A Ready Reckoner Rate (RRR) is the standard value of an immovable property assessed and regulated by the respective State government in which the property is established. Here, the word immovable property encompasses residential property, commercial property, and land/plot.
In a bid to ensure an accurate valuation of real estate properties, all the State governments publish area-wise rates of properties on a yearly basis known as Ready Reckoner Rate (RRR). Also, referred to as Circle Rate, a RRR differs across States, cities, and localities.
The RRR acts as a benchmark below which no property transactions can take place in an area. Generally, it is the minimum value that a buyer has to pay for a property, and also the minimum price on which the government levies stamp duty and registration fees. However, if the actual cost of the property is higher than the circle rate, the stamp duty and registration fee is charged on the actual price of the asset.
Example- Assuming a property in a specific locality has a RRR of Rs 5,000 per sq ft. However, if the market price of the property is Rs 6,000 per sq ft, the buyer has to ideally pay stamp duty and registration fee on Rs 6,000 per sq ft, as it is higher. However, Rs 5,000 per sq ft will form the benchmark for the registration of this property, below which the city authority will not register it.
How RRR govern real estate transactions?
While RRR determines the minimum selling price of the property, there is no cap on the maximum property price or the market rate. By definition, the market rate is a price that a buyer finally agrees to pay for a property based on amenities involved and the previous property transactions in a location. Most of the properties in India are sold at market rate, and since these rates are usually higher than RRR, buyers end up paying more.
However, it is observed that revising the circle rates either quarterly or bi-yearly ensures parity between the market rates and the circle rates. Therefore, the State governments should revise the circle rates from time to time. Circle rate revision will not only benefit the State governments as higher circle rate would ensure higher revenues through stamp duty and registration fees but would also help in circumventing black money circulation in the real estate sector.
Overall, a RRR is a good indication of the price a homebuyer has to pay in an area. Moreover, since the market rate is generally higher than RRR, it is recommended to invest in an area where the gap between the two is smaller because the increase in RRR would imply an increase in market rates. And a higher market rate would mean a higher property cost for a buyer.