Delhi rents may be linked to circle rates; hike soon?

The AAP government has proposed linking rent and lease agreements to circle rates of properties, a move that may lead to an increase in rents, especially in posh south and central Delhi neighbourhoods.

According to government sources, stamp duty on a lease deed or rent agreement — residential or commercial — to be paid by a tenant at the time of registration will be calculated on the basis of the existing circle rate of an area. A circle rate of 5-7% is likely to be imposed on the rented properties.

“The move will stop evasion of stamp duty as people often do not disclose the actual rent amount in the agreement,” said a senior Delhi government official.

Many home owners also don’t disclose the actual rent to avoid paying tax on it. Therefore, they may hike rent rates further to protect their original earnings after paying the additional tax.

The hike would hurt tenants most in places like south Delhi, where circle rates are quite high, and in expensive market places like Khan Market, Connaught Place and Greater Kailash.

The revenue department has forwarded the proposal to the finance department for its consideration, after which it is likely to be tabled in the cabinet, the sources said.

Circle rate, introduced in the Capital in 2007, is the minimum valuation of land and immovable property and an indicator of the ‘market price’ of the property. It is revised periodically by the state government and differs from area to area: Delhi is divided into eight categories, A to H, where A stands for the poshest colonies and commands the highest circle rates.

A high circle rate also acts as a disincentive for the use of cash or undisclosed “black money” in real estate transactions.

The government was recently planning to increase circle rates in group housing society flats and DDA flats by almost 100%. So far, flats in the city have a uniform circle rate of Rs 58,000 per square meters. If this plan too goes through, circle rates for flats might go up by 100% and so would rents.

Source :
Hindustan Times
8th July 2015