Anyone entering the real estate industry will likely come across the term “circle rate” and its different synonyms, as this value is crucial in determining the price of real estate transactions. This article aims to thoroughly explain all the aspects of circle rates and their influence on your property purchase.
What are circle rates?
In India, land falls under the jurisdiction of individual states. The task of setting a predetermined rate for land and other properties within cities is the responsibility of district administrations. Transactions cannot be officially recorded if they fall below this specified rate. Due to the vast size of cities and varying values of different areas, the circle rates differ from one locality to another.
Different terms are used in different parts of India to refer to circle rates. In Maharashtra, they are called ready reckoner rates. In Haryana, Punjab, and Uttar Pradesh, they are known as collector rates or district collector rates. In Karnataka, they are commonly referred to as guidance value.
The need for circle rates
Government agencies must generate revenue in order to operate and fulfill their responsibilities. This is primarily achieved by imposing taxes on the different services they offer to the public. One of the main sources of revenue comes from services related to property and transactions surrounding it. In this regard, we will discuss circle rates and their influence on your decision to purchase property.
In order to become the rightful owner of a property, a homebuyer must personally visit the nearby sub-registrar’s office and complete the registration process. As part of this service, the office collects a stamp duty and a registration charge from the buyer. These two fees significantly contribute to the financial revenue of local authorities and the state.
Yet, because every transaction is different in some regard, the local government must use different criteria to determine the stamp duty and registration fees during property registration. This is where circle rates become relevant.
Why there are different circle rates within a city?
Circle rates differ not only between cities within a state, but also within localities, projects, and buildings, depending on the specific location of the property. For instance, the circle rate in a well-developed locality with metro rail access will be significantly higher compared to an upcoming locality without metro rail connectivity. Additionally, the circle rate of an area serves as an indicator of its popularity in the real estate market and is generally higher in highly desirable residential areas.
What do market rates refer to and how do they differ from circle rates?
When deciding on the circle rates for a city, the local government considers the current rates at which properties are being sold in a specific market. These rates are referred to as the “market rate” of the property, and it is expected that the authorities keep the circle rate for an area as similar as possible to the market rate. The market rate essentially represents the price at which a seller could sell their property and the price that buyers would be willing to pay. In situations where property prices in the market significantly increase due to speculation, the authorities make efforts to control this by maintaining a lower circle rate.
In order to achieve these two goals, district administrations are expected to update the circle rates on a regular basis. In areas such as Bangalore, Gurgaon, Noida, and Mumbai where the housing market is highly active, the district administrations may need to update the circle rates more frequently than in other cities. However, even in these cases, the rates are only revised twice a year at most. Since new infrastructure developments immediately increase property prices, delays in revising the rates often result in significant differences between the circle rates and the actual market prices of properties. Because the circle rates are not updated as often as the market value of properties changes, there are often large gaps between the two in major property markets across India.
An example would provide a clearer explanation.
Circle rates, also known as guideline values or ready reckoner rates, are the minimum property prices set by the government for different areas. In Bangalore, circle rates play a crucial role in determining the registration charges and stamp duty of properties. These rates are revised periodically to reflect the current property market trends and provide a fair assessment of property values.
Although both buyers and sellers are required to register a property at either the actual transaction value or the government’s minimum rate, there is no motivation for them to report the accurate amount. However, in rare cases, if the buyer pays less than the specified value, the property must be registered based on the circle rate. One such scenario is found in New Friends Colony in Delhi, where the market rate is lower than the circle rate.
The calculation of stamp duty is determined by the circle rate.
Say you are interested in purchasing a residential property in a prime location in Bangalore. The market rate for similar properties in that area is ₹1 crore. However, the circle rate set by the government for that specific locality is ₹1.5 crore.
Since the calculation of stamp duty is determined by the circle rate, you would be required to pay stamp duty based on the higher value of ₹1.5 crore, rather than the market rate of ₹1 crore. In this case, the stamp duty applicable on the property would be calculated using the circle rate of ₹1.5 crore.
It is important to note that the circle rate acts as a reference point for property transactions and has implications for both buyers and sellers in Bangalore.
Listing the circle rates of the top 10 places in Bangalore:
Koramangala: Rs. 16,000 per Sqft.
Indiranagar: Rs. 18,000 per Sqft.
Jayanagar: Rs. 15,000 per Sqft.
Whitefield: Rs. 12,000 per Sqft.
Malleshwaram: Rs. 14,000 per Sqft.
Marathahalli: Rs. 10,000 per Sqft.
Rajajinagar: Rs. 12,500 per Sqft.
BTM Layout: Rs. 11,000 per Sqft.
HSR Layout: Rs. 13,000 per Sqft.
Electronic City: Rs. 9,000 per Sqft.
*Please note that these rates are approximate and subject to change. It’s advisable to check the latest circle rates with the concerned authorities or consult a real estate professional for accurate information. Circle rates are an important aspect of property transactions and understanding them can help individuals make informed decisions when buying or selling properties in Bangalore.
Conclusion:
Circle rates, market rates, and circle rates in Bangalore are all integral components of the real estate market. While market rates fluctuate based on demand and supply dynamics, circle rates serve as a baseline for property valuation and taxation purposes set by the government. It is important for potential buyers and sellers to be aware of both the market rates and circle rates to make informed decisions regarding property transactions. Understanding the relationship between these rates can help individuals negotiate prices, evaluate investment opportunities, and ensure compliance with legal requirements. By staying updated on the evolving rates, individuals can navigate the real estate landscape in Bangalore effectively.
