Delhi broadly has eight categories of localities – from A to H. Category A being the most affluent ones and H being the most economically weaker ones.(S Burmaula / HT Photo)
Delhi broadly has eight categories of localities – from A to H. Category A being the most affluent ones and H being the most economically weaker ones.(S Burmaula / HT Photo)

Delhi govt reduces circle rates by 20% for next six months

The decision was taken at a cabinet meeting on Friday. It was decided to reduce the circle rates by 20% for residential, commercial and industrial properties across all categories of localities.
By Abhishek Dey, New Delhi
PUBLISHED ON FEB 06, 2021 02:02 AM IST

The Delhi government on Friday reduced circle rates, the minimum price at which a property can be bought, for all categories of properties for the next six months, a move that experts said will boost the real estate market and boost revenue for the government.

The decision was taken at a cabinet meeting on Friday. It was decided to reduce the circle rates by 20% for residential, commercial and industrial properties across all categories of localities.

“… This decision is expected to make it substantially cheaper for people to do property transactions, revive the real estate sector which has been hit severely by the coronavirus pandemic and create new jobs,” the chief minister’s office said in a statement.

The statement further read, “A reduction of 20% in the circle rate would have an impact close to reduction by 1% in the stamp duty or registration charges… The economy by and large at the national level, in general, and the real estate sector, in particular, have witnessed huge slump due to the unprecedented Covid-19 pandemic. Lakhs of construction workers have lost their jobs. While the Kejriwal government has already provided direct monetary relief of 10,000 for construction workers of Delhi, there was a need to revive the real estate sector and get the lost jobs back. Today’s decision of the Delhi cabinet will help begin the long-term recovery in the real estate sector.”

Circle rate is the minimum designated price per square metre or square feet for land or property fixed for a certain category of locality, at which transactions have to be registered. It varies with each state and is revised from time to time depending on demand, supply and other development indicators pertaining to the concerned area.

Delhi broadly has eight categories of localities – from A to H. Category A being the most affluent ones and H being the most economically weaker ones. The circle rates are proportionate. For instance, in an A category locality, circle rate for a residential property so far was 7,74,000 per square metre and for one in an H category locality was 23,280.

Neighbourhoods such as Golf Links, Vasant Vihar and Jor Bagh come under A category, those like Greater Kailash, Defence Colony and Safdarjung Enclave come under B and those in Tagore Garden and Subhash Nagar come under C. Categories D and E mostly have localities that were notified as regularised in the past, some old areas where low-income and mid-income flats were developed and resettlement colonies. Categories F, G and H comprise mostly of unauthorised colonies in which residents have recently availed the opportunity – through a central government scheme – to get their properties registered.

For registration, there is a stamp fee on the transaction value – which is 6% for men and 4% for women – to be paid by the buyers. “In property transactions, people tend to keep the transaction value less on paper and essentially pay the registry fee on more or less the circle rate, which is the base rate for property transactions in a concerned area,” said a senior official in the government’s revenue department who did not wish to be identified.

In 2018-19, the Delhi government earned around 4,459 crore through property registries. For 2019-20, the revised estimate was 4,897 crore and for 2020-21, the budget estimate was 5,297 crore, showed budget documents of the government.

However, a senior official in the finance department said that between April 1, 2020, and November 30, 2020, the Delhi government earned 1,860.57 crore, against 3,258.47 crore for the corresponding period in the previous financial year.

Mudassir Zaidi, executive director of real estate consultant group Knight Frank, said: “The real estate sector in Delhi was already witnessing a slump for several years now. The demonetisation in November 2016 came as a major blow. And then Covid-19 happened. The market is now showing slow signs of recovery. This decision by the Delhi government would significantly contribute to the market’s revival by boosting the volume of transactions, especially in the most affluent colonies in Delhi where market rates of properties had dropped below circle rates. The government’s decision is capable of rectifying such anomalies in the system.”

Ritesh Mehta, senior director and head (west India) residential services at JLL India, said: “It is a positive move and will encourage the fence sitters to take the plunge. The cost of a house may not be directly impacted by the move as the cost is a function of many other factors like demand and supply but will give a positive push to the real estate market. In the residential segment, it will impact more in Category A which is categorised as posh and high-end, where typically the market rates are lower than the circle rate. It will boost luxury transactions as the monetary impact would be high.”

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