Why AAP Govt's proposal of increasing circle rates must be appreciated

The Arvind Kejriwal-led AAP Government in Delhi is contemplating to increase circle rates in the national capital to pump in revenue into the state government's exchequer. Once a reality, this measure will prove beneficial in boosting the state's revenue besides empowering the land owner who will be in a position to get higher compensation.

Thus AAP government must be lauded for thinking in this long-forgotten issue because the circle rates in Delhi are far lower than the existing market rates and need an immediate change.

What is circle rate?

Circle rate is the minimum rate for property or assets (plots, independent houses, flats) in a particular area/locality.

From a realtor's point of view circle rate is the minimum value at which he/she can register a property. The circle rates are always lower than the existing market rates, which in turn are determined by market forces driven by demand and supply.

From a land owner's point of view its the rate at which he/she can sell his/her property. An owner may not get the fare deal if the circle rate in the area hasn't been updated. If one takes the case of Delhi then there are flat circle rates for different categories of houses.

This means that a property owner will get Rs 76,200/sq m for a 100 sq m DDA flat, be it in any part of Delhi.

Who determines the circle rates?

The circle rates are decided by revenue department of the state government or the local development authorities. The same department also fixes the stamp duty charges and the registration charges. The stamp duty and registration charges are the source of income of the state government in a property transaction.

The Kejriwal government is contemplating to increase circle rate for flats of group housing societies and DDA by around 100 per cent. The revenue department, under Deputy CM Manish Sisodia, has prepared a proposal which also favours to increase circle rate on agriculture land and farmhouses by up to 100 per cent and 150 per cent respectively.

This move will certainly boost the state's exchequer as the buyers will pay more stamp duty and registration cess and the owners will get a much better deal for their property.

Why circle rates were not revised from time to time?

The reason why circle rates must be revised because no one ever bothered to push for a revision since 2008 for this helped in keeping the compensation rates low in case of land acquisition for development projects. The compensation amount for acquired land is fixed on the circle rates and lower circle rates mean lower compensation amount.

The increasing gap between market rate and circle rate, actually accounts for increasing black money transactions in the real estate sector. If the government continues revising circle rates from time to time, keeping the market rates in mind, this will not only stop corruption but also boost the treasury of the state government.

Good initiative from AAP Government

The AAP government's proposed move of increasing the circle rates will definitely boost the state's revenue besides empowering the land owner. Thus, it is a positive initiative by Delhi Government and other states must learn from it, for it will help in boosting the real estate sector, improve the infrastructure and also help in checking corruption.

But, the government must also keep in mind the interests of buyers by reducing the per cent of registration charges or keep the existing rates unaltered. For this move will also boost the confidence of the buyers and realtors.

In Delhi stamp duty and transfer duty is 4% if the buyer is a woman and 6% if the buyer is a man. The registration fee is 1% of the total value of sale deed + Rs 100 pasting charge.