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Five reasons why high circle rates don’t work

real estate Updated: Feb 26, 2016 13:58 IST
Circle rates,land,real estate
Any hike in circle rate leads to high stamp duty and this pushes up overall costs of properties(ISTOCK)

What is a circle rate? It’s the minimum value fixed for sale or transfer of a plot, built-up house, apartment or a commercial property by a state government’s revenue department . Local development authorities can also fix the rates.
1. High stamp duty:
When the circle rate is unrealistically high as compared to prevailing market rates, buyers pay more stamp duty to the state government as stamp duties are calculated on the basis of circle rates
2. Increase in overall property prices:
Since payment of stamp duty is mandatory to own a property, any hike in circle rate leads to high stamp duty and this pushes up overall costs of properties
3. Negative impact on realty market:
High circle rate often impacts negatively to the realty market because it becomes a prominent factor for the high property prices. Often developers demand decrease in circle rate
4. Increase in tendency to undervalue a property:
High circle rate tends buyers to undervalue the property at the time of registry or drive them to adopt unsafe mode of transfer of properties like notorised general power of attorney
5. Undue harassment of buyers:
Often sub-registrars or revenue officials demand bribe to register properties which are undervalued due to high circle rate even if the purchase pays the stamp duty at the circle rate

First Published: Feb 26, 2016 13:58 IST