The real estate market in India is growing rapidly. Almost everyone who transacts a property often comes across the term 'circle rate' in real estate. It is important to understand the difference between circle rate and market value. Property buyers often hear about this term.
Circle Rate
You must have heard many times that the circle rate was increased in Delhi or the circuit rate was increased in Mumbai. This gives you a rough idea of the price of a place, but the circle rate is quite different from the market value of that place. In such a situation the question arises what is the meaning of circle rate?
The circle rate is issued by the administration of the area. This is done to prevent tax evasion. To buy land, stamp duty has to be paid along with registration. If there is no circle rate then both the seller and the buyer of the property can evade tax. One thing that is important to know here is that the circle rate is the minimum rate of property in an area. This means that land or house cannot be bought or sold for less than that.
Circle rate is the minimum price at which a property, whether commercial, residential or landed property, is registered for sale. It acts as a regulator to control property prices. District administrations are tasked with setting standard rates for properties across states and cities. This circle rate varies according to the area. Transactions below the circle rate are generally not registered. Circle rates may also be known as collector rates or district collector rates in states such as Haryana, Punjab and Uttar Pradesh.
For example, if someone wants to buy 5,000 square feet of land in an area. He has purchased this land at the rate of Rs 1500 per square foot. So, that land cost him Rs 75,00,000 lakh. There is no fixed circle rate in that area. So, the buyer and the seller can agree that stamp duty and registration fees can be saved by showing the land rate lower. This will cause a huge loss to the local administration. Stamp duty and registration fees are major sources of revenue for them. Therefore the circle rate is fixed. No property will be sold below this. This avoids any dent in the income of the local administration.
Apart from this, the circle rate affects the transfer of ownership of the property. It determines the location of the property in the state and city. It also shows the landscape and development of that area.
Market Rate
Market rate, on the other hand, reflects the actual price at which the builder sells the property. This rate is influenced by factors like size, service and location of the property. Generally the market rate is higher than the circle rate. Builders rarely sell properties at circle rates as it leads to huge losses. As a result, properties are generally not available at circle rates. Market rate shows the value appreciation of any area in the real estate sector.
While the circle rate acts as a regulatory benchmark for property transactions. The market rate reflects the various factors affecting value and the true selling price. It plays a vital role for potential buyers in effectively navigating the real estate market and making the right decision regarding property investment. The circle rate is close to the actual rate. However, it never comes anywhere near that. There is usually a huge difference in this. The actual price is the price at which the builder sells you the flat or house. It can be any amount. If the builder starts selling houses at a circle rate, he will suffer a big loss. That is why property is mostly never available at the circle rate.
