Government Lowers The Circle Rates By 20% in New Delhi

In a major revelation on February 5, 2021, the Chief Minister of Delhi has decided to lower the circle rates by 20%, applicable to all categories of real estate properties ranging from commercial residential to individual properties and others. These reduced rates will be in effect till 30th September 2021. 

What is Circle Rate?

Circle rate is the minimum value below which, no property can be transferred or sold. This is also known as Ready Reckoner Rate. The government deduced the circle rates considering the demand/supply and development of the area as the yardstick. Circle rates further help in calculating the stamp duty and other tax charges on the property. 

The Real motive behind the decision

With the decision of lowering the circle rates, the government officials are expecting a reduction in the cost of the property transaction and therefore giving the housing demand a right push in the recent future. 

This way it will help the real estate market to revive the unprecedented decline due to the global pandemic. This decision was taken by Chief Minister Arvind Kejriwal led government in Delhi and the other cabinet ministers have welcomed the move. Deputy Chief Minister Manish Sisodia opened on this situation that, it would boost up the real estate sector big time. Also, revenue minister Kailash Gahlot said that this decision would help to make more transactions in real estate. 

Effect of Circle Rate Reduction in Real Estate in Delhi

According to the industry experts, upscale South Delhi areas like Vasant Bihar, Maharani Bag, Panchsheel Park, and New Friends’ Colony had market rates lower than the circle rates, as a result, many sellers could not slash the price in the fear of getting charged for penalties from the tax authorities. Section 43 CA of the income tax, incorporated in 2013, states that any property seller or real estate developer selling any property at a rate lower than a circle rate or ready reckoner would be penalised. 

Property in Delhi is classified from ‘A’ to ’H’ in eight categories. The current rate of the land in ‘A’ category is in rupee 7.74 lakhs per square meter, which after revised circle rate will go down to rupees 6.19 lakhs per square meter. Similarly, in category ‘H’, the circle rate would be revised from rupees 23280 to rupees 18624 per square meter. It goes beyond saying that ‘A’ category plots belong from the post area and ‘H’ category plots are least developed. 

The minimum cost of construction for the commercial properties in Dwarka would also reduce from rupees 25200 per square meter to rupees 20160 per square meter. The lowest rate of built-up flats of the building with more than four stories would reduce from rupees 87840 to rupees 78272.

[All the figures are according to the PTI report] 

A reduction of 20% in the circle rate would result in a reduction of approximately 1% of registration charges and stamp duty. 

Effect on the Economy

Even for a limited period, reducing the circle rate is pretty good news for the Delhi housing market, for it will help to lower the property prices. Thereafter prospective home buyers will be privileged for paying fewer registration charges of the properties.

In November 2020, finance minister Nirmala Sitaraman made a provision for increasing the difference between circle rate and agreement values, opened up a possibility for a price reduction. According to some researchers, there are nearly 546000 unsold units all across India’s top 7 cities, which sums up a value of rupees 1.5 crores, with another 49500 units pricing between rupees 1.5 crores to rupees 2.5 crores.