Property prices in Delhi are set to skyrocket, with the government raising circle rates by up to 200 per cent on Wednesday. Circle rates in category A, such as Vasant Vihar, Shanti Niketan, Anand Niketan and Bhikaji Cama Place, zoomed to Rs 6.45 lakh per sq metre, from Rs 2.15 lakh per sq metre last year and Rs 86,000 in 2010. Since 2010, circle rates have gone up seven times in category A areas of Delhi.
Circle rates are the minimum rates, below which no property transaction can happen for registration. This ensures increase in the government’s revenue in the form of stamp duty and reduces the black money component as the differential between market price and minimum price narrows.
Circle rates in category B colonies like Kalkaji, Munirka and Nehru Enclave have been increased by 50 per cent and by 22 per cent for the rest of the categories.
Analysts say the nearly seven times rise in circle rates in two years has narrowed the difference between the market prices and circle rates from up to 60 per cent to 20-30 per cent, which indicates that market prices may also shoot up.
“Market rate in colonies A is nothing below Rs 8 lakh to 10 lakh per square metre,” said an analyst. In colonies like Vasant Vihar or Shanti Niketan, the market rate is over Rs 10 lakh per square metre
Delhi revenue secretary Dharampal said the government decided to increase the circle rates to cut the black money component in property transactions. He said the government expected to generate an additional revenue of Rs 200 crore from the rise.
In 2011-12, the Delhi government had collected Rs 2,000 crore in revenues from registration of properties and Rs 1,300 crore has been collected so far this financial year.
As many believe market prices will go up further, a few analysts argue that prices are dependent on demand as well. “Property prices can go up only to an extent, up to which people are willing to buy. In times of economic slowdown, demand for high-end properties has definitely corrected a bit,” said a property consultant in Delhi.
The market price increase could, however, be seen in the mid categories since investors have the money to invest there in slowdown times. Delhi was divided in eight categories in 2007 and that’s when circle rates were introduced and notified under the provisions of the Delhi Stamp (Prevention of Undervaluation of Instruments) Rules, 2007 on July 18, 2007.
Talking about colonies B, though the minimum circle rate has moved up to Rs 2.04 lakh per square metre, the market rate is anywhere between Rs 5 lakh and Rs 8 lakh per square metre. Delhi chief minister Shiela Dikshit said the Cabinet took a “sympathetic view in effecting hike of the rates in colonies under categories C, D, E, F, G and H.”
For C category colonies, the circle rate has been gone up to Rs 1.33 lakh per square metre from current Rs. 1.09 lakh per sq metre, while in neighbourhoods under Category D, the new rates will be Rs 1.06 lakh against the existing rate of Rs. 87,200.