Property Prices To Fall In Delhi, As Govt Lowers Circle Rate By 20%
Rates of properties in India’s national capital could fall significantly, as the Delhi government, on February 5, 2021, announced a 20 per cent reduction in circle rates, the government-defined value below which a property cannot be registered in the government's records.
This, however, is a temporary relief brought about by the chief minister Arvind Kejriwal-led Aam Aadmi Party government of the union territory, in order to boost real estate in the capital city, in the aftermath of the Coronavirus pandemic. The reduction will applicable on all types of properties, including residential, commercial and industrial, till September 30, 2021.
The reduced rates will also be applicable on all eight categories of properties in Delhi, namely A (the priciest type), B, C, D, E, F, G and H (the most affordable type).
The industry has welcomed the move by the Delhi government.
"The reduction in circle rates, even if it is for six months, is a great move by the government. This step will indeed propel buying and selling activity, especially in a few grade-A category micro-markets, which otherwise have been suffering due to the circle and market rate mismatch. A move of this nature will also enable owners of large assets to mobilise transactions which, otherwise, were challenging, given the size and consequent values," says Shveta Jain, managing director, residential services, Savills India.
Recall here that the national capital region has been the worst-hit housing market in India with a multi-year slowdown that started in 2014 and has further worsened in the aftermath of the novel Coronavirus-led economic contraction.
“The decision by the Delhi government comes at the right time, when the industry is recovering from the tumultuous impact of the pandemic. The reduction in circle rates will make things more affordable and should increase the number of transactions. The decision of the Delhi government may also lead other states to take a similar step in the near future, as a booster to the real estate industry,” said Achal Raina, COO, Raheja Developers.
What Are Circle Rate And Registration Charges?
When you register a piece of property in your name, you are expected to pay registration charges and stamp duty. However, often property sellers and buyers understate the value of the property, to avoid paying a large amount of money as stamp duty or registration charges. To prevent this from happening, state governments decide the circle rate — the minimum rate at which a property transaction can take place. As a buyer, you need to know that there is huge variance in circle rates within a city. This is because there is great variance in property rates within a city.
Read More: Explaining Circle Rate
For example, the circle rates in Greater Kailash-I, a Category-B residential colony in Delhi, would be higher than circle rates in Tajpur Village, an H-category residential colony. In A-Category colonies in Delhi, the circle rates are nearly 30 fold of that of H category colonies.
When you register the transaction of a property, it should either be at the circle rate in that locality in which you buy property or the rate at which the transaction takes place, whichever is higher. You can save on stamp duty, for example, by registering the property in the name of a female buyer. In many states, stamp duty for women is lower.
In Delhi, the stamp duty that women have to pay is four per cent of the transaction value while the stamp duty for men is six per cent of the transaction value. If the property is jointly registered in the name of you and your female partner, the stamp duty would be five per cent of the transaction value.
Registration charges are often one per cent of the transaction value. Registration charges are paid when you register the property document or the sale deed. Even though people often understate the value of the property in official documents to save stamp duty and registration charges, this may have severe consequences.
(With inputs from Shanu)