DELHI: At a time when there is a slump in the real estate market, any hike between 20% and 50% in the circle rates for property registration in Delhi – as is likely to be proposed – may for the first time see the circle rate and market rate become equal in areas like unauthorized regularized colonies and new settlements in Narela and Bawana. The black component in transactions will then be nil. And this may further dampen sentiments and lead to stagnation in sales, say experts.
Though polls in Delhi are over, the lieutenant-governor does not appear to be keen on rushing into a circle rate hike in view of the model code of conduct that will remain in force till May 16. He indicated this at a review meeting on Tuesday. However, for the revenue department, enhancing revenue generation is critical. In financial year 2013-14 that ended on March 31, the department had a target of Rs 3800 crore but could collect only Rs 3000 crore. This is being attributed to a slowdown in the market and fewer property registrations. Also, the government had pinned its hopes on enforcing an e-court fee order which has been stayed by the high court and impacted revenue collections.
The committee on circle rates revision, constituted by the revenue department earlier this year, had submitted its report at the end of February. The committee had recommended a revision of rates-a 20% to 30% hike for the lower categories and a steeper hike of 40% to 50% for A and B categories, sources said. However, since the elections were declared on March 6 and the code of conduct enforced, a decision was put on hold.
Now, since polling is over in the capital, the revenue department is trying to push for an early revision of rates. It is studying the report to rationalize the rates and will send the proposal for approval to the finance department by the end of this week. The proposal will then be sent to the lieutenant-governor, who will have to take a final decision.
A 20%-50% hike will increase the registration cost by that degree. As the registration fee is levied on the higher amount whether it’s the circle rate or the declared rate, people tend to keep the declared rate low, close to the circle rate. But if there is a hike and the circle rate comes closer to the market rate, the buyer may not be able to ‘save’ on the transaction cost. This will eventually keep buyers away.
The last circle rate revision happened in 2012 when the minimum rate for valuation of land and immovable properties were increased substantially.