Gurgaon local authority recently proposed a cut in circle rates. Ghaziabad administration too is considering a cut and has asked for a review. Here is how and why circle rates matter in property deals.
After the announcement by Gurgaon administration to reduce circle rate by 15 per cent, Ghaziabad district authority too is assessing the circle rates in their jurisdiction. A common perception is that such rate cuts will help bring down property rates and encourage more buyers and investors in this real estate market.
Real estate developer’s fraternity has appreciated this step saying that this is much needed considering the stagnation in the market.
Ghaziabad had seen circle rate correction by 4 to 5 per cent in last year as compared to the rates in 2014-15. Although this was applicable to residential plots only but it left an impact on whole realty market of Ghaziabad. Since 2013, the property collection rates are revised here every year from August 01.
According to Dimple Bhardwaj, spokesperson of Raheja Developers, “this is one of the appreciated course of action by the local body to cut the circle rate which will lead to correction in property prices. It has been noticed that in some areas of NCR circuit, circle rates are higher than the market rates of land. So this has to be justified accordingly also to boost the realty market.”
The same sentiment was echoed by property consultants also. “Everyone in the real estate market in Delhi NCR has been expecting some positive steps from the government to boost the market. So, in that regard, this is a positive move. We (real estate consultants) consider it a good step,” says Harish Arora of Saksham Services.
“This news is good for real estate investors also. For end users also it’s good news as now they have to pay less stamp duty on the registration of properties. So it’s a win-win situation for both the government (as revenue will increase if the real estate trading increase) and end users/investors who will have to pay less for property registration,” says Arora.
The link between circle rates and market rates
The local body authority and state government work together to decide collection rates of property within a particular area. Local body has to prepare recommendation for the same and sends it to state government for approval. Its good time for the government to bridge the gap between property rates and the actual market value at which transaction of property take place. Let us understand in brief how these two distinct charges impact the whole transaction.
What is circle rate?
A circle rate is a minimum cost at which property has to be sold or purchased including independent house, commercial or residential apartment, plot etc. The rates for the locality are decided by local state government revenue department or the local development authorities.
What is market rate?
Market price is value of real estate property for a transaction between seller and buyer – generally the value is decided by the existing market dynamics of demand and supply.
How circle rate differ from market rate?
Market price is the value at which transaction of property takes place between buyer and seller. The price is driven by market force which depends upon demand and supply.