c
c






 

 



?
?

? ?

Valuation of real properties: this assignment is done in two parts. chapter 1 and 2 describes various
methods and practices used for valuation and chapter 3 is a case study of valuation of a property
¦
???????????????????????????????????????????????????????????????????


 ?
?
? 
 ?
Ôhe subject of valuation of real properties demands a high degree of common sense for doing
justice to the subject, and in addition, the knowledge of economics, law and engineering
becomes essential on the part of valuer.

Valuation is an art of judgment and forecast based on data obtained and organized. Ôhere are,
however, certain well-established principles and procedures on which the science of valuation
of real estates rests.

Valuation is defined as the process of estimating value. It depends on the circumstances of the
case and purpose of which valuation is needed, at the given time, place and market conditions
prevailing on the date as on which the valuation is required.

It is an art requiring judgment and forecast, in which conclusions about value are arrived at by a
scientific analysis of the available data. In valuation, mathematical certainty is neither
demanded nor possible.

Ôhere are various aspects like situation of the land/property, frontage and depth, nature of
soil, climatic conditions, communication means, fashion and local demands, availability of
essential services, time element, holding of the property, tenure of the property,
encumbrances, topography of the area, legal factors etc. to be taken into account while
working out any of the various types of valuations like present market value, capital gain tax,
open lands, lands with building life interests etcî
?

?
?
Ôhe purpose of the valuation of property consisting of land and building can be any of the
following:
ͻ Purchase or sale of property
ͻ Land acquisition
ͻ Assessment of wealth tax, capital gains tax and the like
ͻ Probate/ death duty
ͻ Partition of property
ͻ Mortgage, bank loans and other security purposes
ͻ Fire insurance, for fixing insurable value and premium payable
ͻ Rent fixation
ͻ Court fees/ stamp duty payable in property litigations
ͻ Fixing rentable value of municipal taxes
ͻ Fixing betterment charges
ͻ Fixing minimum reserve price in property auctions
? ??


 ?
For the purpose of valuation the properties in general are divided into two categories:
1)? ÿpen lands
2)? Lands with buildings

?  ?
?

ÿpen lands can broadly be divided in two categories namely,


?
?
?
?
.
Ôhe urban open lands are classified in different ways such as  
? 

? and
the value of such lands primarily depends on the potentiality of their development by
constructing appropriate structures over them. Ôhe farm lands are agricultural fields and
they are capable of producing earnings themselves. Ôhe valuation methods for these two
types of open lands will now be briefly discussed.

Following are the three methods adopted for the valuation of urban open lands:

a) Comparative Method

b) Abstractive Method

c) Belting Method

?
? ?
   ?

When lands are married with buildings following five methods of valuations are adopted:

a)? Rental Method

b)? Direct Comparison Method
c)? Valuation by reference to profits
d)? Valuation based on the cost or contractor͛s method
e)? Residual or development method
¦
??????????????????????????????????????


 ??
  ?
Ôhis is the second case as discussed in the above chapter i.e. when lands are married
with buildings. Ôhe five methods discussed above can be used for the valuation of this
kind of property and they are:
a)? Rental Method
b)? Direct Comparison Method
c)? Valuation by reference to profits
? 


 ?
? ? ??? 
!? ?
e)? Residual or development method

Here the case study has been done with the help of the method ͞


 ?
? ?
 ??? 
!? "?or it is also called?#

 ? ??

?
$

? "?

? 


 ?
? ? ??? 
!? ?
› ?
 

Ôhe land and building (also known as physical method, summation method, capital value
method, Contractor͛s method etc) consists of estimating the cost of building,
depreciated to allow for age of the building on the relevant date of valuation, and
adding to it the fair market value of the land on the relevant date of valuation.
It is particularly suitable when land forming part of the property is not yet utilized to the
full extent allowable by rules/ statutes/ legislation of the local/state authorities, making
application of rental method of valuation difficult. It also provides cross check on the
valuation done by other methods.

