Home prices in Delhi are expected to rise sharply for the second time this year after the Delhi cabinet gave its nod to increase circle rates in the city by up to 250%.

In February this year, circle rates were increased by over 100%. Circle rate is the minimum rate at which properties have to be registered with the government.

"The growth of the real estate market and instances of under valuation of properties necessitated the notification of the minimum rates," said Delhi's chief minister Sheila Dikshit.

The impact of higher circle rates will be felt on property prices. "Prices will rise because of the sentimental impact and will now be more reflective of market reality," said Prashant Kaura, director, GenReal Property Advisers.

But the move may also reduce the black money component that is emblematic of real estate transactions in the city as circle rates in most locations are much lower than the actual market price of a property.

Increased prices could further slow down property demand. "The valuation of properties is already high. This is expected to further reduce property deals in the city," says Sunil Kapur, owner of Delhi-based KK Real Estate.



The circle rates were notified for the first time in Delhi in July 2007 and it was decided to revise these rates every two years. The circle rates are charged on the basis of the categories prescribed by the MCD for calculation of property tax under unit area method.

The rates in A category has been increased by 250%, B, C & D category by 100%, E category by 25%, F category by 15% and in case of G & H categories just by 10%. The circle rates for A category will go up from 86,000 to 215,000 per sq metre, B category from 68,200 to Rs 136,400 per sq metre, C category from 54,600 to 109,200 per sq metre, D category from 43,600 to 87,200 per sq metre, E category from 36,800 to 47,840 per sq metre, F category from 32,200 to 38,640 per sq metre, G category from 27,400 to 31,510 per sq metre and H category from 13,800 to 15,870 per sq metre.

However, the enhanced circle rates will continue to remain less than the prevailing market rates in Delhi as well as in the satellite towns of Gurgaon and Noida.