Delhi

Despite weakening demand for office space Connaught Place remains the fifth most expensive office market in the world.

In property consultant CBRE’s semi-annual Prime Office Occupancy Costs survey, CP has retained its earlier ranking in the list of the world’s 50 most expensive office markets. The latest survey provides data on office rents and occupancy costs as of March 2013 across 133 countries.

“Though demand for office space has reduced, occupancy costs remain high, especially in Connaught Place, due to limited supply in the near future,” said Anshuman Magazine, chairman and managing director, CBRE.

These are hard times for the real estate industry in NCR. One factor that has gnawed away at interest in buying or selling property is the unreasonable circle rates. While Gurgaon proposed a 15% cut [May 2016], circle rates there, and in most of Noida, are higher than the market rates, virtually slowing transactions to a trickle.

The property market in NCR is at its lowest ebb.Prices have either plateaued out or fallen over the past couple of years. Like any bear run, this ought to have got buyers looking for long-term returns interested. But that hasn't happened. As much as the trust-deficit has spooked in vestors, a devil hiding in the detail has further queered the sales pitch. It's called the circle rate.

By definition, circle rate is the minimum value at which a plot, house, apartment or commercial property can be sold.The rate is decided by a state's revenue department in consonance with market rates. But in hot property markets like Gurgaon and Noida, the circle rate has stopped keeping in touch with the market rate. So, while market rates depreciated due to bad buying sentiment, circle rates didn't.

What this created is an environment in which neither buyer nor seller is interested in making a transaction. Why?

Say an apartment's market price is Rs 1crore but its value, according to the circle rate, is Rs 1.5 crore. It means both the stamp duty the buyer has to pay to register the flat and the tax component of the seller will be calculated on Rs 1.5 crore, the circle rate. It's a transaction in which both parties lose.

Acknowledging this, the Gurgaon administration recently made the unprecedented proposal of cutting circle rates by a steep 15% for the 2016-17 fiscal year. The industry hopes the Delhi and UP governments will follow suit.Gurgaon divisional commissioner D Suresh said the proposal reflected the reality.

Unlike in Gurgaon, where circle rates were not revised for the last two years, Noida continued to raise them despite the gloom. Updesh Bharadwaj, a resident of Sector 72, owns a shop in a mall in Sector 18 that he wants to sell. “The market price of the shop is Rs 1.5 crore but it's Rs 2.5 crore as per the circle rate. I have been looking for a buyer for two years. But no one is interested because of the huge gap in rates,“ he said.

Gurgaon

And the gap in office realestate occupancy cost between central business districts (CBDs) such as Connaught Place and suburbs such as Gurgaon (ranked 72nd) stays wide.

Mumbai:

In Mumbai the occupancy costs in Nariman Point, the country’s first planned CBD, have reduced further. In the CBRE survey, Nariman Point dropped to 26th position at $90 per sq ft per annum. In December 2012, it had ranked 25th.

But the Bandra-Kurla Complex (BKC) retained its earlier ranking (11th) among expensive office markets, CBRE said.

CBRE analysts said the Mumbai CBD — including the micro markets of Nariman Point, Fort and Cuffe Parade — had seen office space absorption of only 8,000 to 10,000 sq ft during the quarter. Office rental values in these micro markets declined 3-4% sequentially in January-March, they said.