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The Haryana government has taken the important decision to increase the External Development Charges (EDC) by 20% from January 1, 2025. In the coming years, these fees will increase by 10% per annum, starting from 2026. This increase will affect real estate prices by 2026 in key cities like Gurgaon, Faridabad and Panchkula.
Here’s all the essential information you need about the changes and the effects that may affect the real estate market.
What are External Development Charges (EDC)?
External Development Charges, or EDCs, are fees that developers pay the government to help build the infrastructure around their projects. This includes essential services such as roads, drainage, water and electrical connections outside the boundaries of a residential or commercial project. These costs are calculated based on the amount of growth potential expected in a particular area.
Why is the Haryana Government Raising EDC?
The Haryana government's decision to add EDC is aimed at raising funds to improve infrastructure in the fast-growing area. These costs were last revised in 2015 and the government feels the increase is necessary to meet the growing needs of cities such as Gurgaon, which is emerging as a major real estate hub.
Starting in January 2025, fees will increase by 20%, with increases of 10% per year in 2026 and thereafter. This increase will be a significant cost to developers. And they can pass these increased costs on to homebuyers. As a result, property prices rise.
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Impact on Gurgaon and Other Key Areas
Gurgaon, which is one of the key real estate markets in Haryana, is expected to be hit hard by the EDC hike. Several developers in the city have expressed concerns about the pace. This is despite the enormous amount of funding raised in EDC over the years. But some major infrastructure projects such as better roads and drainage systems Still incomplete.
Parveen Jain, chairman of the National Real Estate Development Council (Naredco), warned that the price hike could make it harder for developers to build affordable properties in Gurgaon. After a similar increase in 2015-2016, many developers stopped applying for new permits due to the high cost of EDC. The same situation could happen again, which could slow down the construction of new projects in the area.
Will Property Prices Increase?
With the rise of EDC, developers may face higher construction and infrastructure costs. These costs are almost certainly passed on to the buyer. This means that property prices in areas like Gurgaon, Faridabad and Panchkula could go up. This is because real estate prices in these areas are already quite high. The rise of EDC could make housing more affordable for many people.
Experts Weigh in on the EDC Increase
Real estate experts like Vinod Behal from Gurgaon have expressed concerns about the EDC hike. According to Behl, the real estate market is facing challenges such as high interest rates and skyrocketing property prices. Combined with these other factors, higher EDC tax rates could slow the market in 2025.
Currently, the cost of EDC machines in projects in Gurgaon accounts for approximately 7-8% of the total project cost. This is a significant amount of money for developers. And these increased fees can end up costing home buyers more.
What’s the Plan for Future EDC Rates?
The Haryana government has hired experts from institutions like IIT Delhi and IIT Roorkee to determine fair EDC rates in the future. These experts will help the government determine appropriate EDC rates for cities and regions. The aim is for fees to reflect the growth potential of each area and be manageable for both developers and homebuyers.
The government has also approved the appointment of a consultant to determine the base EDC rate for future indexation. This will help ensure that EDC rates remain in line with sector growth and continue to support long-term infrastructure development.
The decision to increase EDC fees in Haryana has raised concerns in the real estate community. This is especially true in cities like Gurgaon, Faridabad and Panchkula, even as growth supports major infrastructure projects. But it can also make it more expensive for home buyers. Developers are also concerned about the impact of higher fees on the affordability of new projects. As we enter 2025, the real estate market in Haryana may face a slowdown. Developers and buyers must adjust to these new costs.
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Ans 1. EDC are fees developers pay to fund infrastructure development outside their projects, like roads, water supply, and electrical connections.
Ans 2. The increase aims to raise funds for improving infrastructure in rapidly growing areas, ensuring better facilities for residents and businesses.
Ans 3. The EDC hike will likely raise construction costs for developers, which may result in higher property prices for buyers in affected areas like Gurgaon, Faridabad, and Panchkula.
Ans 4. Gurgaon, Faridabad, and Panchkula are expected to be most impacted, with developers and buyers feeling the brunt of increased charges.
Ans 5. The charges will increase by 20% starting January 1, 2025, with further annual hikes of 10% beginning in 2026.
Ans 6. The rise in charges may make it harder for developers to keep projects affordable, especially in cities with already high property prices.
Ans 7. Yes, EDC charges vary based on the potential for growth and the development plans in specific regions or areas.
Ans 8. The Haryana government has hired experts to set future EDC rates to ensure they remain fair and support continued infrastructure growth.