Ready Reckoner Rates - Meaning, Importance, Calculation
While numerous factors contribute to the hike in real estate prices, there is one significant factor, known as the ready reckoner rate, that has a bigger part in deciding the movement of real estate prices. Before explaining more about these rates, it is important to understand that ready reckoner rates differ from one area to another, how to check ready reckoner rate, etc that are set by the state government of the respective state.
What is Ready Reckoner rates?
Ready reckoner rate meaning are those rates are the prices of the residential property, land or commercial property for a given area and is published and regulated by the respective state government. These rates are regularly revised on a yearly basis depending on the perception about the government for such price revisions. Therefore, a homeowner or buyer would be required to pay the stamp duty or registration amount, not below such stated ready reckoner rates or the actual price of the property, whichever is higher. Read further to know about how to calculate ready reckoner rate.
Example
A house property in a certain area has a ready reckoner rate of Rs. 50 lakhs, while the builder has demanded the price of Rs. 60 lakhs. In this case, a homebuyer would have to pay stamp duty on Rs. 60 lakhs only, as it being a higher price.
How Ready Reckoner rates are important for home buyers?
As per the ready reckoner rate meaning, these rates are nothing but fair value price for a property set by the state government, where the builders have the freedom to charge premium over and above such rates. Clearly, it shows that a person will have to pay a value much higher to own a house over and above the reckoner rates.
Therefore, if a state government revises such rates then it means that a home buyer would have to pay more than before. The ready reckoner rates serve as the biggest revenue source to the state governments. For instance, the Maharashtra State government has recently declared to hike ready reckoner rates, which will make properties altogether very expensive for buyers. It is important also to understand how to calculate ready reckoner rate as there are different ready reckoner rate calculation based on the location and type of property.
How to Calculate Ready Reckoner Rate?
Ready reckoner rate calculation is done by calculating the total built-up area of the property. While calculating the built-up area, one must consider factors like amenities, total area, construction age, and, not the least, floors. Moreover, if you find two values of the built-up area, the original value is mentioned, and the other one with 1.2 times the carpet area. Ensure to determine the value which is more.
Once you are done with this, select the right location of the property and finally do the ready reckoner rate calculation of the value of the selected property as per the ready reckoner rate with the help of the formula.
- Built-up property area*ready reckoner rate in case of flats in Rs sqm.
- Parking slot that is open*40% of ready reckoner rate of the developed land in that area.
- Covered parking slots*25% ready reckoner rate per unit area of the property.
How do Ready Reckoner Rates Govern Real Estate Transactions?
Ready Reckoner rates govern real estate transactions by establishing a standardized valuation framework. These rates are the foundation for calculating property taxes, ensuring equitable taxation across diverse properties. Moreover, they influence the calculation of stamp duty, a significant component of transaction costs. As per the ready reckoner rate meaning, these rates are the minimum value at which a property can be bought or sold in a particular area, as determined by the state government.
By determining the minimum property value for taxation, Ready Reckoner rates directly impact the financial aspects of a transaction, affecting both buyers and sellers. These rates influence buyer loan approvals, as financial institutions often use them to assess property values. This, in turn, affects potential homebuyers' borrowing capacity and interest rates.
In negotiations, buyers and sellers reference Ready Reckoner rates to gauge fair market value, shaping the terms of the deal. Additionally, these rates promote market stability by providing a benchmark for property values, preventing drastic fluctuations. Government revenue is also directly impacted; higher rates result in increased tax collections, facilitating public investments in infrastructure and services. Moreover, adherence to Ready Reckoner rates ensures legal compliance, preventing undervaluation and promoting transparency and fairness in real estate transactions.
What is the Difference Between The Ready Reckoner Rate And The Market Rate?
To know about the difference between these two, you must understand what is ready reckoner rate and market rate. Here are some basis of differences:
| Ready Reckoner Rate | Market Rate |
|---|---|
| Government-determined property value used for taxation purposes and stamp duty calculation. | Actual price at which a property is bought or sold in the open market. |
| Set by government authorities. | Determined by negotiation between buyers and sellers in the market. |
| Used for property taxation and stamp duty calculation during legal transactions. | Reflects the real-time demand, supply, and negotiation between buyers and sellers. |
| Relatively stable, updated periodically by government authorities. | Dynamic and can change rapidly based on market fluctuations and economic factors. |
| Standardized rates for specific regions and property types. | Varied and influenced by property location, condition, amenities, and negotiations. |
| Mandatory to calculate taxes and stamp duties during property transactions. | Not legally mandated, but used as a reference point during negotiations. |
| Directly controlled and influenced by government policies and market analysis. | Indirectly influenced by economic factors, buyer-seller negotiations, and market trends. |
Problems Related to Ready Reckoner Rates
-
Outdated Valuations
Ready Reckoner rates often don’t keep pace with the real estate market, leading to outdated valuations that don’t reflect current property values. -
Unfair Taxation
This discrepancy results in unfair taxation, where property owners may end up paying higher or lower taxes than the actual market value of their property. -
Market Distortions
Outdated rates can distort the property market, discouraging transactions and economic growth due to uncertainty about tax implications. -
Revenue Loss
Local governments can suffer revenue losses because of these outdated rates, impacting their ability to provide essential public services and infrastructure development. -
Regional Disparities
Rates may not be uniform across regions, leading to disparities where similar properties in different areas are taxed differently, creating discontent among citizens.
Impact of Selling Properties Below The Ready Reckoner Rates
Selling properties below the Ready Reckoner rates can have significant consequences. Firstly, it leads to revenue loss for the government, reducing funds for public services and infrastructure. Secondly, it encourages a parallel economy, fostering tax evasion and black money transactions. This practice distorts the real estate market, affecting property values and creating unfair competition.
Moreover, it hampers urban development as lower property prices hinder funding for municipal projects. Additionally, it can lead to legal repercussions, such as penalties and fines. Enforcing strict regulations, imposing penalties for underreporting, and promoting transparency in property transactions are crucial measures to mitigate these impacts.
Ready Reckoner Rate: Impact on Demand
Ready Reckoner rates significantly influence property demand. When these rates are high, they inflate property prices, deterring potential buyers and slowing down the real estate market. High rates increase the stamp duty and registration charges, making properties less affordable. Conversely, lower Ready Reckoner rates attract buyers as they reduce overall property costs, stimulating demand and market activity.
Developers often adjust their selling prices based on these rates, directly impacting buyers' purchasing decisions. Therefore, a balanced and realistic Ready Reckoner rate is essential to maintain a healthy property market, encouraging transactions, economic growth, and investments.
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Frequently Asked Questions
Guidance value or Ready Reckoner rate is the minimum value at which a property is registered for taxation purposes, established by the government to prevent undervaluation and tax evasion.
The government authorities or municipal corporations set Ready Reckoner rates in a particular region based on property assessments and market conditions to determine property values for taxation.
The ready reckoner rate can be checked online through the official state government website.
No, Ready Reckoner rates can vary across different areas within the same city, reflecting differences in property values and local market conditions.
The frequency of Ready Reckoner rate revisions varies by region and government policy, ranging from annually to every few years.
Ready Reckoner rates determine property values for taxation. They influence transaction costs, stamp duty, and property prices, impacting buyer-seller negotiations and overall real estate market dynamics.