Introduction
Real estate purchase transactions are based on this value. So those entering the real estate market constantly hear about the circle rate and its many other synonyms. In this article, we will go into detail about each aspect of circle rates and how they affect your property purchase.
Table of Contents
- What are the Circle Rates?
- Key Facts About the Circle Rate
- Circle Rate Required
- Do Circle Rates Vary Within a City?
- Circle Rate and Market Rate Differences
- Stamp Duty Is Calculated Based on the Circle Rate
What are the Circle Rates?
Land is a state subject in India. The district administration is responsible for fixing the standard rate for land and other properties in cities. No transaction will be registered under it. Cities are vast, and the value of one area can be very different from the value of another. Circle rates vary from region to region.
Various names are used throughout India to refer to circle rates. In Maharashtra, circle rates are known as ready reckoner rates. In Haryana, Punjab, and Uttar Pradesh, circle rates are called collector rates or district collector rates. Karnataka, circle rates are often referred to as guideline values.
Key Facts About the Circle Rate
Basic asset value
These are the basic minimum values used to calculate stamp duty and registration fees.
Differences in Circle Rates
Circle rates differ from city to city. Within a city, circle rates vary from area to area. Circle rates also vary based on property type. Rates are higher for commercial properties and lower for residential ones.
Subject to Changes
The city administration has the right to change circle rates as and when they deem fit. They are typically revised once a year.
Circle Rate Required
Government institutions need to earn income to operate and carry out the activities they are responsible for. This is primarily achieved by levying taxes on various services provided to citizens. Among these sources of income, services related to property and related transactions are the most prominent. In this context, we discuss in detail circle rates and their impact on your property-buying decision.
To legally own the property, the home buyer has to go to the local sub-registrar’s office and get the property registered in his name. To provide this service, the office collects stamp duty and registration charges from the buyer. These two functions are the biggest sources of revenue for local authorities and the state.
However, each transaction is unique in some way. Therefore, the local authority has to apply different yardsticks to calculate the stamp duty and registration charges at the time of property registration.
Do Circle Rates Vary Within a City?
Circle rates vary from city to city in the state. Apart from that, they vary from region to region, project to project, and building to building, depending on the exact location of the property. Circle rates are similar in a well-established area with metro rail connectivity.
For example, metro rail connectivity is much higher than that in the upcoming region. Among other things, an area’s circle rate reflects its success as a real estate hotspot. It is also consistently higher in more prestigious residential areas.
Circle Rate and Market Rate Differences
While fixing the circle rates for a city, the district administration takes into account the prevailing prices at which properties are sold in a particular market. These actual rates are known as the ‘market rate’ of the property. The authorities are expected to keep the circle rate for an area as close as possible to the market rate. The market rate is the price a seller is asking for his property and what buyers are willing to pay.
In cases where property market rates rise due to speculation, the authorities try to keep it under control by keeping the circle rate low. To meet these twin objectives, the district administrations have to revise the circle rates from time to time. For example, in the high-intensity housing markets of Gurgaon, Noida and Mumbai, district administrations may revise circle rates more frequently than in other cities.
However, even in these cases, revision is done twice a year at most. As new infrastructure developments immediately push up the property’s market rates, late revisions often result in wide gaps between the circle rate and the property’s market rates. As the circle rates are not revised regularly as the market value of the properties changes, wide gaps between the two can be seen in major property markets in India.
Stamp Duty Is Calculated Based on the Circle Rate
Suppose Uma Rani buys a flat in the Huda sector, where the applicable circle price in Gurgaon is Rs. 5,100. If the house has a carpet area of 1,000 square feet, and considering the prevailing circle prices, she would have to register the property at 51 lakhs.
Now, the Haryana government collects 5% stamp duty on this amount. Because the property is being registered in the woman’s name. With this, the total stamp duty has reached Rs.2.55 lakhs. She will have to pay an additional Rs.15,000 as a registration fee. Thus, the total cost of the property is Rs. 53.70 lakhs.
Conclusion
All calculations of the property are based on this basic minimum price. So, it is essential to know the circle rate of the property in the area where you are planning to invest. Actual rates may be much higher as the circle rates are the minimum value of the property. But market rates are likely to be much higher. For more information, visit openplot.
Also read: Chennai Corporation Property Tax: How to Calculate