Delhi Real Estate: Going Kosher

Source: Times of India

Introduction of circle rates has been hanging fire for nearly a year now, however, tomorrow may see the Delhi cabinet come to a decision on the
proposed rates, meant to stem ‘black money’ property transactions.

If, the cabinet accepts the proposal for circle rates, they could come into effect within the next two weeks, thereby, turning over the city’s property market. Revenue department estimates claim 40 – 60% of Delhi’s
property business is carried out via black money transactions, a devaluation of property that causes the government an annual revenue loss of Rs. 500-crore.

Proposed once before, circle rates faced stiff resistance from several quarters, due to which a committee was set up for looking into the matter and which put up two options. Cabinet discussions are scheduled to revolve around the two committee recommendations, i.e. 2005 ‘base rate’, almost the same as rates proposed earlier, or a fresh set of 2007 ‘base rate’. The latter option, revenue officials feel is the one that will silence the critics, as it is more in sync with current rates.

Similar to MCD’s unit area method of taxation, the committee proposes minimum land rates for residential use in eight categories. The land rate for eight areas will range from Rs. 43,000.-.Rs. 47,000 per square metre for those falling under Category A, to Rs. 6,900 - Rs. 7,500 for Category H comprising of rural villages.

Applicable for two years, circle rates will come up for review every couple of years, and once fixed, will be incorporated into the Delhi Online Registration System to ensure evasion of stamp duty becomes well-nigh impossible. Just as property tax calculations are to be found on the MCD website, similarly the government’s website will also feature a do-it-yourself software for calculating
property rates.

Circle rates will be fixed for residential use, going up by multiples of whole numbers, depending on usage. As well, construction costs will also be factored in, with circle rates remaining the same as land rates for pucca constructions, 75% for semi-pucca, and half the prescribed rate for kutcha, and construction age will also be taken into consideration.

Final circle rate calculations will factor in building type i.e. whether built by a government agency or private builder, with minimum specified rates for build-up flats ranging from Rs. 8,600 per square metre for DDA / co-operative / group
housing society flats (up to 30-sq. m.), to Rs. 13,000-per sq. m. for those above 100-sq. m. While, circle rates for private colonies (i.e. builder flats) will be multiplied by specified factors.

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