Circle Rates And Their Importance

You would have often come across the term circle rates when you read something about the property prices

. Well, in practical terms, this is the minimum prices at which the registration of the properties in the sale-purchase transactions shall be done. Often, there are news items in the media which carry the news about the upward revision of the property circle rates.

Circle rates are fixed by the state governments and these serve as indicators of valuation of the properties in different localities. These prices differ from one state and city to another and also from one locality within a city to another depending upon the extent of development in the area and the quality of construction in the area.

There are many reasons which would require an upward revision of the circle rates from time to time. Some of these are discussed below:

1.To check the black money in the property market: It is a common practical knowledge that the properties are sold at prices above what the government stipulates. By increasing the circle rates, the government seeks to bridge the gap between the two prices, one which is stipulated by government for registration purposes and the other which is the actual market rate.

2.To check speculation: There has been a tendency of speculative increase in the prices of properties due to lower registration charges which acts as a facilitator for frequent sale and purchase transactions. By increasing the circle rates, there is some curb placed on property transactions.

3.To earn more revenue: The registration cost is borne by the buyer of the property and on this registration cost, there is a levy of stamp duty as a fixed percentage of the registration cost. The more is the circle rate, the greater will be the stamp duty. This will make the government more revenue from the sale-purchase transactions of the property.

4.There are certain obvious benefits of the increase in the circle rates. The seller gets more value for their properties and even the buyers would be able to sell at higher rates. If the buyer is selling his property and buying another one, then there is no major issue since he will sell high to buy high. But, if the buyer has to buy the property without selling his own, then he might have to make arrangements for getting more money to buy the property at higher circle rate. This might mean that he would have to take home loans or take credit from other sources.

Generally, whenever the circle rates are revised, there is a temporary downswing in the property sale-purchase transactions and the market is adversely affected for some time since the revision makes the sellers and buyers make the required adjustments in their dealings. But, this is a temporary phenomenon and the market begins to function normally after some time.

by: kamal bhatt

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