New Delhi: Some property owners in New Delhi find it difficult to sell their properties as those falls in colonies marked with circle rates; the government’s compulsory minimum prices are much higher than the actual market price. 

On the other hand, there are several other colonies where the circle price is far below the prevailing market price, leaving even the tax authorities worried about the potential loss of tax revenues in New Delhi. 

Experts believe the solution for both cases lies in either rationalizing the circle rates or reclassifying colonies per prevailing trends and facilities.

Circle rates” are the benchmark price of any property for buyers, below which no one cannot register their property deals.

Market Circle Rate Down in many Colonies

As per the data issued by India Sotheby’s International Realty, one of the leading property consultants of luxury and ultra-luxury homes, the market rates in many colonies which fall under the A category are much lower than the circle rates of Rs 7.72 lakh per sq. meter.

For example, the market rate in Maharani Bagh is Rs 4.5 lakh, Panchsheel Park is Rs 3.2 lakh per square meter, and New Friends Colony is Rs 3.4 lakh.

Many colonies fall in the B Category, where market rates are much higher than the circle rate of Rs 2.45 lakh per sq. meter. For instance, the market rate in Defense Colony is about Rs 6.6 lakhs, and in Greater Kailash I, it is about Rs 5.3 lakh per sq. meter.

Due to these problems, many property buyers and sellers face difficulties concluding transactions.  Jasraj Singh said, along with my brothers, they inherited a 1,008-square meter plot at Panchsheel Park in South Delhi.

In the last ten years, we have, without success, tried to sell the properties but to no avail. In the case of my

Ring Road facing property, the price per circle rate is Rs 78 crores; on the other hand, the market price of my freehold plot is Rs 45 crores.

Market Circle Rate High in many Colonies

The property rates in A category colony had increased nine times from Rs 86,000 per sq. mt. in year 2010 to Rs 7.73 lakh per sq. meter in the year 2020, Jasraj Singh said.

CEO of India Sotheby’s International Realty, Amit Goyal, said that more than 10% difference between the circle rates and agreement values of properties translates into tax penalties under Section 43CA of the Income Tax Act, 1961.

Goyal also said that both seller and buyer suffer losses in transactions where the circle rate is higher than the market rate. Buyers have to pay higher stamp duty because property cannot be registered below the circle rate fixed for any property; on the other hand, the seller’s tax liability increases because of national gains.

Larisa Realtech

Category A localities like New Friends Colony, Panchsheel Park, Maharani Bagh, and Vasant Vihar, the market rates are generally below the circle rates, particularly for large plots. Under B category micro markets like Anand Lok, Defense Colony, Neeti Bagh, and Greater Kailash, the actual market rates are much higher than the circle rates leaving room for cash transactions.

Best way to keep Circle Rates consistence

Goyal suggested that some micro markets need to be shifted from category A to B and some from category B to A to bring them closer to actual prices. The circle rates are deemed to be sale considerations for the transfer of any property if the collectors rate exceeds the declared transaction value.

Till 2018, according to section 43CA of the Income-tax Act, 1961,  The Finance Act, 2018 provided that these provisions get triggered only where the difference between the sale and purchase consideration and the 1 rate was more than 5% to relieve real estate buyers and developers. After that, the Finance Act 2020 increased this threshold from 5% to 10%.