India’s real estate sector underwent impactful evolutions after the pandemic, and DLC rates are one of those evolutions. Here is all you need to know about DLC rates to assess an investment.
DLC rates are District Level Committee rates, the minimum rate used to calculate a stamp duty or the lowest worth of the property. Concerning DLC rates, a flat, plot, bungalow, or land is valued, and it instantly relates to the appropriate stamp duty on the property, which affects property prices.
These are also called unit and circle rates, by which the buyer pays registration amounts and stamp duty for the government. Each state has different circle rates for its cities, localities, and property. From time to time, DLC rates are set as per the market price, and different DLC rates are assigned to various cities and localities.
5 Types Of DLC Rates
Four main categories according to property type: residential, commercial, educational, and institutional.
1: Residential Property
It contains properties that are known for residential use. These are known for only residential purposes, and these properties are bought by an investor and occupied by tenants. Residential property is especially for living or residence for individuals, including single-family to large, multi-unit apartment buildings. For example- farmhouses, flats, and apartments, etc.
2: Commercial Property
It contains properties known for commercial purposes and used to generate profits. This property refers to immovable, a building that accommodates businesses, land to earn a profit, and residential renting. The property as a commercial property has importance on financing, tax treatment, and the rules which apply to it. For example- showrooms, eateries, banquets, malls, cafes, etc.
3: Institutional Property
It is used for public or helping purposes. However, it does not mean property used for academic purposes; it is intended for medical, social, spiritual, or educational purposes. Like nursing homes, schools, hospitals, living facilities, libraries, museums, helping associations, etc.
4: Industrial Property
It is meant for industrial purposes and is enlisted under the Industrial Department. These save innovations and industrial or commercial inventive work. It has become a financial and strategic tool for any economic party. For example – canteens and small cafes in industrial places for employees.
5: The Exterior and Interior DLC Rates
The DLC rates are further divided into two categories- exterior and interior DLC rates. The Interior DLC rate is applied if the property is far from the main road, and the Exterior DLC rate applies when the property is located near the main road. It involves both commercial and residential properties.
How Are The Calculation of DLC Rates Done?
The lowest rate affirmed by the state for any dealing over land is the DLC rate for lands. For example- the DLC rate of a city is 30 lakh and a 3% stamp duty rate. Now, you have to pay 1.5 lakhs. If the value becomes 70 lakhs, then a stamp duty of 3.5 lakhs is what you have to pay. But if the valuation becomes 40 lakhs, then 2.5 lacks as stamp duty is what you need to pay. DLC rates could be lower or higher than the market price and change yearly.
DLC rate is the lowest worth at which the authorised work is done. When the DLC rate is more than the market rate, and you have to purchase immovable property, the market worth is Rs. 5000 per sq. ft, and the DLC rate is Rs. 5500 per sq. ft. In this case, you should do the stamp duty and registration at the market price of Rs. 5500 per sq. ft.
On the contrary, when the market price is higher than the DLC rate. You have to buy a flat with a DLC of Rs. 4000 sq. ft, and the market price is Rs. 4500 per sq. ft. Here, the stamp duty and registration will be completed at the market price. So, from this, it is clear that registration of any property below the DLC rate is impossible.
What are the Points Needed to Calculate Property Values Through DLC Rates?
Here are the points needed to calculate the property values using the DLC rate-
- Information related to property identification.
- Property’s built-up area.
- Type of the property.
- Conveniences and facilities of the property.
- DLC rate of the locality.
Once you possess all this information, use this formula to calculate the value-
For instance, if the DLC rate of the selected area is Rs.6,000 Per Sq. Ft., the property’s built-up area is 500 Sq. Ft.
So this is how the details will be applied in the formula-
Value of the property = 6000 x 500 = 3,000000. Hence, this is the lowest price to estimate the registration charges and stamp duty during the property registration.
Why are DLC Rates Required?
Let’s start by citing an example. An individual is an owner and possesses land that he has to sell. The real value of the land is about 70 lakhs, but selling it for only 50 lakhs because he is selling it to a family member for cheap or because he needs the money urgently. The price at which he is selling is the individual price of the land that, as the owner, he chose.
Another example- is that someone purchased a property of 40 lakhs but stated it for 20 lakhs only in authorised papers.
For this cause, the government chose to put the lowest price for the property at which they can set stamp duty and registration. And by this, they can stop scams and loss.
DLC rates change depending on market prices. Since property value alters depending on the condition, the last minimum rate and prevalent market price are considered when selecting a new fee.
What are the Importance of DLC Rates?
These rates help to keep an eye on the artificial assumptions of values in a particular locality. There is a frequent updation of DLC rates to maintain the check on high price assumptions, but consistently less than the market values. These values assist the customer in knowing the value in the market rather than the actual value at which the property can be purchased. A significant gap between the unit rate and market value offers a massive flow of black money in the market.
When you purchase property, you should choose the localities where small gaps in the circle rate and the market price are found. The small opening in the market price and unit rate is best to buy the property via loans because the sale will be nearer to the DLC rate, and the loan will be sensible to the customers.
What are the Problems Related to the DLC Rate?
Assume that the customer has a deal of a higher value than the DLC rate. Now, the customer will be at the receiving end. Both parties agree to deal with the lower price of the stamp duty. The rest of the amount is done by a cash transaction to dodge a higher stamp duty amount.
It further raises the black money in the market and creates an unwanted economic situation. Thus, such problems can only be dodged with constant modification of the DLC rate.
Thus, DLC rates are the main factor that aids in purchasing land or property in a specific area. It will help you in keeping away from undesirable assumptions of values. DLC rates are the lowest price for calculating stamp duty decided by the state government, and these rates are necessary to set the property’s registration charges and stamp duty.
What does the DLC rate stand for?
The complete form of DLC rate is District Level Committee which is the lowest rate used to calculate a stamp duty or the lowest worth of the property.
How to check the DLC rate of any area?
To check the DLC rates of any area, always review the state government website for that exact city and state.
How to calculate the stamp duty with the help of the DLC rate?
The DLC rate is used for calculating stamp duty and registration charges if the DLC rate exceeds the market price. On the other hand, if it is smaller than the market price, then the DLC rate can be viewed.
Why do the innovators ask to lower the DLC rate?
The state government increases the DLC rate without conferring the public. The sudden upgradation makes the estate market imbalanced, and the demand increases by 30%.