Introduction
When buying or selling property, understanding the difference between guidance value and market value is crucial. Both these values directly impact the cost, taxes, and overall deal structure. Here’s everything you need to know.
What is Guidance Value?
Guidance value (also called circle rate or ready reckoner rate) is the minimum price set by the government for the sale of land, residential units, or commercial properties in a particular area. It serves as a benchmark for property registration and stamp duty calculation.
What is Market Value?
Market value refers to the price at which a property can actually be sold in the open market. It is influenced by factors like location, demand, amenities, infrastructure development, and the economic environment.
Key Differences Between Guidance Value and Market Value
Authority: Guidance value is government-determined, while market value is decided by buyer-seller negotiations.
Purpose: Guidance value ensures legal and tax compliance; market value reflects real-time demand.
Fluctuation: Market value can change quickly based on trends; guidance value is updated periodically by authorities.
Impact on Transaction: Higher guidance value means higher stamp duty, while higher market value affects profit/loss on sale.
Why the Difference Matters
If the market value is significantly higher than the guidance value, buyers pay more in reality but comparatively less in stamp duty. If authorities revise guidance value upwards, it increases property transaction costs.
Conclusion
Understanding both values helps buyers and sellers plan finances better, stay legally compliant, and make smart investment decisions.
