The Delhi government’s recent Diwali gift to its people has left many high and dry. Its decision to hike circle rates – the minimum price at which a property has to be bought in the Capital – has upset many people’s dreams to buy a house here.
Circle rates of category A houses – including areas like Defence Colony, Gulmohar Park, Panchsheel Enclave and Hauz Khas which have the best infrastructure – are set to see a 200 per cent hike. B category residences will see a 50 per cent rise and C to H groups will bear a 25 per cent increase.
The circle rate - determined by MCD in all the categories – determines the stamp duty one has to pay to register his or her property with the government. The more the Circle rate, the more the final price one has to pay for a property. The government revises this price from time to time to ensure that it is closest to the actual market price and, that people pay the complete tax on a property purchase.
Real estate consultants say that the price rise is arbitrary and the government needs to look into the matter again to see where the circle rate matches the market price or whether it is exceeding it.
Mahesh Gupta, a realtor in South Delhi says, “There are areas like Mohan Cooperative Industrial Enclave, Okhla and Nehru Place where the circle rate is more than the market price. In Mohan Cooperative Industrial Enclave, a sq. yard costs Rs 1 lakh while its circle rate is fixed at 1.74 lakh. In Okhla and Nehru Place too, the Circle Rate is 40 to 60 per cent above the market price.”
“On the other hand, in areas like Chittaranjan Park, Jor Bagh, Golf Links, the circle rate is way below the market price and the government is obviously not getting its due revenue from property transactions here. I am consulting my lawyer to file an RTI in this regard.”
In Delhi, where the difference between the ‘black’ and ‘white’ components in a purchase can vary anywhere between 10-25 percent (in cheque) while the rest of it is cash, the government loses out on taxation. These periodic revisions ensure that the use of black money is minimised and white money is encouraged. However, it is not as simple as it sounds in theory.
Another property consultant Deepak Bose says, “Not everyone has that kind of white money to provide in a property transaction. Most have more money in cash. Now they too will also have to ensure that they can pay it all in cheques. It’s a necessary evil. The government has to get its revenue but people will have to bear the brunt of higher property cost at a time when inflation is already troubling them.”
This move, though, is likely to benefit those looking for home loans as they can get it from banks and other institutions on the basis of the hiked circle rates. Pratima Goyal, a homemaker says, “My husband and I were planning to buy a flat in Mayur Vihar but since the prices are set to go up, home loans seem to be the only way out. And the government, by hiking these rates, has made that way easier for us. I guess, this was destined to be.” Win some, lose some.