What is the meaning of Guidance Value?
Guidance value is a price of the property fixed by Local Government.
Ex: Govt of Karnataka declares the Guidance Value for Karnataka. You can’t register the property below this price. Let’s go through the below image to understand the same.
There are two types in guidance value.
1. Land Value- This is only for lands not for any constructed properties (open site value is measured as land value).
2. Composite Value- This is for the constructed properties where it includes both land value as well as the value of buildings (Land Value + Construction cost)
WHAT IS GUIDANCE VALUE OF A PROPERTY?
You noticed that for Property B, the market price is Rs.8,000 per Sq Ft. But the Government Guidance Value is Rs.4,000 per Sq Ft. You can register the property at the rate anywhere between Rs.4,000 to Rs.8,000.
In the case of Property A, the market is price is Rs.2,000 per Sq Ft. But the Government Guidance Value is Rs.4,000. Hence, you are not allowed to register the property below the Government Guidance Value.
It clarifies that you are no longer allowed to register your property below the price of Government Guidance Value. However, you are free to register at any price which is above the Government Guidance Value.
Hope you now got an idea about Guidance Value.
Why Government raises the Guidance Value of Properties?
For Government, the major revenue source is property registration. By raising the guidance value, Government expects higher revenue. Therefore, once in 3-4 years usually there will be an increase in guidance value.
How Guidance Value of property affect the prices?
Let us say Property XYZ is currently selling at Rs.4,000 Sq. Ft. and Government Guidance Value is Rs.3,000. Then there is a sudden jump in Government Guidance Value from Rs.3,000 to Rs.4,500. In such situation, property owner of XYZ will definitely not willing to sell his property less than Rs.4,5000. Becuase, he know Government itself fixed the price at Rs.4,500 then why he want to loss by selling it lesser than the Guidance Value.
In this way, whenever there is a revision in Government Guidance Value, the price of real estate will jump. It is not the affordability of buyer. But the price, below which no one ready to sell. Hence, with revision in Guidance Value, those who are in real estate business will feel happy. But the buyers feel it sad as the price of real estate will automatically raise.
What is the Guidance Value of Bangalore for 2016?
Recently Government of Karnataka revised the Guidance Value of Properties. This again boosted the price rise in real estate market. The last revision was in the year of 2014. So again after 2 years one more revision. This shows how Government is eager to earn more by raising the Guidance Value of Properties across Karnataka.
The Guidance Value of Bangalore is divided into A, B, C, D, E and F zones. Zone A means highest guidance value, which starts from Rs.7,000 per Sq Ft and above. In the same way, Zone F means Rs.1,000 per Sq. Ft and more.