Govt plans area-wise cap on realty prices across country

Price capNEW DELHI: Developers will not be able to take consumers for a ride by charging arbitrary price for a property. The government plans to cap location-wise property prices.

“The government is concerned about artificial scarcity of housing stock. In order to dissuade speculators from the real estate market, it is planning to announce circle rates, which will be the upper limit for property prices in a particular location,” said a senior official in the urban development ministry.

At present, the rates vary between 75% and 200% over and above the circle rates in various states. “Prevailing circle rates are too low, which have made transparency in private land deals practically impossible,” he said adding that circle rate, which has lost its relevance, will now be revived.

In order to factor in genuine price escalation, the government intends to issue new circle rates soon. Circle rate is the rate at which the government acquires land. It is also the official price for a piece of land. The exercise has started for the National Capital Region and new circle rates for the NCR will be announced soon. “The government will ensure that no one violates the new norm,” he said.

After NCR, the same model will be replicated in other states. The proposed real estate regulator will ensure compliance. The Real Estate Regulator Bill is expected to be tabled in the winter session of Parliament.

According to sources in the Nirman Bhawan, the government has already discussed the issue with some of the state governments, including Haryana and Punjab. An official circular is likely to be issued to all state governments next month.

According to prevailing circle rates, properties are underpriced. For instance, at present the circle rate for agriculture land in the Gurgaon main area (outside R-zone) is as low as Rs 16 lakh per acre, whereas sources in the property dealing business say transactions easily happens at Rs 70-80 lakh per acre.

The difference is even more acute in the case of the R-zone, where transactions take place for as much as Rs 3 crore per acre against a circle rate of Rs 30-35 lakh. Similarly, in Noida, the actual land price is almost Rs 1 crore per acre, with circle rates of Rs 20-22 lakh. However, the magnitude of this disparity is relatively lesser in southern markets.

Industry insiders say that if implemented, the move would be a win-win situation for all. “It will obviously bring in more transparency in land transactions. In addition, it will also incentivise more land owners, in possession of agriculture land to sell to government,” TDI managing director Kamal Taneja said.

“In fact, this has been another major concern for state governments, particularly in Haryana and Punjab, where there is a need for over 4,000 acre of agriculture land to support the ongoing and proposed projects. However, for most state-level urban development authorities, land acquisition is an extremely difficult process, mainly because of the circle rate, which is not at all lucrative,” said Realty Verticals MD Rajan Ahuja.

Source : The Economic Times

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