Revised circle rates in Delhi
An increase in circle rates does not necessarily mean a proportionate hike in property pricesrealestate Updated: Mar 13, 2013 12:10 IST
Undervaluation of properties is a significant factor contributing to circulation of black money and avoidance of stamp duty. To curb the practice of heavy undervaluation of transactions of immovable property, state governments periodically fix and revise circle rates. Circle rates are the minimum rates for valuation of immovable properties. The rates are taken into consideration by the competent registering authorities at the time of registration of documents relating to transactions of immovable properties.
Recently, the Delhi government revised the circle rates for properties in Delhi under the Indian Stamp Act, 1899, as applicable to Delhi and Delhi Stamp (Prevention of Under-valuation of Instruments) Rules, 2007. The revised circle rates came into effect from December 5, 2012, and have superseded the rates last prescribed by the Delhi government in November 2011.
The circle rates applicable to a particular property depend on various factors. For instance, circle rates differ depending on whether the prescribed usage of the land/property is residential, commercial, industrial or any other. In Delhi, circle rates are much higher for commercial and industrial land as compared to residential. The rates also differ on the basis of which category of locality the property is situated in. In Delhi, the government has divided all localities into eight categories, ranging from Category A to H. Each category has a different circle rate — the more affluent areas of Delhi have higher rates as compared to the less-developed areas. Within a year, circle rates of land in category A properties have tripled from the previous rate of R2,15,000 per square metre to the current rate of R6,45,000 per sq m, whereas circle rates of other categories have also increased but not in such high proportion as in aategory a properties (refer to the table for revised circle rates for residential land in Delhi).
Circle rates also prescribe the minimum rate of construction for ascertaining the minimum valuation of built-up properties (on per square metre basis). These rates depend on the category of locality, whether the property is being used for residential or commercial purpose, the year of completion of construction and the quality of construction (whether pucca, semi-pucca or kutcha). As for flats in Delhi, the minimum value of built-up rate varies depending on whether a flat is in a DDA/ cooperative/ group housing society or whether it has been developed by a private builder. The minimum built-up rate for flats developed by private builders is higher compared to flats in DDA/ cooperative/ group housing societies. Additionally, the minimum built-up rate for flats in buildings having more than four storeys is greater than minimum built-up rate for flats in buildings that are up to four storeys high.
An increase in circle rates does not necessarily mean an equivalent proportionate increase in property prices. However with the latest hike, an average buyer will no doubt have to bear increased costs towards stamp duty and registration fee. Given the wide gap between actual market rates and previous circle rates, these new circle rates will help curtail the circulation of black money in real estate transactions. Moreover, the new circle rates will increase transparency in such transactions as well as add to the revenue of the state.
(The author is a senior partner, ZEUS Law Associates, a corporate commercial law firm. One of its areas of specialisation is real estate transactional/litigation work)