It is a common truth now a days that government rates of circles do not reflect the prevalent rates being paid for properties.
It begs to question, What do the government rates achieve then?
Simply they help the property dealers to save on stamp duty (which is paid as a percentage of cost of property) and encourage underhand dealings resulting in accumulation of black money.
A good example of low government rates is revealed in the purchasing of properties by Robert Vadra at government specified rates while market valuations are multiple times over.
Reference: http://www.thehindu.com/news/states/other-states/clean-chit-to-vadra-on-land-row/article4034449.ece?homepage=true
What is the solution of the situation?
It is a difficult situation
Option 1: Government as the ultimate provider:
Under the current circumstances the housing demand is multiple times the supply thus people are ready to pay multiple times the price set by government.
The situation requires increase in fair cost housing projects by government instead of selling land to private developers who create little housing and sell at exorbitant cost. This requires the government to evaluate the performance of government housing projects by the number of houses created and it must fulfill the demand.
This option is not working because the government is not focussed on achieving targets of housing. Perhaps people need to wake up their local representatives from the lethargy and stop tolerating living in slums.
Option 2: A more market based approach with government as facilitator:
People can directly purchase plots of land and property developers just provide the service of construction. For this government should enable common man to purchase land easily, electricity and tap water installation should be accountable.
This is a better solution as it requires only reform in certain parts of government mainly the water works, land and electricity department.
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