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What is circle rate?

Circle rate is the minimum rate for valuation of a plot, an independent house or a flat in a particular locality or area. The circle rates differ according to various categories of colonies. The rates are fixed by the state revenue ministry.

Circle rate hike

There are eight types of colonies in Delhi. These colonies have different circle rates. There have been discussions about revisions of existing circle rates and the rates have been increased with effect from 1st December, 2012. Circle rates of affluent colonies have been raised by as much as three times compared to the existing rates. Other areas have witnessed 22 per cent rise in circle rates. With the hike in property rates, speculations are rife that the property prices will also rise in Delhi.

Why the circle rates hiked?

The last time circle rates were being hiked in Delhi was in November, 2011. This time, the circle rates of the most affluent category A colonies like Vasant Vihar, Nehru Place, Friends Colony, Anand Niketan and Shanti Niketan have been raised from Rs 2.15 lakh per sq meter to a whooping Rs 6.45 lakh per sq meter. Similarly, category B colonies like Nehru Enclave, Sarvodaya Enclave, Greater Kailash, Nizamuddin East and Hauz Khas have also witnessed rate hike to a substantial extent.

Despite the rate hike in 2011, the rate was much lower than the prevailing market rates and transactions have taken place at a rate much lower than the market rate. Hence, the authorities had to go for rationalisation of the rates to curb the flow of black money in the capital.

The rates were introduced in 2007 after it was found that people were under reporting the sales transaction to avoid paying taxes. Delhi circle rates are still lower than neighbouring National Capital Region (NCR) cities of Gurgaon and Noida.

Are property prices going to rise?

Usually the properties in Delhi are registered at the circle rates. The stamp duty and registration fee is calculated as a percentage of the registered price of a land or house. Therefore, the stamp duty and registration fees will rise with the rise in circle rates.

However, it cannot be said that circle rate hike will inevitably lead to rise in property prices in Delhi. The circle rates are only pointers of property price, not the single determinants. Demand and supply for properties in an area is the force that drives the property rates.

Aide for home buyers

The rate hike is an aide for potential home buyers as they would no longer find it difficult to raise higher home loans. The reason behind it is the fact that the banks and other lenders usually take circle rates as a basis for property prices in Delhi.