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Gap between circle rate and market value reducing in top cities: Report - New Delhi News

New Delhi, June 15 (IANS) In a significant trend in the Indian housing market, the difference between the ready reckoner rates (RRR) or circle rates and the actual market prices of property in the major cities has declined over the past few years, according to a report by Anarock Property Consultants.

Updated Jun 15, 2020 13:32 PM

Gap between circle rate and market value reducing in top cities: Report - New Delhi News

The report showed that over the past five years, the rise in circle rates have been much more than the growth in market price of properties.

It noted that from a more than 100 per cent difference between the two rates in certain areas in Mumbai, Pune, Gurugram and others in 2015, some localities now show a mere 6 per cent variation.

Ready reckoner rates, also known as circle rates or guidance values, are the minimum values set by a state government below which a property cannot be registered.

Each area within a city has its own RR rate on which stamp duty is calculated. In the last 4-5 years, most state authorities regularly increased the circle rates in cities to align them with market values. However, market values increased only marginally in the same period.

The average circle rates at Jogeshwari East in Mumbai stood at Rs 11,571 per square foot in 2015 and currently, it is Rs 15,143 per square foot, an increase of over 31 per cent in 5 years. The market value of property during this period increased only 6 per cent, from Rs 16,300 per square foot in 2015 to Rs 17,280 per square foot.

Dwarka Expressway in Gurugram saw circle rates rise by 43 per cent in the last four years, from Rs 2,900 per square foot in 2016 to nearly Rs 4,133 per square foot in 2020. However, market values in this period increased only by 10 per cent, showed the report. Other cities show some equally interesting trends, it said.

Anuj Puri, Chairman of Anarock Property Consultants, said: "The gap between market values and RR/circle rates in many areas is as low as 6-7 per cent, equal or even negative."

He said that registering a property below circle rates is not permissible. Section 43CA of the I-T Act says that developers or sellers will attract penalties for selling lower than RR rates. Moreover, even if buyers somehow purchased property below the circle rates, they will bear an additional tax burden as the difference between two rates is taxable, both in the hands of the buyer and seller.

"Reducing RR rates would reduce stamp duty on property purchase, thereby boosting buyer demand and also providing relief to developers as the multiple premiums they pay to the state governments are linked to the RR rates," Puri said.

The report noted that the major advantage of this reduced gap is that it discourages 'black money' transactions. The primary sales market in tier-I cities currently offers limited scope for unaccounted cash infusions because of the minimal gap between the state-notified circle rates and the market value quoted by developers in such regions.

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