Property rates may soon rise in Delhi as CM moves to revise circle rates – What does this mean?

Property rates in Delhi are likely to rise in the coming days amid efforts to revise circle rates in the national capital. Delhi Chief Minister Rekha Gupta announced the formation of a committee for the same — with an official statement citing mismatch between the existing circle rates and the prevailing market rates. The decision was taken during a high-level meeting on Saturday that also saw the CM vow to revamp the real estate system of Delhi.

According to an official statement, the CM has announced the formation of a committee under the chairmanship of the divisional commissioner to revise the circle rates. The committee will submit a report based on current market conditions and property values, which will then be used as the basis for revising the circle rates. Gupta also emphasised the need to make construction-related procedures simple, transparent and accountable to avoid unnecessary delays in developmental works.

What is circle rate and how does it affect prices?

A circle rate is the minimum price per unit area as determined by the government. The amount varies from state to state and even within different areas of a city. It depends on various factors including demand and supply, amenities, and profile of the neighbourhood — with amendments being made from time to time. A property cannot be registered for a price lower than the circle rate for that area.

Delhi has eight categories based on the floor price with localities divided from ‘A’ to ‘H’. Upscale areas such as Jorbagh, Vasant Vihar, and Safdarjung Enclave come under category ‘A’. Meanwhile the least developed places — mostly located in Outer Delhi — fall in the category ‘H’.

The Delhi government had relaxed circle rates by 20% amid the COVID-19 pandemic — leading to a significant reduction in prices. The circle rate for category ‘A’ fell from Rs 7.7 lakh to Rs 6.2 lakh per square metre while category H on the other end of the spectrum saw floor price drop from Rs 23,280 to Rs 18,624 per square metre. These rebates were eventually withdrawn in 2022 and the 2014 guidelines are currently being implemented in the city. While the base unit rate of cost of construction (residential use) in category ‘A’ is Rs 21,960 per square metre, the corresponding value for category ‘H’ is Rs 3,480.

An upgradation of circle rates is likely to increase property prices in the national capital once implemented.

(With inputs from agencies)