Delhi’s high-end market will also be affected by the government’s move to demonetise Rs 500 and Rs 1000, especially in areas where the circle rate is more than the market rate. Real estate prices in tony pockets of the Capital such as Vasant Vihar, South Extension, Anand Niketan, Greater Kailash, where there has been a spurt in the supply of builder floors, may see prices falling to more reasonable levels as attempts are made to ‘clean up’ the market.
Real estate experts say that there will be more of all cheque transactions in these markets. Some markets where the circle rates are more than the market rates may see prices correcting further due to lack of demand.
Vinod Sachdeva of Bhawani Estates, a realty firm in New Friends Colony Market says that he is expecting prices to correct by 20% to 25% going forward. “A 2,000 sq ft park- facing apartment priced at Rs 7.5 crore is not selling even for Rs 6.5 crore because the circle rates are higher than the market values, which means the stamp duty is very high. The circle rate in the area is around Rs 7.75 lakh per sq m,” he says.
A broker in Vasant Vihar says that all-white deals have been picking up in the area. There is a lot of ready stock of apartments in the area which is mostly bought by businessmen who sell off their properties in places such as Punjabi Bagh or families within the area that have grown or expanded. “An apartment of 2,050 sq ft constructed on a 400 sq yard plot costs around Rs 9 crore and this move is only going to encourage more people to buy through the all-cheque route,” he says.
In Golf Links, too, the market has remained sluggish for the last few years and prices have corrected by 25% to 30%. Property constructed on a 1,250 sq yard plot that was earlier available for Rs 200 crore is now available for less than Rs 150 crore, says a broker active in the area. The currency move will slow down the market further.
In the Lutyens Bungalow Zone (LBZ) too the circle rates are much higher than the market rates but the problem is unique because an existing property there cannot be redeveloped. There is a limited area that is available for development on a one-acre plot but the prices are exorbitant.
“For almost all high-value residential transactions in the LBZ area in the last five to 10 years, 70% to 80% of the amount has been financed by banks. The market has already been cleaned up and demonetisation will not have any impact,” says Jaiwant Daulat Singh of Daulat Singh Consulting Pvt Ltd.
What’s unique about this market is that the last few high value transactions in the area have been between companies that want to show the full value in their books. The circle rates in the market are higher than the transacted values due to which the buyers have to pay a higher stamp duty and sellers have to pay a high capital gains tax.
To cite an example, for a property transaction that took place a few years ago for a bungalow located on a land parcel of less than one acre, the buyer had to pay stamp duty of almost Rs 10 crore on a valuation of Rs 252 crore because of high circle rates, even though the deal was struck at Rs 136 crore. In the last few years, activity in the market has come down because rules do not allow buyers to build or redevelop these properties and because the circle rates in these areas are very high. Also, out of the 200 privately held homes in the LBZ that includes premium areas such as Aurangzeb Road, Prithvi Raj Road and Amrita Shergill Marg, whatever churning was expected to take place in case of 10 to 20 houses has already happened. The market is dry not because of the cash going out of circulation but due to factors such as reduced developable area and high circle rates compared to market rates.