Valuation

Valuation of Properties
Land & Buildings

Introduction:
WHAT IS VALUATION?
• VALUATION IS THE TECHNIQUE OF ESTIMATION OR DETERMINING THE FAIR PRICE OR VALUE OF PROPERTY SUCH AS
BUILDING, A FACTORY, OTHER ENGINEERING STRUCTURES OF VARIOUS TYPES, LAND ETC.
• VALUATION THE PRESENT VALUE OF A PROPERTY IS DEFINED.
DIFFERENCE BETWEEN COST, PRICE & VALUE
• COST IS USED TO INDICATE THE ACTUAL AMOUNT INCURRED IN PRODUCING A COMMODITY WHICH POSSESS
SOME VALUE
• PRICE IS USED TO INDICATE THE COST OF THE COMMODITY PLUS PROFIT OF THE MANUFACTURER
• VALUE IS DEFINED AS THE CORRESPONDING EXCHANGE OF ONE COMMODITY INTO ANY OTHER COMMODITY;
PRESENTLY MONETARY UNIT OF THE COUNTRY
http://www.valuationindia.com/cfvs/career.html
Methods & Techniques for Valuation
• Source : GUIDELINES FOR VALUATION OF IMMOVABLE PROPERTIES 2009,

INCOME TAX DEPARTMENT
For determination of cost of construction of a building.
i. Accounts method.
ii. Plinth Area Rate and Cost Index method.
iii. Detailed or item wise method.
iv. Material and labour contract method.
v. Comparable method.
For determination of Fair Market Value of the property.
i. Land and building method.

ii. Rent capitalization method.
iii. Development method.
iv. Profit method.
v. Comparable method.
vi. Combination of more than one method for partly owner occupied and partly
tenanted property.
vii. Guidelines rates issued by local Authorities for relevant period and location in
respect of rates of land, construction, flats commercial properties etc.
• Land and Building Method :
As the name indicates, in this method the value of land is added to the value of
structure to arrive at the fair market value of the property. The method is generally
adopted in the following situations :-
1. In the case of self occupied property.
2. In the case of property partly self occupied (i.e. more than 60%) and balance
tenanted.
3. In the case where it is not possible to obtain fair and maintainable rent.
4. In case where there is no direct evidence of rent such as schools and hospitals
etc.
5. In the case where the property is not fully developed, or the return from the
property is not commercial.
Step 1 : Calculate per sqft. Component costs
1. Land cost
3. Marketing & Overheads (10%)
Area of land = 400 sq.yd. = 3000 X 10%
Approx. price = ₹ 18,000 / sq.yd.
= 3300 ₹/sq.ft
Total land cost = 400 X 18,000 = ₹ 72,00,000
4. Builders’ Profit (20-25%)
Proposed Built up = 1800 sq.ft (on one floor) =3300 X 25%
Number of floor = 4 =4125 ₹/sq.ft
Total built up = 1800 X 4 = 7200 sq.ft.
Land cost to be divided pre sq.ft = 72,00,000/7200
. =1000 ₹/sq.ft
2. Building Cost
(Approx.) Resd. ₹ 1500 – 2000 /sq.ft

Comm. ₹ 3000 – 5000 /sq.ft
Total Building cost = ₹ 1000 + ₹ 2000 = 3000 ₹/sq.ft
(land) (Building)
Step 2 : Multiply by area
1800 sq.ft X 4125 ₹ = 74,25,000

(approx.)= ₹ 75,00,000
Step 3 : Add Premium Factors (10-20%)
• Location – How far from City Centre / CBD

• Infrastructure – schools, Hospitals, Transportation
• Preferential Locations – road facing, 3 Side open, more frontage
higher / lower floors, Directions
• Luxury Specification
• Furniture
• Amenities
Total value of property = 75,00,000 X 15%

