Circle rate is the minimum value at which the sale or transfer of a plot, build up house, apartment or commercial property can take place. This rate is decided by the government authorities. Circle rates are decided by the state revenue ministry. The circle rates for sale and purchase of properties in a particular area are finalized considering the available infrastructure and other parameters. The increase in circle rates may result in the increase in property prices.
The reason for the notification for a specific circle rate in a given area is to simplify the assessment of stamp duty and bring transparency and efficiency in the property registration process. Circle rates are revised from time to time whenever government feels that there is a need for price revision. Each area has a different circle rate. Circle rate is just a pointer of property prices.
It can be used as a reference rate for market value and lags behind the market rate. The circle rate usually serves as the base price below which the market price will not fall. Circle rates are linked to the built up area of the property, not the carpet area or the super built up area.
In short, circle rates are the fair price set by the government itself. The market price will definitely be higher than the circle rates. The circle rate usually serves as the base price below which the market price will not fall. Higher circle rates may be a bad news for buyers who plan to use black money to buy property. Increased circle rates reduce the scope of utilizing illegal funds. Land rates also go up when there is an increase in circle rate. A property has to be registered either on the actual transaction value or the minimum rate set by the government, whichever is higher. In rare cases, where the actual price paid by a buyer is less than the circle rate, the property has to be registered on the circle rate. State governments collect stamp duty and registration charges on the circle rate.
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