Many people, especially property buyers get confused between circle rates and market rates. Circle rates and market rates both influence the cost of a property, but are different from each other. Circle rate is the minimum cost above which the sale of a property can occur, while the market price is the final cost of the property that is built up after adding all the costs to it.
Market prices are usually never lower than circle rates, but what if they are? That is exactly what is happening nowadays. A greater difference between the circle and market rates often tempt tax officials to look into the matter, to check out the involvement of any black money in the deals. And now, with a completely opposite trend of circle rates being greater than market rates, taxmen are more suspicious of black income issues.
Let us consider the Hyderabad real estate trends. Just like any other place, the property rate in Hyderabad real estate is such that, the circle rates are lower than market rates. But if the buyers have to pay a stamp duty on circle rates which are greater than market rates, then the real estate prices in Hyderabad become less than the duty paid! And such an absurd situation will prompt taxmen to think, that the deals are coming from black income, become duties paid are more than market prices!
Circle rates are decided by the government of the area of the property. Thus the government, especially the stamp duty officials can look into the matter to reduce circle rates and bring them below the market rates.
This situation has adversely affected the realty sector, which was already expected. To avoid the suspicions of the Income Tax Officials, numerous prospective buyers are backing out from transactions. They are either completely abandoning, or postponing the deals till decrement of circle rates. Even though they can seek help from their tax lawyers, buyers are wishing to avoid these hassles as these time-consuming legal issues.
However, the realty sector has not given up yet. They are still trying to lure buyers by decreasing the project rates as much as they can so that the skyrocketed circle rates do not affect the overall property costs much. But even then, the response from buyers is pretty low. Numerous real estate managers are of the view that property sals have decreased miserably, and the realty sector has been badly hit.
Stamp duties cannot be avoided at any cost. And the realty sector- which is a thriving business- has to be saved from perishing as well. Thus, reduction of circle rates is the need of the hour as soon as possible, to avoid further adverse effects.