What Importance Circle Rates Hold In A Property Purchase?

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     Circle rate is a minimum rate at which the property at the time of transfer of title i.e. sale or purchase is registered. State governments on a time to time basis fix these rates and metro cities are seen to get these rates revised more often. Within the same state, circle rates vary for different cities. Even for a same city, circle rates may be different for different localities as per the market dynamics.

    Circle rate can be inclusive or exclusive of land value i.e it can be representative of the value of the land and not include any constructions on that. On the other hand, it can be composite in nature and include value of the land and also any construction value on that land.

    Payable Stampy Duty

    It is based on the circle rates for a particular property that stamp duty is payable on the purchase of a property. So, any likely increase in circle rate, increases the stamp duty and registration charges in the same proportion. Several instances have been notified wherein Circle rates have been revised northwards to check unaccounted money in the industry.

    Circle rates should be at par with market rates

    In India, already the properties are priced on a higher side whereas circle rates are lower. This comes in handy for sellers who then get a chance to show less capital gains realized and save on taxation on capital gains.

    Registration of a property

    Property registration has to be made with the authorities at either the price at which the property transaction materializes or basis the circle rate. In a general case, the registration has to be done, at a rate whichever is higher i.e circle rate or the value of the property transaction.

    Also, called as the guidance value in few of the states, buyer of the property is not allowed to get the property registered with the registrar office at a price below the circle rate.

    For the registration of the property document or sale deed, 1% of the property value is payable as registration fees.

     

    Property Pricing with change in circle rate

    Market forces i.e. demand and supply determine property price, and in a current scenario when the sector is ruling with huge inventory and newly enforced RERA, any likely increase in circle rate shall not result in resultant property price change.

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