NEW DELHI : For the second time this year, the Delhi government announced a steep hike in circle rates in a bid to garner more revenue and check the use of black money in property transactions.
Circle rates are the government's valuation of land in the city - differentiated into eight categories, A to H - below which a realty deal cannot be registered. After doubling the circle rates in February this year, the government on Monday further revised the rates with a hike in the range of 15% to 250%. The new circle rate regime is unlikely to affect real estate prices in the city. If anything, the hike may result in a price correction in certain areas as the black money component in property deals comes down. Property analysts said even the revised rates were much below real property values in the city.
The city government expects the revised rates to bring in additional revenue to the tune of Rs 800 crore annually.
Chief minister Sheila Dikshit said the revision was an attempt to bring circle rates closer to real property prices, although these were still lower than market values in many posh colonies. According to senior revenue department officials, in most cases , the actual rates of properties are not shown on paper due to which the government suffers loss in revenue in stamp duty and registration fees.
Impact of circle rates
NEW DELHI: With Delhi government hiking thecircle rates substantially on Monday, the city's realty market is expected to be impacted somewhat. It's going to be a two-pronged impact, say property experts. While the "white" component of the transaction will be going up as circle rates try to catch up with the grossly deflated market prices, the good news is that more genuine buyers are now expected to enter the market with financers taking a backseat.
Said real estate analyst Pradeep Mishra: "The reason for the impact on the property prices is that the component of the price that was white, comprising the stamp duty that was usually undervalued, will now go up." It's not going to be a huge jump though, say experts, despite the staggering 250 per cent hike in circle rates of upmarket colonies in Category A. Said Harish Sabharwal, a Mayur Vihar broker: "The circle rates are finally becoming more realistic, reflective of the market. Since this means that the stamp duty is going up, there will be a short-term impact." The hike will be passed on to the buyer, who will bear the additional load, said experts. Both Mishra and Sabharwal, however, feel the impact will be absorbed in the next few months. "Transactions will be affected only for a couple of months and then it'll go back to normal. The increase will also be absorbed," added Mishra.
In fact, properties in the region of more than a crore may see a rate correction, feel market watchers. That is because of the larger role of genuine buyers in this market. "With the revision in circle rates, the financier will not invest as heavily now. There are several reasons for this, like the stricter general power of attorney norms as well as higher stamp duty. The financier's profit margin is smaller in this scenario," added GP Tiwari (name changed), who invests in real estate. The impact of financiers taking a backseat, added Mishra, will be felt the most in properties in the range of Rs 1.5-2 crore and above. "A 5-10 per cent rate correction may happen in this category of properties," said Mishra.
In a market already impacted by rising interest rates, the hike in circle rates will play spoilsport, rue most industry watchers. "While Delhi's circle rates are comparatively lower than that of the other NCR areas, it's a substantial hike - between 100-250 per cent in all the upmarket colonies. Even the G and H category will have a 15 per cent increase. Property rates will obviously be affected," added Sabharwal. The hike however, is expected to be beneficial in the long run, as it will check transactions in black money and undervaluation of property, add experts.
Impact of circle rates
NEW DELHI: With Delhi government hiking thecircle rates substantially on Monday, the city's realty market is expected to be impacted somewhat. It's going to be a two-pronged impact, say property experts. While the "white" component of the transaction will be going up as circle rates try to catch up with the grossly deflated market prices, the good news is that more genuine buyers are now expected to enter the market with financers taking a backseat.
Said real estate analyst Pradeep Mishra: "The reason for the impact on the property prices is that the component of the price that was white, comprising the stamp duty that was usually undervalued, will now go up." It's not going to be a huge jump though, say experts, despite the staggering 250 per cent hike in circle rates of upmarket colonies in Category A. Said Harish Sabharwal, a Mayur Vihar broker: "The circle rates are finally becoming more realistic, reflective of the market. Since this means that the stamp duty is going up, there will be a short-term impact." The hike will be passed on to the buyer, who will bear the additional load, said experts. Both Mishra and Sabharwal, however, feel the impact will be absorbed in the next few months. "Transactions will be affected only for a couple of months and then it'll go back to normal. The increase will also be absorbed," added Mishra.
In fact, properties in the region of more than a crore may see a rate correction, feel market watchers. That is because of the larger role of genuine buyers in this market. "With the revision in circle rates, the financier will not invest as heavily now. There are several reasons for this, like the stricter general power of attorney norms as well as higher stamp duty. The financier's profit margin is smaller in this scenario," added GP Tiwari (name changed), who invests in real estate. The impact of financiers taking a backseat, added Mishra, will be felt the most in properties in the range of Rs 1.5-2 crore and above. "A 5-10 per cent rate correction may happen in this category of properties," said Mishra.
In a market already impacted by rising interest rates, the hike in circle rates will play spoilsport, rue most industry watchers. "While Delhi's circle rates are comparatively lower than that of the other NCR areas, it's a substantial hike - between 100-250 per cent in all the upmarket colonies. Even the G and H category will have a 15 per cent increase. Property rates will obviously be affected," added Sabharwal. The hike however, is expected to be beneficial in the long run, as it will check transactions in black money and undervaluation of property, add experts.
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