VALUATION

Valuation is an intellectual guess based on certain objectives factors. The deciding factors are location,quality of construction, type of building,nature of building i.e temporary,permanent,prevailing cost of land,demand and supply.

The worth of the property is essence of valuation.Valuation is considered as another type of estimation with the available data. It is a multi disciplinary subject embracing economics,law,engineering,mathematics,statistics and geography. Valuation process requires access to lots of information on cost indices,properties,land rates, cost of construction,plinth area rates and judgments related to valuation.

Valuation is a process by which value of an asset is estimated. Before valuing any property three basic questions must be raised by a valuer, Viz., Value for whom? Value for what purpose ? Value as on which date

VALUE : Represents the worth,utility and attachment to a thing in the eyes of a person. For a thing to have value,it must posses specific economic and legal qualities like utility,demand,scarcity and transferability of ownership. Concept of value differ from person to person.Hence different person create different values for the same property. Value is a function of place,purpose and time.

MARKET VALUE : It is the amount which might be expected to realize from a willing purchaser on a sale of property by a willing seller in the open market. Few essential requirements of market value Vendor must be willing to sell Purchaser must be willing to purchase No compulsion on either in the transaction.

Urgent necessity of sale or purchase is to be discarded. Sentimental value to the vendor has no place. Potential use to be considered. Factors which govern the market value PHYSICAL,LEGAL, ECONOMIC, SOCIAL, UTILITY MARKETABILITY, TRANSFERABILITY, SCARCITY

Approach to valuation may differ from purpose to purpose and Value being a dynamic entity changes from time to time. Before doing valuation it is important to ascertain the type of property. a)Investment property- that is held with an Intention to generate regular periodic income. e.g., cinema theatre

b)Marketable-non investment property- That is not generating any direct income but is beneficial to its owner/user and it can be easily bought and sold. e.g., Owner occupied residential house. c) Non-marketable non-investment property – That neither it is an investment property nor it is generally nor it is generally bought and sold. e.g, religious property, charitable hospital

Purpose of valuation The purpose of valuation plays an important role in determining market value of a property. Value never remains constant at all times.Valuation is required for several fiscal and nonofficial purposes.

Fiscal purpose Levy of property tax by local bodies To fix stamp duty for registration by state govt. To ascertain the cost of construction Nonfiscal purposes For real estate purposes – purchase for occupation, development or sale, speculation And for auction.

For rent fixation under rent control Act. To grant compensation under acquisition Act. To assesses loss in respect of insured properties due to natural calamities or fire. For Bank guarantee, security,deposit and Earnest money deposit.

Value classification : Value : It will be determined in the open market by demand and supply forces. Value is function of time,place, and purpose. Market Value : It is the sum the property will fetch if it sold in the open market. Fair Value : A reasonable value acceptable to seller and buyer in the open market with full knowledge of utility,scarcity,transferability

Scrap Value : It is the Value of old materials in an asset less cost of duration. Insurance Value : It is the Value for which the building is insured. Normally the building is insured for superstructure only excluding the cost of foundations and the site (Land ). Potential value : It is and inherent value which may increase due to passage of time or other factors. Distress Value : It is less than a market value. Lower Value may be due to seller’s financial crisis,sentimental reasons and nuisance.

Monopoly Value : The fancy price demanded by a vendor for few left over plots in developed colony is known as monopoly value. Sentimental : Settler demands a higher price than the market value when he attaches a sentiment to his property. Replacement Value : It is the cost of production of a similar asset with similar specifications at the current market rates on the date of valuation. Depreciation Value : It is the reduction in value of property due to age, deterioration,poor maintenance,decay wear and tear.

Auction Value : Value of property which may be realized if sold in public auction. It may be in the range of 75% to 85% of market value. Reversionary Value : the reversionary value of the land is the present consideration for the value of the land obtainable after the specified period is over. Speculative value :When an asset is purchased to sell the same a profit after some duration the sale price is known as speculative value.

On what key internal factors influence the valuation of residential flats ? Compact planning with cross ventilation Maximum benefit of natural environment Floor finishes such as granite and marble Leak free toilets Quality fixtures and Granite finished cooking platform.

On what key external factors influence valuation of residential flats ? Large open spaces all around the building Landscaped garden Facilities for out door games without swimming pools, adequate car parks aesthetics of the building External elevation treatment No.of flats per floor and no. of lifts

On how end-user investors can enhance the value of old flats : A little inputs from the interior designer Structural repairs and refurbishment On what role does location play in property valuation : It is the location that decides the characteristics of properties.

Location that characteristics properties as those with a water front, with a garden view and width other environmental properties. Location is the backbone in the valuation of the properties. And location alone can decide the expected sale consideration.

On how much does quality of construction influence valuation of properties: Better the quality of construction,better the units are and better are their prices. In terms of impact percentage on value, this can vary between 15 % and 40% of the over-all value depending upon the value of the land.

On what properties fetch higher valuation for investors: Commercial properties. On what are the various elements a valuer looks at while valuing properties. Valuers look at the Infrastructure The updated civic amenities

Water supply Transport services Open spaces Clean environment Garden area Children's play area, Special features such as Garden view, road view, condition of the building Age of the building Amenities available

On how does the age of the buildings influence valuation ? If the building is old, but well maintained,it will not have substantial influence on the valuer. If the old age is accompanied with bad structural condition of the building, perhaps the valuer may not value.