Good News For Buyers As Punjab Reduces Circle Rates
In a move that would bring cheers to home buyers and trigger real estate activity in that state, the Punjab state government within a span of three months slashed circle rates by 25-30 per cent. Earlier, the state had already reduced the circle rates by 10-20 per cent and recently State Revenue Minister Bikram Singh Majithia further slashed these by 15 per cent. The move will also bring much relief to real estate developers in Punjab. This move will encourage real estate transactions, especially in the posh localities, where buyers used to shy away from investing due to the high circle rates.
Lower circle rates would also encourage buyers who have been postponing registration of their properties to apply for the same. (Higher circle rates mean higher registration costs) and help the government earn additional revenues.
If other states followed the Punjab move, it may help revive India's real estate sector.
What are circle rates?
Circle rate is that minimum rate set by authorities at which a property can be registered with the sub-registrar. These rates are set by the district collector, vary from locality to locality and are reviewed from time to time. The stamp duty on a property is determined according to either the circle rate of the locality or the actual price paid for purchasing the property, whichever is higher.
Suppose you bought a flat for Rs 40 lakh while according to the prevalent circle rate the value of this flat is Rs 60 lakh. In a situation like this, you would be paying the stamp duty on Rs 60 lakh even though you actually bought the property for Rs 40 lakh.
A vicious circle
Unrealistic circle rates have an adverse impact on the real estate market. At a time when the sector is witnessing a slowdown, high circle rates only discourage buyers from investing and this in turn forces developers to sit on an unsold inventory. Authorities can tackle this situation by keeping the circle rates as close to the market value of a property as possible.