'Circle rate at ₹35 lakh, market rate ₹1 crore...': Homebuyer sheds light on cash dealing scam in Indian real estate

In India's real estate market, the gulf between circle rates and market prices has long fueled a silent crisis. Circle rates — official property valuations notified by local authorities — serve as the basis for calculating stamp duty and registration fees. But these rates often fall dramatically short of actual market prices, giving rise to a widespread practice: underreporting sale values to save on taxes and facilitate black money transactions.

While buyers and sellers benefit in the short term, the system breeds corruption, undermines transparency, and locks honest, salaried individuals out of home ownership. Now, voices from within are calling out this institutional loophole.

A Reddit post recently threw a harsh spotlight on this issue. “I was planning to buy property in a Tier 3 city. The market value of the plot I liked is around ₹1 crore,” the user wrote. “But then I learned that the circle rate is only ₹35 lakhs. Which means: Banks will only give me a loan based on ₹35L, and the rest — a whopping ₹65L — has to be paid in cash, off the books.”

Frustrated by the absurdity, the user added, “How is this even legal? The only people who can manage this are: Sarkari babus with black money, people doing shady under-the-table deals, and those who don’t care about legality or taxes… Meanwhile, honest, salaried taxpayers like us are screwed.”

They went further: “The government knows this is happening… But nothing changes. It seems like the system is deliberately designed to keep us out and protect the corrupt.”

That sentiment resonated widely. “There are certain problems with Tier 3 cities that are not easy to overcome,” commented another user. “High salary individuals are limited… This leaves mostly businessmen or govt. employees who engage in these real estate transactions—both of whom have black money.”

They explained how buyers and sellers both benefit from the black component: buyers avoid around 7% stamp duty, while sellers dodge 12.5% capital gains tax. “The people responsible for raising circle rates (DM office, tehsildars) are the biggest hoarders of the black money… and they would have no way of using it if circle rates were increased.”

Others were more resigned. “This is how real estate works. Real estate is the haven for black money holders… If you buy this property you will be converting ₹65L of your white into black money,” one user noted.

Another added, “Circle rate is the rate set by the government… in real estate there is always some % of black money involved. You can always negotiate with the seller. Again, no one will take complete white money!”

But not all agreed. “You are wrong,” a user countered. “You can always go to registration office and get it registered for ₹1 crore. Bank will give a loan for ₹1 crore. No issues. In your case, the seller wants you to register at ₹35 lakh so that he can avoid paying taxes. We are the culprits and not the government.”

Someone else weighed in with a more optimistic account: “Bought and sold multiple apartments in Bangalore, all from Tier 1 builders— not a single one was ready to take even a single rupee in cash. Heck, even the interior firm I chose insisted on an 18% GST paid invoice.”