What is Circle Rate in Real Estate?

A key concept in real estate is the ‘circle rate’, and a variety of its synonyms, as real estate purchase transactions are typically based on this value.

What are Circle Rates?

State administrations in India are responsible for determining the standard rate at which land and other property can be traded across cities. Any transaction below that rate is not valid. A circle rate varies from locality to locality within the state.

State administrations in India are responsible for determining the standard rate at which land and other property can be traded across cities. Any transaction below that rate is not valid.

Circle rates are known by various names across India. Circle rates are known as ready reckoner rates in Maharashtra, as collector rates in Haryana, Punjab, and Uttar Pradesh, and as guidance values in Karnataka.

Use of Black Money in Real Estate

Buyers and sellers are more likely to engage in illegal activities when circle rates are lower than market rates. By showing a lower transaction value, the buyer is able to save here, while the seller saves on capital gains taxes. The money is thus not recorded by any official authority, resulting in ‘black money’.

We have also discussed about the ‘Black Money’ and how it affects the real estate market?

If such practices are prevalent, real estate loses its affordability and is used as a vehicle for unaccounted money. The Benami Transactions (Prohibition) Amendment Act, 2016, was introduced by the Indian government to address illegalities in the real estate industry.