With the economic stress caused by the second wave of the Coronavirus pandemic taking a toll on its revenue generation, the Delhi government has started the process to revise circle rates of properties in the national capital.

Circle rates, the state-determined prices below which a property cannot be sold in a specific market and the rates which act as the basis of stamp duty and registration charge payment, were last revised in Delhi in 2014. In Delhi, circle rates are classified in to eight categories, from A to H, based on the area where they are located.

A committee led by officials from the Revenue Department is evaluating the circle rates. This committee is expected to submit a report, within a month, to the government. Meanwhile, the union territory government, led by chief minister Arvind Kejriwal, has sought feedback from the public over this move. Also, authorities of the 11 districts under the UT government have been directed to submit details of land within their jurisdiction.

 In a circular issued, the East Delhi district has sought feedback from the stakeholders, for the circle rates of residential, commercial and industrial properties and land, by July 31, 2021. The list of stakeholders include residents’ welfare associations, real estate developers, architects, landlords, etc.

The move by the Delhi government comes against the backdrop of the Revenue Dcollecting Rs 3,297 crores as revenue from stamp duty fee in 2020-21 against the target of over Rs 5,000 crores.

Recall here that the UT government had also effectuated a 20% cut in circle rates recently, in order to boost sales of luxury property in specific areas. 

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Property Prices To Fall As Delhi Govt Cuts Circle Rates By 20%

In a move that would significantly bring down the cost of property in the national capital, the union territory government, on February 5, 2021, announced a flat 20 per cent reduction in circle rates, across various categories of properties.

The decision to cut circle rates, the government-fixed value below which a property cannot be registered in the government's records, was made in a late evening meeting of the chief minister Arvind Kejriwal-led cabinet. The reduced rates will remain in effect till September 30, 2021 and will be applicable on all types of properties, including residential, commercial and industrial.  The slashed 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).

For stamp duty and registration charge calculation, tax authorities refer to the circle rates to calculate the exact amount that the buyer will have to pay. In Delhi, where the stamp duty for property registration is four per cent of the deal value, the buyer will have to pay four per cent of the circle rate-based property rate as the stamp duty.

Real estate developers, who have largely been disappointed by the lack of incentives from the recently unveiled Union Budget 2021 and the RBI’s monetary policy, have welcomed the move.

Lauding the Delhi government's decision, Akshay Taneja, MD, TDI Infratech, said that the resale housing market in the capital city will benefit from this decision. “When real estate is in the revival mode, decreasing the circle rates will have a positive impact on the market. The sector is already facing problems to contain the prices of units, because of increasing raw material costs and in this scenario, low circle rates would be beneficial for the residential sector. The secondary market will witness more registrations, as stamp duty and registration charges will come down,” Taneja said.

According to Achal Raina, COO, Raheja Developers, 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 near future, as a booster to the real estate industry,” says Raina.

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Delhi Hikes Circle Rates For Agricultural Land

The Chief Minister Arvind Kejriwal-led Delhi government has decided to increase circle rates of agricultural land in the national capital on December 18, 2019, in a move that could increase their cost by at least five times. From Rs 53 lakhs an acre now, circle the rates for agricultural land in Delhi have been hiked between Rs 2.25 crores and Rs 5 crores. The proposal has yet to get an approval from the lieutenant-governor. 

LG’s Approval Needed For Fixing Circle Rates, SC To Delhi Govt

The Supreme Court (SC) on February 14, 2019, said that although the Delhi government had the powers to fix land circle rates in the national capital, it could not implement such measures without receiving an approval from the Lieutenant Governor (LG). At the same time, the top court also remarked that it did not expect the LG and the council of ministers to differ on such issues often. In case there was a difference of opinion between the state government and the LG, the matter could be referred to the President for decision, the SC stated.

Circle rates are government-fixed minimum rates at which a property could be sold in a particular area. Subject to periodic revision, these rates, also known as ready reckoner rates, government rates and collector rates, vary from state to state and locality to locality. It is this rate on the basis of which buyers have to pay stamp duty on their real estate transactions. A hike in rates would mean properties becoming costlier.

The apex court ruled that circle rates were fixed for the purpose of payment of stamp duty and did not pertain to right over land.

"Circle rates are fixed for the purpose of payment of stamp duty. Therefore, they do not pertain to land namely rights in or over land, land tenures etc., or transfer of alienation of agricultural land etc. Stamp duty is not a duty on instrument but it is in reality a duty on transfer of property," the Bench said.

The circle rates in the national capital are revised under the provisions of the Indian Stamp Act and Delhi Stamp (Prevention of Under-Valuation of Instruments) Rules, 2007.

Circle rates for residential plots in Delhi