The importance of a guidance value of a property

Bangalore is all set to cut the guidance value of properties all across the city. The whole state of Karnataka will follow soon after and revise the guidance value of properties. What does this mean for prospective buyers and sellers of properties?

It is a reason to celebrate as guidance value determines the selling price of the property. For the inexperienced, here is everything you need to know about the guidance value of a property:

What do you mean by guidance value?

The guidance value of a property refers to the minimum selling price as fixed by the government. It depends on factors such as the type of structure and locality of the property. 

The State governments across India fix the guidance value. Some states also call it the circle rate. The records are maintained by the Department of Stamps and the Registration of each state. Guidance values become an important source of revenue for the government. This is because it can directly impact the stamp paper duty, registration charges and property taxes of a property.

Important points about the guidance value of properties

• Even if a person buys a property for a lower price than the guidance value, they have to register it at the market value. They also have to pay the property taxes according to the market value of the locality.
• If a person buys a property for a price higher than the guidance value, they can register it at the actual value. They can pay taxes at the purchase price of the property.
• Guidance value is applicable for any kind of property in India. It could be agricultural land, a residential building or a commercial office. It usually depends on the developmental stage of properties. For instance, a property based in a well-developed locality will have a higher guidance value.
• A buyer cannot force the seller to sell their property at the guidance value set by the government. The seller is free to set up a price higher than the guidance value. The guidance value merely lists the minimum selling price of the property.

Why guidance value is important

Guidance value has a direct impact on the market value of the property. It can change the price of the property and influence real estate investments. For instance, if the minimum selling price of the property is higher, fewer people will be able to buy it. Simultaneously, if the price is lower, more people will be able to buy.

The guidance value also affects the sellers of properties. If the guidance value is increased, sellers will gain a comfortable profit by selling their property. The guidance value of properties usually sees an upward trend. However, it is not necessary that the guidance value of a property will always be increased.

The Department of Stamps and Registration tries to keep the guidance value equal to the market value. By doing this, they try to prevent fraudulent activities such as black money. 

Revision of guidance value in Bangalore

The guidance value should typically be revised every year. However, there have been no changes in the guidance value in Bangalore since January 2019. In 2019 the rates had been increased from 5% to 25% in Bangalore.

The government is now set to revise guidance values in Bangalore and Karnataka in January 2022. This move by the government could potentially increase the purchase of properties. Since the prices of properties in Bangalore are high, buyers have much to gain from this revision.

The government might increase the prices of properties in rural areas. If that happens, it would be a boon for property sellers as well. Additionally, it will also lead to a decrease in prices around select urban localities.

There has been a demand for affordable housing in Bangalore for a while now. Due to the inflationary rates of properties, affordable housing is difficult to achieve. It also acts as a setback for those who wish to buy properties in Bangalore. With this revision, real estate investments may increase in Bangalore.

Conclusion

The guidance value of a property helps a person decide the worth of the property. It can directly impact the value of the property. Consequently, it affects the property tax, as well as the buying and selling of properties.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.