Circle Rates Increased In Maharashtra: Here’s How It Will Impact Your Home Buying Decision

Circle Rates Change: As per experts, the effective rise in the charges will hamper the prospects of home buying in the state especially at the time of festive season.

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Mumbai: It seems there is no relief for the battered real estate sector which is grappling due to the pandemic as the Maharashtra government has increased the ready reckoner (RR) rates across the state.  The ready reckoner rates (RR) have been increased on an average of 1.74%. In Pune, the RR remains the highest hike at 3.91%, except for Mumbai where it reduced by 0.6%. Also Read: Pension Alert! Life Certificate Submission Date Extended Till Dec 31. Know About All Digital Options Available The changes are effective from 12 September 2020. As per experts, the effective rise in the charges will hamper the prospects of home buying the state especially at the time of the festive season. The state government had earlier temporarily reduced the stamp duty on housing units from 5 percent to 2 percent until December 31, 2020. What are ready reckoner rates? RR rates or most commonly known as circle rates. Basically it is the minimum price at which a property has to be registered in case of its transfer. You need to get the property registered either on the actual transaction value or the minimum rate set by the government, whichever is higher. Such rates act as an indicator of the expected properties rates in various areas. How are the rates determined? The circle rates are decided by state governments and get revised depending on the changing market conditions. It can differ within cities in the same state, and among various localities of a city. Even within localities, rates may differ based on the property type (residential, commercial, or institutional), location, and size of the plot, and various other factors. What does it mean to you? Impact on stamp duty charges: At the time of buying or selling a property, the state government collects stamp duty and registration charges on the value of the transaction or on the circle rate, whichever is higher. Since property prices have undergone a significant correction in certain regions, there are chances to find a property below the circle rates. However, remember that the stamp duty charges will have to be paid at circle rates even as the purchased price of the property is lower. For instance, take this example, if you buy a property for ₹60 lakh while the stamp duty value or circle rate value is ₹65 lakh, you will have to pay registration charges on ₹65 lakh. Hence if the stamp duty charge is considered at 8%, the actual cost of buying the house will be ₹60 lakh plus ₹5.20 lakh. In a situation where the circle rate goes up further to ₹67 lakh, the stamp duty charge will go up to ₹5.36 lakh. This automatically raises the overall cost of buying a house. Extra tax burden: Moreover, the difference between the transaction value and circle rate value or stamp duty value also gets added to the income of the buyer. It translates into an additional tax burden for the buyer. For a seller, the capital gains tax will also be calculated on the stamp duty value even as the actual transaction may have taken place at a lower price. In such a situation you can try getting the valuation of the property and ask the registrar to register the property at a lower rate. If you receive a notice from the tax department, you can show the valuation report. Moreover, you can also file the income tax return and write a separate letter to the tax department with the valuation report. WATCH | China spying on Indian businesses via mobile applications