Realty deals have been hit severely in some areas of the Capital due to the recent hike in circle rates. Circle rates are now much higher than the market rates in some category-A areas of Delhi, namely New Friends Colony and some parts of the Lutyens’ Bungalow Zone. Though the intent behind the revision was to put an end to black money transactions in the market, people are now shying away from buying and selling properties because of the high stamp duty they will have to pay due to the mismatch.
To cite an example, the new circle rate in New Friends Colony is R645,000 per sq m or R542,017 per sq yard and the market rate around R450,000 per sq yard. This means that though the market value of a 500 sq yard house comes to R22.5 crore, it will be priced at about R27.1 crore on the basis of the circle rate. Thus, the stamp duty for a male (at the rate of 6%) will work out to around R1.6 crore (as per the circle rate) which otherwise would have been R1.3 crore.
The capital gains tax liability too has gone up as it is calculated at the transaction value or the circle rate, whichever is higher. “Due to this anomaly the seller also has to pay a higher capital gains tax,” points out Jaiwant Daulat Singh of Daulat Singh Consulting.
“There has been a major impact on the secondary market in New Friends Colony areas, which have over a 100 vacant units. People have postponed buying and selling properties. If at all some deals are being struck, they are mostly end-user deals. A correction of around 10% has already set in and it may rise if nothing is done about it. There has also been a sharp drop in the registries,” says Ashwani Singh Virk of Jagson Realtors.
The New Friends Colony Residents’ Welfare Association (RWA) has approached the authorities regarding the matter and apprised them of the problem but so far nothing has been done. “We have sent them a letter asking them to downgrade the colony to category B as we do not have facilities like that of Friends Colony West and Friends Colony East. There are no good roads or proper drainage facilities. Streetlights and parks have not been maintained. Moreover, we are sandwiched between areas such as Timur Nagar, Bharat Nagar and Batla. Plots here, too, are sized just between 300 sq yard and 500 sq yard unlike in other localities which largely have 4000 sq yard plots,” says Vivek Dhupar, president, New Friends Colony RWA.
When approached to comment on the mismatch between circle rates and market values in some localities, Dharampal, secretary (revenue), Delhi government, said that circle rates have been determined on the basis of the top five transactions in that area by taking their average. It is based on actual transactions.
“I feel our circle rates are fine. If they are higher than the market rate, it depends on what you consider to be the market rate. If at all registrations in that area have come down due to the mismatch between circle rates and market rates in some areas, it may be due to the fact that high value transactions in any case are few and far between and if they are less than last year it may have to do with the overall economic environment.”
Though circle rate hikes do not usually affect the high-end property market, investors who traditionally put in their money in south Delhi are now finding more opportunities in the NCR.
“The problem has arisen after the areas not considered premium in south Delhi have also been categorised as A. Not only are the market rates different in these localities, there is a huge difference in infrastructure, too,” says Dhruv Khanna of LJ Hooker, an international brokerage firm.
“FSI feasibility should have been considered while assigning the circle rates, especially in the Lutyens’ zone, which has large plots with comparably restricted built-up area,” says Shveta Jain, executive director, residential, Cushman & Wakefield India.
Categories and circle rates
Category A: (Rs. 645,000) Anand Niketan n Friends Colony n Friends Colony East n Friends Colony West n Golf Links n Kalindi Colony n Maharani Bagh n New Friends Colony, Panchshila Park, Shanti Niketan, Sunder Nagar, Vasant Vihar
Category B: (Rs.204,600) Anand Lok, Andrews Ganj, Defence Colony, Greater Kailash-I, Greater Kailash-II, Greater Kailash-III, Greater Kailash-IV, Green Park, Gulmohar Park, Hamdard Nagar, Hauz Khas, Maurice Nagar, Neeti Bagh, Nehru Enclave, Nizamuddin East, Pamposh Enclave, Panchsheel Park, Safdarjang Enclave, Sarvapriya Vihar, Sarvodaya Enclave
Category C: (Rs. 133,200) Alaknanda, Chittaranjan Park, Civil Lines, East of Kailash, East Patel Nagar, Jhandewalan Area, Kailash Hill, Kalkaji, Lajpat Nagar-I, II, III & IV, Malviya Nagar, Masjid Moth, DDA Flats, Munirka DDA Flats, Nizamuddin West, Panchsheel Extension, Punjabi Bagh, Som Vihar, Vasant Kunj
Category D: (Rs. 106,400) Anand Vihar, Daryaganj, Dwarka, East End Apartments, Gagan Vihar, Hudson Line, Indraprastha Extension, Janakpuri, Jangpura-A, Jangpura Extension, Jasola Vihar, Karol Bagh, Kirti Nagar, Mayur Vihar, New Rajinder Nagar, Old Rajinder Nagar, Rajouri Garden
Category E: (Rs. 58,400) Chandni Chowk, East End Enclave, Gagan Vihar Extension, Hauz Qazi, Jama Masjid, Kashmere Gate, Khirki Extension, Madhuban Enclave, Mahavir Nagar, Moti Nagar, Pahar Ganj, Pandav Nagar, Rohini, Sarai Rihilla
Category F: (Rs. 47,200) Anand Parbat n Arjun Nagar n Daya Basti n Dilshad Colony
n Dishad Garden n BR Amdedkar Colony, Ganesh Nagar, Govindpuri, Hari Nagar, Jangpura-B, Madhu Vihar, Majnu Ka Tila, Mukheree Park Extension, Nand Nagri, Uttam Nagar, Zakir Nagar (Okhla)
Category G: (Rs. 38,500) Ambedkar Nagar (Jahangirpuri), Amdedkar Nagar (East Delhi), Amber Vihar, Dabri Extension, Dakshinpuri, Dashrath Puri, Hari Nagar Extension, Vivek Vihar Phase-I, Tagore Garden,
Category H: (Rs. 19,400) Sultanpur Majra