The Maharashtra government has kept unchanged the ‘ready reckoner’ rates, popularly known as the circle rates, for real estate for FY 18-19. This is the first such rate freeze since 2009. The move comes after a modest 4-5% increase in FY 17-18. Along with the rest of India, the state has been in throes of a real estate slowdown. However, pockets of growth do remain elsewhere in the country, with circle rates in Gurgaon increasing by up to 15% in FY 17-18.
What is the Ready Reckoner Rate?
The Ready Reckoner or Circle Rate is the rate used by the State Government to levy stamp duty. Stamp duty is levied on the actual purchase price of a property or the circle/ready reckoner rate, whichever is higher. For example, assume the circle rate is Rs 10,000 per sq ft and you buy a flat of 500 sq ft at Rs 9,000 per sq ft. In this case you will have to pay stamp duty on 10,000 * 500 = Rs 50 lakh and not 9000 * 500 = Rs 45 lakh.
The rate of stamp duty in areas under Municipal Corporations in Maharashtra is 5%. It is 4% for areas under Municipal Councils and rural areas under the Mumbai Metropolitan Regional Development Authority (MMRDA). You can view a detailed list of rates, here. There is also a registration charge of Rs 30,000 or 1% of the transaction value, whichever is lower.
Why the circle rate reflects property trends
The circle rate is calculated using the prices used in actual real estate transactions in a locality, for similar properties. Once this rate is declared, you have to pay stamp duty as per this rate even if you buy or sell property below this rate. This rate thus has to be close to the actual price levels in the property market. If it is set too high, property transactions fall and the state loses revenue. If it is set too low buyers and sellers tend to increase the cash component and avoid stamp duty.
Note that, you can officially file a petition before the stamp duty authorities arguing for a lower rate for your specific property if there are reasonable grounds to do so. This process is called ‘adjudication.’