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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.
D depreciated value
P cost at present market rate
rd fixed percentage of depreciation (r stands for rate
and d for depreciation)
n The number of years the building had been
constructed.
To find the total valuation of the property, the present
value of land, water supply, electric and sanitary fitting
etc; should be added to the above value.
The value of rd can be taken as
given in table below
S.N Life of Building rd value
1 75 100 1
2 50 75 1.3
3 25 50 2
4 20 25 4
5 <= 20 5
Fixation of rent:
The rent of building is fixed upon the basis of
certain percentage of annual interest on the
capital cost and all possible annual expenditure
on outgoings.
The capital cost includes the cost of construction
of the building, the cost of sanitary and water
supply work and the cost of electric installation
and alteration if any.
The cost of construction also includes the
expenditures on the following: a) raising, levelling
and dressing of site b) construction of compound
wall, fences and gates c) storm water drainage d)
approach roads and other roads within the
compound.
Net return is worked out based on
Capita cost / Years purchase
If the capital cost is not known, this
may be worked out by any method of
valuation.
The owner experts about 2% higher
interest than the prevalent interest
to cover up the risk of his
investment.
To this net return, all possible
expenditures on outgoings are added
to get gross annual rent.
Valuation of Land:
Valuation of land is done by one of
the three methods as and where
applicable.
1. Comparative method
2. Belting method
3. Hypothetical building schemes
Comparative method: this is simplest and
most direct method. The method is based on
instances of other sales with dates of open
comparative like lands in the neighbourhood.
So there are two main factors on witch this
method is based 1) Sale prices and 2) similar
neighbourhood lands.
Sale prices should be recent.
The method is based on the comparison of
like to like. Properties may be similar but
each property is unique so they can never be
like. But we can assess by using the
following factors.
Situation: position of the land means
locality, availability, type of people,
nearby schools, market, office,
hospital etc.
Size:
Return Frontage:
Front road width:
Vistas:
Nature of soil:
Belting method of valuation: it is based
on the road frontage. Frontage land has a
greater value than back land. So in order to
find out the realistic value of land the
entire plot is divided into a number of
convenient strips by lines parallel to the
centre line of the road.
Each such type of land is known as belt.
Then a relationship regarding the value
and the depth of each belt to the front belt
is fixed up. Then calculate the valves of
each belt in terms of first belt. Then
summing up the value of each belt.
Normally the plot of land is divided in to three
belts. The depth of second belt is taken as 1
times that of front belt and the depth of the
third belt at 1 times the depth of the second
belt or depth remaining after second belt is
considered as the depth of third belt.