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Guidance Value/Circle Rate : Adarsh Palm Meadows

Posted by Amber on February 12, 2019
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In January 2019, BBMP revised the guidance value also known as circle rate for many communities and areas in Bangalore. Adarsh Palm Meadows is one of the communities which saw this revision, and for a change it brought smile on many faces.

What is Guidance value/Circle rate?

It is the minimum value at which you can register a property. As per the law, even if you buy a property at a price lower than the guidance value, you will still have to register the property at guidance value. If the sale value is higher than guidance value then the property has to be registered at sale value.

The government’s aim is to keep guidance value as close to market value as possible. This is done to curb cash transactions which generate black money and also to maximize revenue for the government.

Guidance Value of Adarsh Palm Meadows BEFORE 1st January 2019

The guidance value of land/plots in Adarsh Palm Meadows was fixed at Rs. 14020 psft till 31st december 2018. If you own a corner plot, then add a premium of 10% to it, which translates into Rs. 15422 pft. The Built up of the villa was charged at Rs. 1325 psft over.

So, if you own a corner plot measuring 5000 Sq.ft, with a built of 3000 Sq.ft, then the value of the villa, at which capital gains, stamp duty and registration charges be calculated is:

5000* 15422 + 1325*3000 = Rs. 8,10,85000

Guidance Value of Adarsh Palm Meadows AFTER 1st January 2019

The BBMP revised the guidance value of Adarsh Palm Meadows effective 1st January 2019. Based on the plot size, the guidance value will vary.

Plot Sizes
Guidance Value in Psft
Less than 2000 Sq.ft Rs. 13579
Between 2000 and 4000 Sq.ftRs. 12579
Above 4000 Sq.ftRs. 12075

* 10% premium for corner plots is still applicable.

If you own a 5000 Sq.ft plot with a 3000 Sq.ft built up, then the value as per new guidance value comes to Rs. 7,03,87500.

This difference of over 1 crore translates to savings of 20 lakhs in capital gain tax for the seller and 6.6 lakhs in stamp duty and registration charges for the buyer.

Why did the Guidance value come down?

A. There was a big variation between market value ( which is less than Rs. 10,000 psft in Palm Meadows) and the guidance value. This meant that fewer buyers were willing to take the burden of additional stamp duty and registration charges. Hence, there were fewer transactions and thus loss of revenue for the government.

B. There was pressure from various groups to reduce the guidance value and bring it closer to market value to facilitate more transaction, which is also the intention of the government.

C. Fewer people were willing to sell their properties because computation of capital gains is done on whichever value is higher (guidance of transaction value). Therefore, an increased tax liability meant erosion of actual gains, leading to fewer people willing to sell.

Implications of reduced guidance value for Sellers and Buyers

Given the current market situation, where the market value is still substantially less than the guidance value, even a slight reduction in guidance value help both the buyers and sellers in a big way. Some immediate benefits are

A. Lower capital gain tax for the seller

B. Lower stamp duty and registration charges for the buyer

C. More people willing to sell

D. Increased revenue for the government

E. Possible lower sale values for the buyer

I hope this provides more clarity to people looking to sell or buy a property in Adarsh palm Meadows.

You can reach out to us if you are looking to sell or buy a villa in Adarsh Palm meadows.

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