Circle rate is the minimum value at which the sale or transfer of a plot, built-up house, apartment or a commercial property can occur. This rate is set by the state government’s revenue department or the local development authorities. Within a city, there can be different circle rates for different localities.
When you register a piece of property in your name, you are expected to pay registration charges and stamp duty. But, often property sellers and buyers understate the value of the property to avoid paying a large amount of money as stamp duty of registration charges. To prevent this from happening, state governments decide the circle rate — the minimum rate at which a property transaction can take place. As a buyer, you need to know that there is huge variance in circle rates within a city. This is because there is great variance in property rates within a city.
Circle rates differ within cities in the same state, and among various localities of a city. These rates are an indicator of likely prices of properties in various areas. A property has to be registered either on the actual transaction value or the minimum rate set by the government, whichever is higher. In rare cases, where the actual price paid by a buyer is less than the circle rate, the property has to be registered based on the circle rate.