Circle Rate in India: Everything You Need to Know About Circle Rate

Importance of Circle Rate

Now that you understand the meaning of circle rate, here’s a look at its importance:

• The development authorities and the state government decide the circle rate list for various areas in a city or region. 
• The circle rate affects the property rates in different localities within the same city.
• The circle rate is an indicative price and does not determine the property's actual cost.
• Any real estate transaction cannot occur below the circle rates.

What is the Market Rate?

The market rate is the actual price of a property the buyer pays to the seller. Both parties, the buyer and the seller, mutually decide the final rate to complete the transaction. The final rate largely depends on the seller’s demand and the buyer’s willingness to pay. It is the rate mentioned in the sale agreement for a property transaction.

Importance of Market Rate

Here are a few points to understand the importance of market rate in real estate:

• The market rate depends on the supply and demand of properties in an area.
• It depends on the buyer’s inclination to pay and the seller’s price expectation for the property in question.
• Understanding the market rate helps a buyer measure their financial capacity.
• The market rate indicates the degree of appreciation in a given area’s real estate prices.

Circle Rate Vs. Market Rate

In most cases, the market rate is higher than the circle rate in an area. Although they impact each other in some aspects, a major difference between them disrupts the property value perceptions in the real estate market. This difference is a major cause of black money transactions in the market. 

Importance of Circle Rate and Market Rate

Knowing the circle and market rates is essential as it helps understand a property's right price. When looking for a property loan, the lender will sanction it based on the sales deed. Therefore, having a smaller gap between the circle and the market rate is important. So, next time you buy a property and apply for a loan, know the area's circle and market rates. It makes property value assessment much easier.

Circle Rate List Based on City

Want to know what is circle rate of property in a given area or city. Visit these official websites of different areas to find a complete circle rate list:

Stamp Duty Calculation Based on Circle Rate

A property’s stamp duty calculation largely depends on its property circle rate. The government sets this rate, representing the minimum value to register a property. Calculating the stamp duty typically involves a specific percentage of the actual transaction value or the circle rate, whichever is higher. If a property's sale value is less than the circle rate, the stamp duty applies to the circle rate to prevent undervaluation. If the property’s sale value is above the circle rate, the stamp duty applies to the transaction value to combat tax evasion and foster transparency in the sale. 

Tax Implication if Market Rate is Lower than the Circle Rate

Let’s look into the tax implications if the market rate is lower than the property circle rate:

• As defined in section 56(2)(x), if any person receives any immovable property for a consideration that is less than the Stamp Duty Value, then the difference amount between the Stamp duty value and actual consideration paid, is taxable in the hands of the buyer as Income from Other Sources.
• In November 2020, Union Finance Minister Nirmala Sitharaman announced a stimulus package under Atmanirbhar Bharat 3.0 to boost the economy after the pandemic. It only applies to residential units of value up to Rs 2 Crore.

Everything You Need to Know Before Getting a Property Registered

Here are a few important things one must know before getting a property registered:

• Before negotiating the price, one must find out the property circle rates and keep the transaction cost as close to it as possible.
• Under-reporting a property’s value may lead to legal trouble. Hence, register the transaction for the actual amount paid for it.
• Property loan providers finance only a certain percentage of the registration amount. The buyer must pay the remaining amount as a down payment. 
• The market rate indicates the kind of area of the property location. Hence, it’s crucial to study the local market trend before selecting a property.
• In some areas, the market rates are lower than the circle rates. The registration and stamp duty charges for such properties will apply to the circle rate rather than the transaction value.
• Avoid buying a property from sellers looking to earn money through the deal.

Conclusion

Property circle rate is a standard parameter the government sets to establish property valuations, prevent under-reporting, and avoid tax evasion. While the market rate fluctuates according to location and demand, the circle rate remains a common reference point. 

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Frequently Asked Questions

1. How is the circle rate determined for a specific area?

The government sets the circle rate in a specific area according to the location and facilities.

2. Why do different areas have different circle rates?

The government determines circle rates for different areas according to the reputation and amenities in the locality. The better the locality, the higher the circle rates.

3. How often are circle rates revised or updated?

The government revises or updates the circle rates around every three years, not exceeding twice a year. It depends on the amenities in a locality, inflation rate, demand, and other factors.

4. Do circle rates differ for residential and commercial properties?

The circle rates are higher for commercial properties than residential properties. Therefore, yes, circle rates differ for residential and commercial properties.

5. Can the public access historical circle rate data for a specific area?

Different states have official websites where one can find the current and historical circle rate data for specific areas. Everyone can access this data through the platform.