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Economy Nov 22, 2012

Will Delhi home prices shoot up? Circle rates in upscale colonies up 200%

By Firstbiz Staff

The Delhi government has increased the circle rates - the minimum valuation of land and immovable property - by up to 200 percent in its bid to check black money in transactions. The rates in more affluent parts of the city were increased by as much as three times, while other areas registered a 22 percent rise.

The rates in upscale colonies like Greater Kailash, Defence Colony, Gulmohar Park, Panchsheel Enclave, Anandlok, Green Park, Golf Links and Hauz Khas have been increased by 200 percent.

The rates in more affluent parts of the city were increased by as much as three times

Realty experts, however, feel that that the latest hike will not make the houses costlier as the market price in affluent areas is still way higher than the circle rates, which represent only 60 percent of the actual market cost, but it will help the government to earn more on every transaction.

"The current circle rates are far lesser than the market prices... I do not think there will be any immediate impact due to this increase of circle rates. Property prices are always determined by the market forces. It is dependent on demand supply scenario," said Jones Lang LaSalle (India) Chief Executive Officer (Operations) Santosh Kumar.

He, however, said there may be some price hike in the long run due to this step. "The best thing about raising the circle rates is that it will reduce the black money transactions. Now, the government will get more money and transparency in property dealings will increase," Kumar said.

A report in the Daily Mail points out that buyers will be able to claim a higher bank loan for their properties now by citing the increased circle rates because currently there is a massive difference between the actual cost of a house and the loan that is sanctioned to buy it, which is based on the circle rates fixed by the government.

As per the rates approved by Delhi Cabinet, Rs. 6.45 lakh per square metre has been fixed as new circle rate for category A colonies as against existing rate of Rs. 2.15 lakh. This means nobody would be allowed to buy land and immovable properties in these colonies for less than Rs. 6.45 lakh per square metre. However, the market rates in these upscale colonies like Jor Bagh is as high Rs 10 lakh to Rs 12 lakh, while in GK it is around Rs 5 lakh to Rs 6 lakh per sq metre.

A report in Times of India says the Delhi government has played safe and shown a distinct unwillingness to take on real estate bull by the horns.

"The hike in A and B category colonies will not make a dent in the black market while marginal hike in the colonies inhabited by the middle and the lower middle classes - quite obviously a case of keeping voters in good humour in view of the elections next year - is a half-hearted and halfway measure," the report said.

The rates in Category B neighbourhoods like Andrews Ganj, Kalkaji, Munirka Vihar and Nehru Enclave have been increased by 50 percent while for rest of the areas, the hike has been fixed at 22 percent.

As per the cabinet decision, Rs. 2,04,600 per square metre has been fixed for B category colonies as against current rate of Rs. 1,36,400 per square metre.

The state government is expecting a twin result by hiking the circle rates exactly a year after they were revised as it help take care of the revenue crunch while keeping a check on black market transactions on properties.

Delhi Revenue Secretary Dharampal said the government decided to hike the circle to cut the black money component in property transactions. He said government expects to generate an additional revenue of Rs 200 crore from hike in circle rates.

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 in current fiscal.

National Real Estate Development Council (NARECO) President Navin M Raheja said that builders are unlikely to get impacted since there are hardly any projects in the primary market but the hike in circle rates will impact prices in the secondary market where properties are traded.

Confederation of Real Estate Developers Association of India (CREDAI) NCR President Geetambar Anand said: "There will be slowdown in property transactions and prices will not increase as market is already down because of high interest rates and other factors."

Delhi chief minister Sheila Dikshit said circle rates were increased as last hike was effected in November, 2011.

"The current rates are quite less than the prevailing market rates at which transactions are taking place. That is why we decided to hike it," Dikshit said adding, "In order to curb the flow of black money, it has become important to rationalise the minimum circle rates."

She 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 hiked to Rs. 1,33,224 per square metre from current Rs. 1,09,200 while in neighbourhoods under Category D the new rates will be Rs. 1,06,384 as against existing rate of Rs. 87,200.

The rate for colonies under category E has been hiked from Rs. 47,840 to Rs. 58,365 per square metre while for F category colonies the rate will be Rs. 47,140 as against current rate of Rs 38,640.

In respect of category G colonies, the new rate will be Rs. 38,442 per square metre as against existing Rs. 31,510 while for H category colonies it has been hiked to Rs. 19,361 from Rs. 15,870.

The circle rates were first introduced in Delhi in 2007, dividing the capital into eight categories, and were notified under the provisions of the Delhi Stamp (Prevention of Undervaluation of Instruments) Rules, 2007 on July 18, 2007.

With inputs from PTI

by Firstbiz Staff

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