What is Circle Rate? And Its Important Points

What is Circle Rate? And Its Important Points - Namma Family Builder

What Is Circle Rate?

  • The minimum price at which a real estate property can be transferred from one owner to another owner is called the circle rate. The circular rate is the lowest and minimum price at which a residential or commercial property like land, flat, or constructed house can be reserved for another.
  • This rate is fixed by the state government. These circular rates vary across cities and regions. An area with facilities such as transport networks, markets, schools, and hospitals has a higher circularity ratio than a developing area.

Important Points Of Circle Rate

Important points about circular rates are:

  • The minimum price is determined by local development authorities or state government authorities.
  • Different localities in a city have different types of circular ratios.
  • The aim is to ensure that each part is listed against the correct price.
  • The circular rate refers to the actual price of the property and is lower than the market rate of the property and is higher than the real estate transaction rate.
  • Sales character should be close to the circular ratio.

What Is Market Rate?

  • The market rate is the rate that buyers pay to sellers or developers when acquiring ownership of a property. It is the final price that is decided between the two parties, the buyer and the seller.

Important Points Of Market Rate

Important points about Market rates are:

  • The market price is calculated by demand and consumption in that area.
  • It is based on the buyer’s willingness to pay and the seller’s price expectations.
  • Buyers use these to review their purchasing power.
  • Market rate refers to the level of real estate value in a given area.

Difference Between Circle Rate And Market Rate

  • Buyers should know the difference between the circular rate and the market rate before buying a property.
  • Market rate is the price paid by a buyer of an asset and the actual value of the asset in transactions between buyer and seller.
  • Often the circular rate is lower than the market rate, and the two have a moderating effect on each other.
  • The difference between the market rate and the circular rate shows Pinida in the real estate industry.
  • It is a major cause of black money transactions in the real estate market.

Importance Of Circle Rate And Market Rate

  • Circle rate and market rate should always be updated for real estate. Knowing this legal rate and market rate before deciding to buy a property will help to reduce financial problems.
  • As home loans are given on the basis of sales character, a small gap between these is helpful for the buyer.

Stamp Duty Calculation Based On Circle Rate

Let’s see how stamp duty is calculated at the circular rate:

  • If you are buying a flat in a city development sector, the circular rate per sq ft is Rs 5100. If the area of the house is 1200 sq ft, the total charge for the plot is Rs 61.2 lakh.
  • The stamp duty of 5% makes the total Rs 3.06 lakh. And since the market value of the property is more than Rs.25 lakhs, you have to pay Rs.15000 as a registration fee. To register the property you have bought, the total amount is Rs.64.4 lakhs.

How To Calculate Circle Rate?

The calculation of the circular rate depends on various factors. They are:

  • Property Type – Residential Flat / Residential Apartment or Commercial Flat / Commercial Apartment
  • Property area
  • Trends in market value and assets

When The Circular Rates Are Higher Than The Market Rates Are:

While it is unusual for circle rates to be higher than market rates, let’s look at three options in those cases.

  • Declaring the market value equals the circular rate: This is particularly dangerous for property buyers, as these transactions are brought under the purview of the Income Tax authorities.
  • Payment of stamp and registration charges at circular rate: The cost of registration in stamp duty and circular charges causes huge financial loss. On average stamp duty is up to 6 percent per property.
  • Appeal to Sub-Registrar to charge as per market rate: A home buyer can request a sub-registrar, which allows him to pay market rates instead of circular rates. When the real estate market is booming, the gap between circular rates and flesh prices widens.

Tax Implificaton If The Market Rate is Lower Than The Circle Rate

  • Under Section 56 (2)(x) of the Income Tax Act, if the market value of the property is less than its circular rate value, the difference is taxed as other income to the buyer. The seller has to pay capital tax at the circular rate of the property.
  • The government decided to provide some support to buyers and sellers of the Union Budget if it lasted for more than five years. The interest rate is less than 10%.