Set by the State governments guidance value is the minimum price below which the property, generally a residential property, cannot be registered.
Prescribed on the basis of the area any change in guidance value increases or lowers the corresponding property prices. Stamp duty is paid @ 5% of the registration value while registration fee amounts to 1% of registration value.
And as the real asset is an appreciating asset chances of guidance value being lowered down are rare. Further as the guidance value cannot be changed very often the benchmark set rule out any ambiguity.
The current guidance value of the property in a particular area in a city could be received from the jurisdiction Sub-register office.
However, it should be noted that guidance value is only the minimum price for registration and not the price at which the property would be sold or market value.
Market value of a property like other commodities is influenced and decided on the basis of a number of factors such as market forces, vicinity of the property to the different new developments being made in the city. For instance, property located near an upcoming airport will shoot up in value.
So, the property can be registered at either the guidance value or market value. However, in case of registration on market value you eventually end up paying higher stamp duty.
Impact of periodic changes in guidance value
The changes in the guidance value on a property in a particular city that are implemented on a periodic basis dampen the property development sector with the increase in property prices. Also, property purchasers now have to dole out a considerably larger amount for stamp paper and registration.
So, consequently property price sees an upside with the increase in guidance value. The upward revision of guidance value more often witnesses decline in property registration by large number owing to the increase in property prices. To the government, it means higher revenue from stamp duty and registration.
Indian city where guidance value has been revised only lately
One of the Indian metro city Bangalore only lately witnessed a surge in guidance value on property by as much as 100% in certain areas.
Before the implementation of the same, property purchasers rushed to get their property registered as after that they would have to shell out significantly higher amounts as stamp duty and registration fees.