J ?›› 

›
 

In the Land and building method, valuation of land component of the property almost entirely
depends on the comparison technique, wherein value of comparable plots of land from various
instances of sale in the recent past is taken, and by working out an average, assessment of the
market rate of land is made. In such an exercise, maximum reliance is placed on the sale
instances of the land nearest to the property being valued.
Market value of land depends on many factors like location, size and shape,
depth/frontage/return frontage, width of road, etc. After deciding the average market value of
the land in vicinity, weight age for various plus and minus factors of the land being valued is
considered to arrive at the land rate to be adopted.
  ? 
›

›


›

›
 

Ô? For very large plots of say 2000 sqmt and above in area, there being very few likely purchasers
for such large plots, a minus weight age of 10% to 20% is considered.
Ô? In the case of plots having irregular shape, proper land utilization for building purpose may
become difficult. So based on the irregularity of the shape of the plot, a minus weight age of 5
to 15% may be considered.
Ô? For the plot with immediate vicinity of slums, cemeteries, railway track nuisance, tanneries and
other depressing factors like nallah, open drain, public toilet blocks, a minus weightage for such
factors may be considered from 5 to 25%.
Ô? Ôhe plot with wide frontage but tapering to much lesser width towards rear ʹ ͚vyaghramukhi͛
plot ʹis being considered as inauspicious by superstitious buyers and a minus weight age of 5 to
10% may be considered.
Ô? A plot of land having no access or approach whatsoever to any road is called ͚land locked land͛.
Value of such land locked plots is usually assessed about 20 to 50% lesser than plots free of
such Disadvantage.
Ô? Corner plots with return frontage or plots with access to road at front as well as rear access
may be given a plus weight age of between 5 to 15% depending upon the locality, width of the
road and importance on the road on which the additional frontage is available.
Ô? A plot situated at Ô junction of road, on the opposite side of the secondary road will have a
clear and uninterrupted view along the length of the secondary road, and said to enjoy a ͚vista͛.
Such land may be given a plus weightage of 5 to 10%.

?
 ? 

›

u? %&'u? (&'%?
?
?
road

Plot

Ôhis method is restored only for very large plots for more than 1000 sq mt in area and
having road at one of the smaller side of the plot only.

ͻ In this method, Plot divided in 3 belts as shown in the figure above

ͻ 1st ʹ margin of frontage (i.e. x here)
ͻ 2nd ʹ 50% more than depth of 1st (i.e. y=1.5x) belt
ͻ 3rd ʹ remaining area (z=1.5y or remaining area)
 ͻ Value per unit of land in 1st best is taken same as the rate of plots of reasonable size and
having depths ideal for the internal land use i.e. commercial/residential etc.

? „
?? ?? ?


?? ?? ?
??
?

?
?
? „
?? ???

?? ?? ?
??
?


? 


 ??
  ?¦  ?
?
Land and building basis of valuation contemplates Ascertainment of cost construction,
depreciated or un depreciated one. In both the cases, the task of the valuer will be to
estimate the basic cost of construction as if new on the relevant data of valuation and
make necessary deductions for the depreciation. Basic cost of construction can be
ascertained by any one of the five methods out of which the first two will give more
accurate results as compare to the latter three.
1. Account method
2. Detailed or item wise method
3. Estimate on area basis
4. Estimate in cubic meter basis
5. Estimate by Building cost index?
¦
?????????????????????????????????????????????????????????????????¦
?
%?
For the purpose of case study a residential property of Jamnagar falling well within JMC
(Jamnagar Municipal Corporation) was taken. Ôhe details of the real estate property taken for
case study are:

1)? Purpose of Valuation: To assess present market value for Banking purpose

2)? Date as on which valuation is made: 01-11-2010

3)? Bank for which valuation is made: Dena Bank ± Hawai Chock Branch, Jamnagar.

4)? Name of the purchaser: Mr. Manoj Hansraj Gondaliya

A)? Name of the vendor:

>)? Brief description of the property: Ôhe property is within city limit area and belongs to
residential zone. Ôhe property is within well-developing area and facilitated by road,
drainage line, street light etc. Permissible F.S.I. in this area 2.00 at present

7)? Location, Street, Ward No: Near K.P.Shah Vadi, Rameshwar Nagar, Jamnagar

8)? Classification of locality ʹ high-class middle-class / poor class: Middle class

9)? Proximity to civic amenities like schools, hospitals, offices, markets, etc: Within 1 km

10)?Is it freehold or leasehold land? : Freehold

 º
 

  


 º  º 


)*+?,??-./0+11)*/?

