Circle Rate vs Market Rate: What every property buyer should know

Understanding the various terms and regulations can be overwhelming when buying a property. One of the most critical aspects that often confuses buyers is the difference between the Circle Rate and Market Rate.

Both play significant roles in determining a property's value and calculating stamp duty and registration fees, but they serve different purposes. Here's what every property buyer should know about these two rates.

What is Circle Rate of Property?

How to find circle rate of property

The Circle Rate of land (also known as guideline value or ready reckoner rate) is the minimum value at which a property can be registered with the government. It is determined by the local government or revenue department and varies across different areas. The government revises the circle rate periodically based on factors such as infrastructure development, economic trends, and land value in the locality.

The Circle Rate of property is a tool used by the government to prevent the undervaluation of properties and ensure that adequate taxes are collected during property transactions. Since stamp duty and registration fees are calculated based on the circle rate, it ensures that buyers cannot underreport the transaction value to reduce their tax liabilities.

But how do you find the Circle Rate of property? Let's understand.

How to calculate Circle Rate?

To calculate the Circle Rate, multiply the area of the property (in square feet or meters) by the Circle Rate set by the local authority for that location.

For example, if the Circle Rate is ₹5,000 per square foot and the property is 1,000 square feet, the total value based on the Circle Rate would be ₹50,00,000 (1,000 sq. ft. × ₹5,000).

What is Market Rate?

The Market Rate is the price at which a property is sold or bought. Unlike the circle rate, it is determined by demand and supply dynamics in the real estate market. Location, property condition, amenities, and economic trends influence the Market Rate.

For instance, in high demand and prime locations, a property's market rate might be significantly higher than the circle rate. Conversely, in areas with limited demand, the market rate might be close to or even lower than the Circle Rate.

The market rate is fluid and often varies from one property to another within the same locality. Buyers and sellers negotiate prices based on current trends, amenities, and other influencing factors. As a result, market rates are usually higher than circle rates.

Circle Rate vs Market Rate: Key Differences

Here are some differences listed between the circle rate and the market rate:

Additionally, stamp duty is typically calculated on the higher value between the circle rate and the market rate. If you purchase a property below the circle rate, you will still need to pay stamp duty based on the circle rate.

Why should Buyers know the difference?

Knowing the difference between circle and market rate is crucial for both buyers and sellers. As a buyer, you might negotiate a lower market price, but if the circle rate is higher, your stamp duty and registration charges will be calculated based on the circle rate, which may increase your costs. On the other hand, if you buy a property at a market rate much higher than the circle rate, you might feel you're paying more in terms of the total transaction value.

Final Thoughts

Knowing the difference between the circle and market rates

Understanding the nuances between circle and market rates helps you make an informed property decision. It assists buyers in anticipating additional costs such as stamp duty and registration fees and provides insights into whether they are getting a fair deal in the current market.

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