Circle rates, the minimum value of any piece of land or immovable property for registration, doubled in Delhi yesterday. First fixed in 2007, they’ve been revised for the first time.
Developers and analysts were split on whether this would take property prices up significantly in the capital. While some developers indicated these could increase 10 to 12 per cent, others anticipated only a marginal impact, as the market rates were already much higher than the revised structure in many places.
There’s consensus, however, that the overall revenue going into the city government kitty from stamp duties would shoot up. The government said it wanted to check the circulation of black money in realty transactions by revising the circle rates. After the Delhi Cabinet led by chief minister Sheila Dikshit had decided to increase the circle rates by 100 per cent, lieutenant governor Tejendra Khanna had opposed it. Subsequently, the matter was referred to the Union home ministry, which backed the Delhi government.
Delhi is divided into eight circles for property valuation purposes. Experts note that neighbouring Haryana and Uttar Pradesh have revised their circle rates frequently.
The revised rates will be referred to for registration of instruments (land and immovable properties) in the city in line with the amended Delhi Stamp (Prevention of Undervaluation of Instruments) Rules.
Mixed reactions
Anshuman Magazine, chairman and managing director, CB Richards Ellis (a real estate consulting firm), said, “Property prices have increased over the years in Delhi; therefore, the increased circle rate is justified.” Welcoming the city government move, he said, “It should result in improving transparency in the residential transactions in the city, henceforth.”
On whether the circle rate revision would impact property prices sharply, Magazine noted property values in many localities were already extremely high, and on par with advanced economies. The revised rates would have an impact only in cases where the property prices are quite low, he argued.
However, Manoj Goyal, vice-president, Raheja Developers Ltd, said the increase would affect property prices in Delhi by 10 to 12 per cent, due to the burden of additional stamp duty and capital gains tax. “The government’s initiative to minimise the black marketing will serve if the duty is reduced to two per cent from six per cent now, besides hiking the circle rates.” According to Goyal, a cut in stamp duty rate would help in controlling the rise in property prices caused by the increase in circle rates.
Another developer in the city, RG Group, ruled out any significant impact of the revised rates on property prices. Rajesh Goyal, managing director of RG Group, argued there would not be any effect of the circle rate revision on property prices. In most areas, rates are already much higher than the circle rates announced, he said. But it will make the registration process a costly affair, he added. According to the RG Group, this move will help in reducing the gap between the government-fixed circle rate and the actual market rate, reducing the role of black money in this business.
The National Real Estate Development Council (Naredco) has hailed the step. This will not only increase the stamp duty collection, which is shared between the Delhi government and the Municipal Corporation of Delhi (MCD) but also encourage property buyers and sellers to declare the true value of property, thereby minimising black money transactions, Naredco stressed. It has, however, called for reduction in stamp duty as a next step, “as this would encourage more people to declare true value even in high value transaction of property and increase the revenue for the government”.
