Given that circle rates typically represent less than half the value of properties in the capital, and much less in other cities, the Delhi government has done well to raise circle rates for the third time since they were introduced five years ago. While many fear this will raise property prices, the fears are unfounded since extra taxes to be paid on registering new properties are quite reasonable given property taxes are in the 5-7% range. Indeed, bringing the value at which properties are registered to levels that are closer to market prices also ensures the amount of black money transactions get lowered.
Indeed, while property taxes can never hope to pay for improvements made to cities through creation of new infrastructure, increased property tax collections is an important way to collect funds for O&M expenses at least. Increasingly, cities have to link infrastructure provision to higher circle rates. While well-developed city centres offer less scope to increase collections as property prices typically rise slower than they do in suburbia being linked through high-speed bus or metro corridors, the latter offer good scope for increasing rates. Not surprising then that an important component of the JNNURM is proper mapping of residential and commercial properties and ensuring proper collection of property taxes. Sadly, the record of most cities in collecting the full value of potential property taxes is still poor. When the new improved JNNURM is cleared, this is likely to be an integral part of it.