= 85,00,000 ₹
Rent Capitalization Method :
The rent which is foundation ingredient of rent capitalization method
is net maintainable Rent which is the difference of Gross maintainable
rent and out goings. Thus to determine the fair market value of the
property gross income per annum is to be determined.
This method is generally resorted to in the following situations : -
i. In case the land is fully developed i.e. it has been put to full use legally permissible and
economically justifiable and the income out the property is normal commercial and not a
controlled return or a return depreciated on account of special circumstances.
ii. In the case of fully tenanted property and statutory control of terms and conditions of tenancy.
iii. In the case of a property small portion of which is self occupied and balance large portion is
tenanted.
iv. In the case of commercial establishment like cinemas and hotels, if the building is given on
outright lease / rental basis and rent fetched is reasonable.
Development Method :
This method of valuation of large extent of land is adopted in the following
situations.
i. When the comparable sales of large tracts are not available but sales of small plot are available.
ii. When the land is ripe for use for building purpose it possess necessary potentialities for urban use.
Profit method
In the case of Hotels, Motels, Cinemas, Public houses which falls under the
category of the Licensed premises, the F.M.V. depends primarily on the earning
capacity of the property. The F.M.V. of such properties is determined by applying
profit method provided.
(i) The owner runs Hotel, Cinema himself.
(ii) The owner gives Hotel or Cinema on conducting agreement to a
conductor.
MINIMUM QUALIFICATION FOR
EMPANELMENT OF VALUERS
PRESCRIBED UNDER
SECTION 34AB (RULE 8 A) OF THE
WEALTH TAX ACT 1957
https://www.obcindia.co.in/obcnew/upload/.../Mint_1_11-May-2015_valuer_qual.pdf
What is Govt. Approved Property Valuer?
The Government solicit the services of valuers for one or the other reason and many of
them are maintaining a register of valuers with them for specific purpose or a panel of
valuers from which a particular one can be called upon to undertake their assignments.
For instance, under the enactment of Wealth Tax Act, under Section 34 AB, a valuer can
get registered (which is as good as an empanelment) with related Income tax authorities for
undertaking Wealth Tax work.
There are (ten) different categories of valuers possessing different qualifications as
prescribed for such valuers. For a particular case under reference, such as ‘Valuation of
immovable properties’ (other than agricultural lands, plantations, forests, mines and quarries) they shall
have degree qualifications in followings :
(i) B. E. Civil, B. Architecture, B. Planning from a recognized university.

(ii) Post Graduate degree in valuation of real estate from recognized university (Possess
a qualifications recognized by Central Government for recruitment to superior
services or Posts under Central Government in the field of Civil Engineering.
Architecture or Town Planning.;
http://www.propertyvaluer.org/what_is_govt_approved_valuer.html
A valuer of Immovable property (other than agriculture lands,
plantations, forests, mines and quarries) should have the following
qualification:
(i) He should be a graduate in civil engineering, architecture or town planner of a

recognized university.
(ii) He should be a Post graduate in valuation of real estate from a recognized
university.
(iii) He should possess a qualification recognized by the Central Government for
recruitment to superior services or posts under the Central Government in the
filed of civil engineering, architecture or town planning besides holding other
qualification and experience as detailed in the enclosed Annexure-”A”.
Role of Architects as approved Valuers
Role of Architects
The Architect must have in depth knowledge of both local and wider property markets,
current legislation, taxation rules, modern valuation methods, standard practices and other
factors that can affect a property’s sale value or assets potential. It enjoys the support of its
sister concern REIG VALUATION’S powerful research, information and archive resources. The
well respected architect’s valuation team appraises properties for sale, mortgage, insurance,
financial reports, receivership, leasing, rental review, swap deals, etc.
An Architect’s valuations serves the following purposes:
– Litigation support
– Lease Negotiations
– Insurance replacement/reinstatement
– Mortgage and capital raising
– Corporate restructuring
– Financial reporting & Public issues
– Partnership and Joint Valuations
– Swap Business deals.
– Related Parties Transactions Assessment.
An Architect’s holds a thorough understanding of valuation related issues and is

well recognized for its technical rigor in the industry and other fields such as:
– Tangible assets valuations
– Intangible assets valuations
– Tangible assets advisory services
– Dispute resolution support
– Fairness opinion
– Specialized services (including financial modeling)
Thank you
• DHRUV SONI 15 sa 215

• PRIYANK BHATT 15 sa 232
• SANJAY PRAJAPATI 15 sa 236

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What are the different methods used for valuation of properties?

What are the different methods used for valuation of properties?

What qualifications are required to become an approved valuer?

What qualifications are required to become an approved valuer?

Valuation of Properties

Land & Buildings

• VALUATION THE PRESENT VALUE OF A PROPERTY IS DEFINED.

DIFFERENCE BETWEEN COST, PRICE & VALUE

• Source : GUIDELINES FOR VALUATION OF IMMOVABLE PROPERTIES 2009,

i. Land and building method.

(Approx.) Resd. ₹ 1500 – 2000 /sq.ft

1800 sq.ft X 4125 ₹ = 74,25,000

Step 3 : Add Premium Factors (10-20%)

• Location – How far from City Centre / CBD

Total value of property = 75,00,000 X 15%

(i) B. E. Civil, B. Architecture, B. Planning from a recognized university.

(i) He should be a graduate in civil engineering, architecture or town planner of a

An Architect’s holds a thorough understanding of valuation related issues and is

• DHRUV SONI 15 sa 215

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