Increased circle rate is also one of the significant causes of shift in buyers behaviour as they may become more cautious, potentially delaying purchases until they can assess how the market stabilizes post-hike. However, it does help to sell the property at a better price later.

Sellers can use the higher circle rates as a reason to ask for higher prices. Luxury properties, like penthouses, stand to gain the most, with some expected to sell for over ₹100 crore.

This surge in circle rates has also drawn considerable attention from investors. Some may see this as a chance to invest in popular areas before prices go up even more, while others might choose to spread their investments into areas where prices are rising more slowly like Southern Peripheral Road and New Gurgaon. These locations offer potential benefits from upcoming infrastructure projects such as the Dwarka Expressway, Manesar, the Delhi-Mumbai Expressway, and the Rapid Metro expansion.

The hike in circle rates further solidifies Gurugram’s transformation into a luxury real estate hub, positioning it alongside Mumbai and other top global cities.