A property is an investment and a tangible asset which always fetches handsome returns in due course of time. When you plan to buy a property, be it a land or a constructed structure, it is advisable to gather some information about the area where you plan to invest as well as get to know a few terms which you may come across during the deal. A few terms and their significance are discussed here.
TABLE OF CONTENT
1. Circle Rates
1.1. Revision of Circ
1.2. Importance of Circle Rate
1.3. Circle Rates Vary from Locality to Locality
2. Market Rate
3. Difference Between Circle Rate and Market Rate
4. To Conclude
1. Circle Rates
‘Circle Rate’ is the rate set by the state government’s revenue department or the local authorities at which any piece of land, built-up house or apartment or commercial property can be sold. This is the minimum value and it is also known as ‘Guidance Value’ or ‘Ready Reckoner Rate’. Circle rate serves as a tool to assess stamp duty and registration.
Within a city, circle rates can be different in different localities. The real estate market is a bit opaque and does not offer an accurate price index; hence there was a need to set a circle rate so as to put a check on speculation of property prices. The circle rates are lower than the actual market rates as they are not revised often and are not in line with the marketplace. Hence, we can say that the circle rate is not an accurate figure of property prices.
1.1. Revision of Circle Rates
If the circle rates are revised quarterly or once in six months, they will be in line with the market rates. Even the state government will be able to generate higher tax collection with the revised circle rates as the stamp duty of real estate transactions is paid as per the circle rate. On the contrary, the buyer will have to shell out higher stamp duty which will be an extra burden to the buyer. This will result in marginally higher transaction cost and overall cost of ownership. Revision of Circle Rates will have a positive impact and it will go a long way in removing the black money that gets invested in real estate. This will also move the Market price in a positive direction. This revision of circle rates will help raise the investment value and the potential resale value of the property. This will be another positive long-term impact that would be caused due to regular revision of Circle Rates.
1.2. Importance of Circle Rate
A property cannot be registered in the government’s records if its rate is below the circle rate. Government bodies, in order to function and to carry out the activities they are responsible for, need to generate some
income. This is done by levying taxes for the services which are provided to the citizens. Services related to real estate are taken up by the Revenue department. Stamp duty and registration charges are the two biggest sources of income that are charged for the services the revenue department provides. A buyer has to get his newly purchased property registered on his name and he has to pay the stamp duty and the registration fees for the same. Various yardsticks are used to calculate these duties and circle rate is one among them. Stamp duty and registration fees are obligatory duties which a buyer has to pay on a property transaction.
1.3. Circle Rates Vary from Locality to Locality
Circle rates differ from city to city. Not only that, Circle rate of one area may be different from the value of another area, circle rates may vary from locality to locality, from project to project and from building to building. It depends on the exact location of the property. Circle rates will be higher in areas that are well connected and have excellent infrastructure as compared to those that are deprived of these. Circle rate of an area is reflective of its success as a real estate hotspot.
2. Market Rate
Market rate is the price paid by a buyer for a particular piece of property. It is the final price decided between the buyer and the seller, Market rate is based on the demand and supply of a property. An area with low supply but with high demand projects higher prices as compared to other areas and vice-versa. The market rate is an indicator of what sellers demand and what buyers are willing to pay.
3. Difference Between Circle Rate and Market Rate
Prior to going for a purchase in real estate, one should know the difference between the circle rate and the market rate. Circle rate, set by the revenue department of the State government or the local development authorities is the minimum value at which any property can be bought. Market rate is that price which a buyer pays for a property and is the real value of the asset. This rate is decided by the mutual consent of the seller and the buyer. It is based on the expectation of the seller and the inclination of the buyer. Market rate depends on the demand and supply of a place, a location with low supply and high demand will definitely have a higher market rate.
Circle rate and market rate do not have much impact on each other. Circle rate is always lower than the market rate but a noticeable difference may pave the way to black money transactions.
4. To Conclude
Circle rate is also known as Guideline Value or Reckoner Rate is the minimum value at which any land or property can be sold or transferred. They vary based on the type, usage, and area of the property. Circle rate is decided by the government depending on demand, supply, and development of that area. It serves as a tool in calculating stamp duty charges and taxes on that property.
This is the minimum designated price at which the transactions have to be registered. Circle rate is used as a guidance value to keep a check on speculation of the prices of real estate because no transactions can take place below circle rates. It is not fixed for the entire state. They vary from place to place and they are not the same even in a locality. It is based on factors such as type of property, usage of the property, area, amenities etc. The value of the properties varies even if they are in the same area.
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