If you are aiming to become a real estate investor, or just buying or selling property in India, you must have heard the term ‘Ready Reckoner Rate’. Well, in this article we are going to explain the concept of ready reckoner rate as simply as we can and get you ready to ace all your property transactions.
What is Ready Reckoner Rate?
Also known as Circle Rate or Guidance Value, Ready Reckoner Rate is the minimum value set by our Government for property transactions. Naturally it varies from property to property based on many factors. It is used by the Government to calculate the Stamp Duty and Registration Charges that are to be paid by the buyer while purchasing the property.
Basically it ensures that the property sales are done at fair prices and prevents under reporting of transaction values in order to evade taxes ensued by the Government.
Why is Ready Reckoner Rate Important?
Being an important factor determining major property transaction taxes, Ready Reckoner Rate serves many purposes such as:
- Fair Pricing: This helps maintain the fair pricing of property sales based on the market value of properties. Ready Reckoner rate is the minimum rate set by the Government, so the buyers and sellers cannot under report the transaction value to save on taxes.
- Revenue Generation: It helps the Government generate sufficient revenue through Stamp Duty and Registration charges, which in turn is essential for funding public infrastructure and services in the country.
- Market Regulation: It provides a standard benchmark for property values in each area, thereby preventing price manipulation, ensuring transparency and regulating the real estate market.
How is the Ready Reckoner Rate Determined?
Numerous factors aid the Government in deciding the Ready Reckoner Rate for a property.
- Location: The rate depends on the location of the potential property, for example, prime location with well developed civic infrastructure and amenities will have higher pricing compared to less developed areas.
- Property Type: It depends whether the property is residential or commercial or industrial. They will all have different ready reckoner rates.
- Property Use: The intended use of the property whether residential or commercial determines the rate.
- Infrastructure and Amenities: Areas that have better infrastructure and civic amenities tend to have higher ready reckoner rate for the properties therein.
How Does the Ready Reckoner Rate Affect Property Transactions?
As the ready reckoner rate determines the amount of stamp duty and registration charges on every property, it largely affects the overall amount of the property transaction.
- Calculating the Stamp Duty and Registration Charges: Both these charges as explained earlier depend on the property value, whether the ready reckoner rate or the actual transaction value whichever is higher.
So, if the property is sold for INR 45L but the ready reckoner rate is INR 50L, then the stamp duty and registration charges will be calculated based on INR 50L.
- Home Loan: Banks or any other financial institution often considers the ready reckoner rate while determining and approving the home loan value. So, if the property value is lower than the ready reckoner rate, then it may affect your eligible home loan amount.
- Tax Implications: Ready Reckoner Rate will ensure proper tax collection by the Government.
Explaining Ready Reckoner Rate in Actual
Let’s say you are buying a property in Pune municipal corporation limit area where the ready reckoner rate is INR 60,000 per square meter and the property you are interested in purchasing is 100 square meters.
Here’s how property value will be calculated:-
- Property Area: 100 sq.mts.
- Ready Reckoner Rate: INR 60,000/sq.mt.
- Property Value: 100x 60,000 = INR 60,00,000
Here’s how the stamp duty and registration charges will be calculated:-
- Stamp Duty: In Pune Municipal Corporation Area the stamp duty is 6% + 1% Metro Cess = 7% of 60,00,000 = INR 4.20 Lakh
- Registration Charges: Calculated as 1% of 60,00,000 = INR 60,000
- Total value of stamp duty and registration charges = INR 4.80 Lakh is paid on the property value based on the ready reckoner rate unless the actual transaction value is higher.
Do You Know Where to Find the Ready Reckoner Rate of an Area?
- Official Government Websites: Most state governments have websites where they are periodically updating the ready reckoner rates. You can search based on the area and type of property you are interested in.
- Local Sub-Registrar’s Office: Property transactions are registered at the local sub-registrar’s office, hence they can provide you with the latest ready reckoner rates when you visit them.
- Real Estate Agents: Local real estate agents and consultants such as Pyramid Properties are always up to date with the latest ready reckoner rates. They can help you with all the information you need. You can also get a great list of the best properties in the Pune market in the budget and area you are interested in.
So, now that you are up to date with what ready reckoner rate is. How about beginning your property search with the trusted and best real estate consultants in Pune?