Key aspects about ASR that property buyers should know
01 Mar 2016
The decision of buying your own home is one of the most crucial events of an individual's life.
It is very important for the buyers to evaluate all the vital aspects while buying a property in Mumbai's realty market. Apart from checking the developer's credentials, location suitability and applying the other risk mitigation steps, it is very important for the buyers to assess the Annual Schedule of Rates (ASR) as well.ASR is a government tool to find out the minimum value of a property at different locations based on various market factors. In Delhi, it is called Circle Rate whereas; in Mumbai, it is known as Ready Reckoner Rate (RR rate).
Following are some of the key aspects about ASR that property buyers should know:
- Normally, ASR is typically lower than the prevailing market rate of the property in a location;
- The government calculates the minimum stamp duty and registration charges based on the prevailing ASR value in the area;
- ASR is reviewed from time-to-time and the government tries to keep it close to the prevailing market rate in the area.
"The Annual Schedule of Rates is prepared to assess the market value of a property to calculate the stamp duty as applicable on the said property. These rates are determined by the Stamps and Registration Department of the state of Maharashtra. The ASR helps individuals find the official rates for properties in a particular area," explains senior faculty, Vidya Bhagwat, faculty department, REMI.
Experts point out various terms of ASR rates as known in the key cities across India:
- Circle Rate Delhi, Bhubhaneshwar;
- Guidance Value Bengaluru, Hyderabad;
- Guideline Rate (Market Value) Chennai;
- Guideline Rate Kolkata;
- Ready Reckoner Rates Mumbai;
- Jantri Rates Gujarat.
ASR impacts the property prices:
"In cities like Bengaluru and Mumbai, the ASR is now very close to the actual prevailing market rates in most areas and for most asset classes. Thus, they are a good benchmark for the buyer. However, buyers should note that rates will vary from property to property depending on the quality of specifications, micro-location characteristics, reputation of the developer, payment terms, etc," says Amit Oberoi, head of valuation and advisory at Colliers. He further goes on to add, "It is necessary to set a realistic ASR level, so that the government can realise the actual revenue that is used for public good. Also, the government should consider lowering the stamp duty and registration rates, so that there is a greater disclosure of transaction values."
Benefits and drawbacks of ASR for home buyers and investors:
Experts recognise the benefits of ASR, as it provides clarity on the government-defined rate that further helps in base lining the value of the stamp duty payable for all properties within the area. It establishes the minimum threshold for the value of a property. A property should be sold at the given rate or above the given rate. It helps establish a market index for properties in different areas or cities. The index ratio helps determine the price variation of properties over a specific time period.
ASR has some drawbacks too:
- If the property is sold at a very high margin in comparison to the government fixed rate, then the amount of stamp duty that is applicable on the property gets increased.
- If the property is transacted lower than the given rate, then the government authority may ask for details as to why the property was sold below the fixed rate.
- Since the relation is non-linear; forecasting done on this basis may vary at a given time. However, it is important to note here that ASR helps to set price benchmarks in the opaque real estate markets.
-When a buyer buys a home in an unknown area, then ASR helps in identifying the prevailing rate in that circle. Property sellers can't cheat the buyer by charging an excessively higher premium over the prevailing ASR.
- It sometimes also works as an indication tool for the property buyers to compare the growth in different areas by comparing the rate of increase in ASR.
Buyers must use the ASR as a key analytical tool, especially when buying a property in an unknown area, an emerging location or anywhere in an expensive metropolitan city like Mumbai.