1. Purpose for which valuation is : Ôo assess present market value for Banking
made. purpose.

2. Date as on which valuation is : 01-11-2010.

made.

3. Bank for which valuation is made. : Dena Bank ʹ Hawai Chock Branch, Jamnagar.

4/a. Name of Proposed Purchaser. :

Ôelephone No. Residence :

ÿffice :

Mobile :

4/b. Name of Venders. :

5. If the property is under joint : Personal ownership.

ownership / co-ownership, share
of each such owner.
Are the shares undivided?

>. Brief description of the property : Ôhe property is within city limit area
and belongs to residential zone. Ôhe property is
within well-developing area and facilitated by
road, drainage line, street light etc. Permissible
F.S.I. in this area 2.00 at present.

7. Location, Street, Ward No. : Near K.P.Shah Vadi, Rameshwar Nagar, Jamnagar.

8. Survey/Plot No. of Land. : R. S. no. 2>5/1-Paiki, Plot no. 9/A.

9. Is the property situated in : Residential area.

residential / commercial / mixed
area / industrial area ?
10. Classification of locality ʹ high- : Middle class.
class middle-class / poor class.
11. Proximity to civic amenities like : Within 1.00 Km. radius.
 schools, hospitals, offices,
markets, cinemas etc.
12. Means and proximity of surface : G. G. Hospital Road.
communication by which the
locality is served.
LAND :
13. Area of land supported by : Ôhe documents are seen by me, and it is available
documentary proof, shape, with the owner.
dimensions & physical features.
14. Roads, street or lanes on which : Road >.00 Mt. wide.
the land is abutting.

15. Is it freehold or leasehold land? : Free hold.

?
?
1>. If leasehold, the name of Lessor / : N. A.
Lessee, nature of lease, due dates of
commencement and termination of
lease and terms of renewal of lease.
i) Initial premium. : N. A.
ii) Ground rent payable per annum : N. A.
iii) Unearned increase payable to the : N. A.
Lessor in the event of sale or
transfer.
17. Is there any restrictive covenant in : N. A.
regard to use of land? If so, attach a
copy of the covenant.
18. Are there any agreements of easement? : N. A.
If so, attach copies.
19. Does the land fall in an area included in : J.A.D.A. rules & regulation is applicable.
any Ôown Planning Scheme or any
Development Plan of Government or
any Statutory Body?
If so, give particulars.
20. Has any contribution been made : N. A.
towards development or is any demand
for such contribution still outstanding?
21. Has the whole or part of the land been : N. A.
notified for acquisition by Govt. or any
Statutory Body? Give date of the
notification.
22. Attach a dimensioned site plan. :

IMPRÿVEMENÔS :
23. Attach plans and elevations of all :
structures standing on the land a layout
plan.
24. Furnish technical details of the building : See part ʹ 2, in this valuation.
on a separate sheet.
25. i) Is the building owner-occupied / : Fully occupied by the owner.
tenanted / both ?
ii) If partly owner-occupied, specify : N. A.
portion & extent of area under
owner-occupation.
2>. What is the floor space index : Permissible = 2.00 at present.
permissible and percentage actually
utilized ?
RENÔS : :
27. i) Names of tenants/lessees/ : N. A.
licensees etc.
ii) Portions in their occupation. : N. A.
iii) Monthly or annual rent/ : N. A.
compensation / license fee etc.
paid by each.
iv) Gross amount received for the : N. A.
whole property.
28. Are any of the occupants related to, or : N. A.
close business associates of, the owner?
29. Is separate amount being recovered for : N. A.
the use of fixtures like fans, geysers,
refrigerator cooking ranges, built-in
wardrobes etc. or for service charges? If
so, give details.

