How to Use Ready Reckoner to Determine the Appropriate Market Value of a Property When Buying or Selling?

How do you tell whether you are paying the right amount for the property you want to buy or if you are obtaining the correct price for the house you wish to sell?

Utilize a READY RECKONER.

Yes you can use a ready reckoner to help ascertain the appropriate market value of a property (but you will still have to use data points from local brokers, property portals and sites which offer transaction details of properties, etc.)

When acquiring or selling a property, the risks are substantial and might represent a lifetime's worth of income or more. Therefore determining a correct property valuation is of paramount importance.

Depending on the size, amenities, view from the house, parking places, and upkeep of the property, the prices of two nearby apartments may vary substantially; how can a purchaser assess whether the house they are purchasing is properly priced?

The Ready Reckoner (RR) rate is critical:

The state-mandated minimum price for property transactions is the Ready Reckoner (RR) rate, also known as circle rate or guiding value.These rates, which provide buyers and developers a sense of the minimum value of their property, are frequently revised by the state.This encompasses all land, commercial, residential, and industrial real estate holdings.

Numerous factors, including land utilisation, price movement, and market conditions, impact the rate.Properties are often sold at market value, which exceeds the RR rates.

Together, the market value and RR rate play a key role in determining the relevant stamp duty, registration fees, capital gains tax, and property tax.

The RR rates are also important for measuring and monitoring property values and the potential for appreciation over time.

Although it may not give an exact market value, it provides a good approximation of the property's minimum value.Thus, homebuyers and sellers may use it to assess how much and how rapidly their home's value will increase in the future, or whether they are obtaining a fair price.

Fiscal repercussions:

The RR rate is used to calculate the minimum stamp duty and registration costs.If an item is exchanged for more than the RR rate, stamp duty and registration taxes are based on the actual price.Stamp duty and registration fees must be paid at the ready reckoner rate if the transaction's value is less than the threshold.

Nonetheless, to reduce the cost on both purchasers and sellers, a number of state governments have provided tax cuts ranging from 5 to 15%.

Where the difference between the RR rate and the agreed value of a property exceeds 10 percent, section 43CA of the Income Tax Act of 1961 levies tax penalties (or the state-allowed variance).

Since stamp duty is always computed based on the ready reckoner value, buyers must pay a higher stamp duty if the market value is less than the ready reckoner value.In contrast, the seller's tax burden rises substantially, and tax must be paid on the notional gain.

Nonetheless, one should use Ready Reckoner Value or the Circle rate as a point of reference and use other data points from the sources listed at the beginning of this article to determine the fair market value for acquiring or selling real estate assets in any given locality.