Delhi government reduces circle rates for residential, commercial and industrial properties by 20%

“It will also help sellers in localities such as New Friends Colony, Friends Colony, Maharani Bagh, Vasant Vihar, Anand Niketan – areas where the market rate is lower than the circle rate,” said Dipesh Garg, co-founder, Southdelhiprime.com.

"The reduction in circle rates has been a long-awaited and highly controversial topic, especially for properties falling in "A" category, where the circle rate value of properties was much higher than the actual market value. The reduction in circle rates will incentivise property deals in Delhi. However, this reduction has been announced for a limited period of time and the government needs to address this with a long term perspective," said Yudhist Singh of YNS & Associates, a law firm based in Delhi.

Circle rates refer to the minimum rate notified by the government through the registrar or sub-registrar office of Delhi for registration of property transactions. Stamp duty is to be paid on the higher of the declared transaction value and the value calculated as per the circle rate chart applicable for the sector or area of Delhi.

Circle rates tend to vary across various areas of Delhi depending upon the market value of the area and the facilities that are available in that area. Delhi government has divided the properties in entire Delhi city into 8 categories – Category A, Category B, Category C, Category D, Category E, Category F, Category G, and Category H. Most expensive posh areas of the city are part of Category A while Category H has the lowest value areas of the city.

The government generally assigns a higher circle rate to commercial properties and lower rates for residential properties. Circle rates also depend upon the type of property. The registration value of apartments in Delhi are different from those of plots and independent houses even within the same area.

Real estate experts said that the move may also lead to an increase in property transactions, especially in Grade A micro-markets, where there is a circle rate and market rate mismatch.

“Reduction in circle rates even if it is for six months is a great move by the government. This step indeed will propel buy and sell 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,” said Shveta Jain, Managing Director, Residential Services, Savills India.

Ramesh Menon of Certes Realty Ltd is of the opinion that the decision will fuel demand for properties across segments. “During COVID-19 vacancy rate went up and the occupancy rate came down. The intent is clearly to fuel demand,” he told Moneycontrol.

He said that the decision may also be linked to the tax relief for homebuyers and developers buying or selling below the circle rate by up to 20% which has been extended in Budget 2021. This is applicable from the assessment year 2021-22.
“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,” said Achal Raina, COO, Raheja Developers.

Mani Rangrajan, the Group COO of Housing.com, Makaan.com and Proptiger.com, also said that circle rates have a direct bearing on the actual market rates.
"A reduction in circle rates not only will soften property and land prices in Delhi but also put pressure on other adjoining realty markets of NCR. This will bring in a new set of buyers to the market,” Rangrajan said.

"Reducing circle rates, even for only a limited period, is great news for the Delhi housing market because it helps to further bring down property prices, which are very high despite not having risen for quite a long time," Anuj Puri, Chairman- ANAROCK Property Consultants said.

While taking into considering the strong revival post lockdown easements, this decision augurs well for the market, he said.

"Market rates, which are invariably higher than circle rates, are nevertheless influenced by them as they act as a floor price for any property transaction. By bringing down the circle rate, the Delhi government seeks to create a conducive environment for accelerated housing absorption in the market," Puri added.