30. Give details of water and electricity : N. A.

charges, if any, to be borne by the
owner.
31. Has the tenant to bear the whole or part : N. A.
of the cost of repairs and maintenance?
Give particulars.
32. If a lift is installed, who is to bear the : N. A.
cost of maintenance and operation ʹ
owner or tenant?
33. If a pump is installed, who has to bear : N. A.
the cost of maintenance and operation ʹ
owner or tenant?
34. Who has to bear the cost of electricity : N. A.
charges for lighting of common space
like entrance hall, stairs, passages,
compound etc. ʹ owner or tenant?
35. What is the amount of Property Ôax? : N. A.
Who is to bear it? Give details with
documentary proof.
3>. Is the building insured? If so, give the : N. A.
policy No., amount which it is insured
and the annual premium.
37. Is any dispute between landlord and : N. A.
tenant regarding rent pending in Court
of Law?
38. Has any standard rent been fixed for the : N. A.
premises under any Law relating to the
control or rent?
SALES: :

39. Give instances of sales of immovable : N. A. Because purpose of valuation is to find

property in the locality on a separate out present market value.
sheet, indicating the name and address
of the property, registration No., sale
price and area of sold land.
40. Land rate adopted in this valuation. : 7,000.00 Rs./Sq.Mt.

41. If sale instances are not available or not : As per enquiries from the local property
relied upon, the basis of arriving at the dealers, Developers, ÿwners & Personal Experience as
land rate. a valuer since last Eleven years.
CÿSÔ ÿF CÿNSÔRUCÔIÿN:

42. Year of commencement of construction : 199> ʹ 1997.

and year of completion.
43. What was the method of construction ʹ : N. A.
by contract / by employing labour
directly / both ?
44. For items of work done on contract, : N. A.
produce copies of agreements.
45. For items of work done by engaging : N. A.
labour directly, give basis rates of
materials and labour supported by
documentary proof.
?
? 
 


  º



Sr. Particulars Details of the property
No.
1. Name of Proposed Purchaser. :

2. Address of the property : Near K.P.Shah Vadi, Rameshwar Nagar, Jamnagar.

3. Survey No./Sheet No. : R. S. no. 2>5/1-Paiki.

4. Plot No. : Plot no. 9/A.

5. Construction Permission. : Permission no. J.A.D.A./Ôech/Dev/1573/294, Date : 02-02-

199>.

>. Gross Plot Area : >0.00 Sq.Mt.

7. Gross Built-up Area : 44.87 Sq.Mt.

8. Year of construction : 1997.

9. Estimated future life : 32 Years subject to proper maintenance and under normal
conditions.
10. Definition of the building : Residential building.

11. No. of floor : G.F. only.

12. Accommodation : As per sectioned plan, at the ground floor the

property is facilitated by living room, pooja, kitchen, bath,
W.C., balcony projection, R.C.C. stair, open compound,
compound wall with gate, U.G.W.Ô., ÿ.H.W.Ô., S.Ô., etc. and at
the terrace floor the property is facilitated by open terrace,
parapet wall, etc.
13. Ôype of structure : Load bearing structure.

14. Foundation and plinth : U.C.R. masonry.

15. Super-structure : Brick masonry.

1>. Floor Height : 3.00 Mt.

17. Roof covering : R.C.C. slab.

18. Finishing Inside : Cement plaster with lime niru finished.

ÿutside : Sand faced cement plaster.

19. Flooring : Mosaic tiles flooring.

20. Kitchen Platform : Marble platform with lintel level glazed tiles dedo.

21. No./Glazed: : Glazed

Ôoilet : N. A.
Bath : 0.91 Mt. glazed tiles dedo.
W.C. : 0.91 Mt. glazed tiles dedo.
Washing space : N. A.

22. Doors : Ôype of Doors

Wooden framed paneled door.

23. Windows : Ôype of Windows

Wooden framed glass paneled with grill.

24. Ventilation : Ôype of Ventilation

R.C.C. jali.

25. Special Architectural features : No.

2>. Electrification : Concealed.

27. Water supply & Sanitary system : Concealed.

28. Painting ÿutside : Cement paint.

Inside : Distemper.
Doors / Windows : ÿil paint.

29. Drinking water facility provided? : Yes.

30. Special facility provided, if any. : No.

31. Detail of joint property:

- North : Plot no. 8.

- South : Block no. 9/B.

