Will increasing property circle rates in Delhi stop black money transactions? We believe….No

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Delhi Government has increased the property circle rates across all categories of colonies. The change in circle rates has been effected from 23rd September 2014. The increase in circle rates has been a whopping 20%. What are circle rates? Circle rate is the minimum property price set up by the local government to calculate stamp duty and registration charges for any property transaction within the city.

Here are the new circle rates for Delhi:

	New Circle Rate for Land (in  Rs/Sq.Mt.)	Stamp Duty @5% for Joint Holding (in Rs)	Old Circle Rate for Land (in Rs/Sq.Mt.)	Stamp Duty @5% for Joint Holding (in Rs)	Differential (in Rs)	Increase in stamp duty 100 Sq Mt  plot (in Rs)	Increase in stamp duty 300 Sq Mt plot (in Rs)	Increase in stamp duty 500 Sq Mt plot (in Rs)	Increase in stamp duty 1000 Sq Mt plot (in Rs)
Category A	774000	38700	645000	32250	6450	645000	1935000	3225000	6450000
Category B	245520	12276	204600	10230	2046	204600	613800	1023000	2046000
Category C	159840	7992	133224	6661.2	1330.8	133080	399240	665400	1330800
Category D	127680	6384	106384	5319.2	1064.8	106480	319440	532400	1064800
Category E	70080	3504	58365	2918.25	585.75	58575	175725	292875	585750
Category F	56640	2832	47140	2357	475	47500	142500	237500	475000
Category G	46200	2310	38442	1922.1	387.9	38790	116370	193950	387900
Category H	23280	1164	19361	968.05	195.95	19595	58785	97975	195950

The stamp duty charges in Delhi are as follows:
Male - 6%, Female - 4%, Joint - 5%, Senior Citizen - 6%, Company - 6%

The idea behind increasing the circle rates in Delhi is to curb black money component which is rampant in property transactions across the country. Really, will increasing the circle rates curb black money transactions? We are doubtful; on the contrary, it may further push up the property prices and slow down the already subdued demand.

In our opinion, it is a lazy way of looking at the issue of black money in property transactions. So, what could the government do to curb black money component in property transactions?

• Equalize circle rates and prevailing market rates, i.e. there is no circle rate, in fact, stamp duty and registration charges should be calculated on the prevailing market rates. But this will increase the stamp duty burden on buyers. And hence, property transactions will slow down considerably and therefore loss of revenue for the government and adverse impact on the economy. To overcome this issue, government must reduce the stamp duty charges.

• Reduce stamp duty charges to 1% of property value.

• Reducing stamp duty charges and equalizing circle rates with market rates will encourage the buyer and seller to report the correct property value. And hence, it will help in curbing the black money transactions.

• At the same time, people will transact more frequently which will have a positive impact on revenue generation for the government.

• Therefore, need of the hour is to reduce stamp duty charges and equalize market rates with circle rates. Increasing circle rates at the current stamp duty levels will in fact encourage more cash transactions.

Is the revenue generation department of local government listening??

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