The Annual Schedule of Rates (ASR) is the minimum price, on which the government will charge stamp duty and registration fees. The ASR has a significant impact on the property prices in any given area. Often, property prices in an area shoot up, when the ASR is expected to be increased.
“As the ASR identifies the variation that has occurred in property prices, the growth of the index in a particular area reflects the potential for appreciation in property prices, in that area,” explains Vidya Bhagwat, senior faculty at the Real Estate Management Institute (REMI). Adding that ASR can be useful for buyers in the negotiation process, she explains how “A consistent positive index reflects that the property is likely to appreciate in the future. Properties of this nature are usually in high demand.”
The Annual Schedule of Rates, is the government’s estimates of minimum property values in various locations. It is also known as Circle Rates in Delhi or Ready Reckoner (RR) Rates in Mumbai. These rates are typically much lower than the prevalent market rates. Consequently, they are reviewed by the government periodically and increased, to bring it closer to market rates. Since property transactions are concluded in the private realm and the price is often not disclosed, state governments need a benchmark, to ensure that they are not losing out on an important source of revenue.
Benefits and drawbacks of ASR, for home buyers and investors
Real estate markets in India are opaque and there is very limited data available, points out Amit Oberoi, head of valuation and advisory at Colliers India. “Therefore, this (ASR) is a good price benchmark for home buyers and investors, especially in markets where the transaction volumes are low,” he maintains. However, the disadvantage is that the real estate market is heterogeneous – each property is unique. “Adjacent properties can have very different valuations, due to a number of reasons inherent to the properties. Thus, ascertaining a standard rate for a location covering a large area, leads to situations wherein, property values can be lower than the government-prescribed rates. In such scenarios, properties don’t get transacted, as the buyer is averse to paying additional amounts for stamp duty and registration,” he elaborates.
Consequently, experts insist that it is very important to set a realistic ASR. Moreover, property transactions use ASR as the base rate, for the calculation of stamp duty, capital gains, as well as property tax. The ASR also helps new buyers, to assess the prevalent rates in an area. Therefore, it protects home buyers from sellers who charge a huge premium over the existing property price and also from unscrupulous sellers who lure buyers with very low property prices. The ASR in major cities can be easily accessed online. For example, in Maharashtra, the rates are available through a web application ‘e-ASR’ on the website ‘igrmaharashtra.gov.in’.