- East : Plot no. 1.

- West : Road >.00 Mt. wide



)12?¦0+?
Land cost can be worked out by taking into consideration the size, shape and situation of the
plot available road frontage, surrounding development and prevailing market rates of land in
that area, demand and availability and payment terms & conditions etc.

Here in this case, considering the above factors and technical details of the property, land cost
can be
assume 7,000.00 Rs./M2, which is quite fair and reasonable as per my opinion as 01-11-2010.
d on date

¦)¦.)+13/11?
? Size & shape of the plot is good.
? Demand / availability ratio for land is equal to one in this area.
? Availability of civic amenities and infrastructure is medium in this area.
? Photograph of the property is attached here with.

¦10+*.¦+1?¦0+?
Construction cost of any building depends upon type of the structure, quality of material used
and workmanship, size of the rooms, life span passed, present market rates of labour,
construction area etc.

Here in this case, considering the above factors and technical details of the
property, construction cost can
be 3,500.00 Rs./M2, which is quite fair and reasonable as per my
assumed opinion.

2/*/¦)+1?
Depreciation is the graded exhaustion of the usefulness of a property. Ôhe value of building
will be gradually reduced due to its used life, wear & tear etc. Here in this case, structure of
the building is load bearing type structure. Generally for load bearing type building, total
expected life is >0 years is taken into consideration. Here in this case by considering
construction condition of the building total expected life of the building can be assumed 45
years. Here in this case the building is 13 years old, so the depreciation will be 2>%. And
estimated future life of the building will be 32 years.

¦


  ?
?
Construction cost = Rs 3500 per sq mt
Depreciation = 3500*0.2>
= 910
Cost after dep. = 3500 ʹ 910
= 2590 Rs per Sq. mt
Quality of construction and workmanship is medium as such net construction cost of the
property i.e. Rs 2590 per Sq.mt is quite fair and reasonable

).)+1 ?
Sr. Description Area Assumed Rate Amount
No. M2 Rs./M2 Rs.
1 Land cost >0.00 7,000.0 4,20,000.00
2 Construction cost 44.87 2,590.00 1,1>,213.30
Ôotal Rs. 5,3>,213.30
1 Ôhe valuation is subject to agreement
(Vechan Karar) done on date: 13-10-2010.
Say Rs. '455555?


º*¦/2?3?20+*/00?0)/?)./??
Ôhe property is said to have distress value when it can fetch lower value than the market value.
Ôhe distress value is developed due to various reasons such as : (1) Financial difficulties of
seller, (2) Intention to favour purchaser, (3) More availability and less demand etc. considering
above mentioned factors here in this case forced / distress value of the property can be
assumed ʹ 5% of the valuation done. So forced / distress value of the property as on 01/11/10
is *?'?565537?
?
).)+1?¦1¦.01?8)? ?2
 ?57755?
?
Name of Proposed Purchaser. : Mr. MANÿJ HANSRAJ GÿNDALIYA
?
Location of Ôhe property : Near K.P.Shah Vadi, Rameshwer Nagar, Jamnagar.
Market Value of the property : Rs. 5,3>,000.00
Force/Distress sale value of the : Rs. 5,09,200.00
property
1+/?

1.? Any kind of litigation or dispute pertaining to the property under consideration is not
accountable to the valuer.
2.? Value varies in accordance with the purpose, time, specific condition, demand potentials
etc.
3.? Valuation of the property under consideration should not be referred to any purpose
other than the one specified here in above.
4.? If any financial assistance is sought producing this property as collateral security, the
concerned financial institution is requested to verify the extent shown in this valuation
report with respect to the latest legal opinion.
5.? Ôhis value does not include Stamp Duty, Registration or any other Governmental and
incidental Expenses of brokerage charges etc.

2/¦)*)+1?
Hereby declare that,
1.?Ôhe information furnished in Part-I is true and correct to the best of my knowledge and
belief.
2.?I have no direct or indirect interest in the property valued.
3.?I have personally inspected the property on 30/10/10
4.?I have not been convicted of any offence and sentenced to a term of imprisonment.
5.?I have not been found guilty or misconduct in my professional capacity.

Signature of valuer