VALUATION STANDARDS

12/20/2018
AND ITS RELEVANCE AT
PRESENT CONTEXT TO

IOV Bangalore
THE VALUATION
PROFESSION

SANDIP KUMAR DEB

2018
BE LLB MSc (REV) MSc (P&MV) AMIS (Val), AMIS (QS) FIV
1
 WHAT IS STANDARD?

12/20/2018
Standard is an acknowledged
measure of comparison for

IOV Bangalore
quantitative or qualitative value

2018
2
 12/20/2018
The need of uniform
standards of practice in

IOV Bangalore
valuation was first felt by
the Royal Institution of
Chartered Surveyors
(RICS) UK long back and
published its first

2018
Valuation Standards in
1974
3
The purpose of these
standards is to ensure that

12/20/2018
the valuation produced by
its members achieve high

IOV Bangalore
standard of integrity, clarity
and objectivity, and are
reported in accordance with
recognised bases that are

2018
appropriate for the purpose.
4
Through the mid 1980s a crisis was
looming in the United States savings
and loan industry. The widespread

12/20/2018
failure of the lending institutions and
investor losses resulting from the

IOV Bangalore
faulty appraisal supported mortgage
loans forced seven US appraisal
societies and the Appraisal Institute
of Canada to form Appraisal
Foundation in 1987.
This foundation came up with the first

2018
USPAP in 1989 providing a consistent
and robust set of appraisal ethics and
5
standard rules.
In 2001, the Appraisal Institute
of Canada separated itself and
published its first edition of

12/20/2018
Canadian Uniform Standards

IOV Bangalore
of Professional Appraisal
Practice (CUSPAP). Since 2006,
USPAP has been updated in a 2
year cycle, which begins on
January 1 of even number

2018
years.
6
The real estate appraisal
practice in Germany is

12/20/2018
partly codified by law. The
federal Baugesetzbuch (abbr.

IOV Bangalore
BauGB, "German statutory
code on building and
construction’) contains
guidelines on governing

2018
authorities, defines the term
market value and refers to
continuative rules. 7
This federal law is
supported by the

12/20/2018
Wertermittlungsverordnung
(abbr. WertV, "regulation on

IOV Bangalore
the determination of
value"). The WertV defines
the codified valuation
approaches and the general

2018
valuation technique.
8
 WertV's general regulations
are further supported by the

12/20/2018
Wertermittlungsrichtlinie
(abbr. WertR, "directive on the

IOV Bangalore
determination of value"). The
WertR provides templates for
calculations, tables (e. g.
economic depreciation) and
guidelines for the

2018
consideration of different
influences. 9
Valuation profession in Russia is
overseen by The Russian Society of

12/20/2018
Appraisers, established in 1993.
Members of the Russian Society of
Appraisers are bound by the

IOV Bangalore
observance of the International
Valuation Standards. There also
exists a set of three general-
purpose "Federal Valuation
Standards" (FSO 1,2,3 adopted in

2018
2007) which prescribe a required
uniform structure for valuation
reports 10
The Property Institute of New
Zealand in collaboration with the
Australian Property Institute (API)

12/20/2018
published the Australia and New
Zealand Valuation and Property

IOV Bangalore
Standards in the year 2009. API is
the successor of the
Commonwealth Institute of
Valuers formed in 1926 and PINZ

2018
is formally the New Zealand
Institute of Valuers established in
1942 11
TEGoVA is the
European umbrella
organisation of

12/20/2018
national valuers
associations. Today it

IOV Bangalore
represents the
interests of 44
associations from 26
countries with a total
of over 120,000

2018
members.
12
 INDIAN SCENERIO

12/20/2018
INSTITUTION OF VALUERS
INSTITUTION OF SURVEYORS

IOV Bangalore
INSTITUTION OF GOVERNMENT
APPROVED VALUERS
PRACTISING VALUERS ASSOCIATION OF
INDIA
INDIAN INSTITUTION OF VALUERS

2018
13
 INDIAN SCENERIO

12/20/2018
IOV Registered Valuers Foundation
Institution of Estate Managers and

IOV Bangalore
Appraisers
ICSI Registered Valuers Organisation
The Indian Institution of Valuers
ICMAI Registered Valuers Organisation
ICAI Registered Valuers Organisation

2018
PVAI Valuation Professional Organisation
CVSRTA Registered Valuers Association
14
 INDIAN SCENERIO
GOVERNING LAW

12/20/2018
IOV Bangalore
WEALTH TAX ACT, 1957
COMPANIES ACT, 2013

2018
15
 INDIAN SCENERIO

12/20/2018
ANY STATUTORY USPVP
OR CODE OF ETHICS ?

IOV Bangalore
NO

2018
16
INDIAN SCENERIO

12/20/2018
INDIAN

IOV Bangalore
VALUERS
ARE FREE

2018
17
 INDIAN SCENERIO

12/20/2018
Anybody in India
can practice as
valuer if his

IOV Bangalore
report is
accepted by the
client and end
user

(Except for the Purpose of

2018
Wealth Tax)

18
 INDIAN SCENERIO

12/20/2018
We can use any
type of

IOV Bangalore
reporting
format which
may not be

2018
understandable
to others. 19
 INDIAN SCENERIO

12/20/2018
We can use any
term suitable for

IOV Bangalore
us in our
valuation report
which may not
have any
meaning in

2018
International
Parlance
20
INDIAN SCENERIO

12/20/2018
We can adopt
any valuation

IOV Bangalore
method to
arrive at a
conclusion
which may not

2018
reflect the
market value 21
 INDIAN SCENERIO

12/20/2018
We can provide
a single page

IOV Bangalore
valuation
report without
providing any

2018
detail valuation
calculation 22
INDIAN SCENERIO

12/20/2018
I can give
statement that I

IOV Bangalore
don’t follow any
standard but I
follow my own
standard when I
could be

2018
testified as an
expert witness
23
 INDIAN SCENERIO

12/20/2018
We can accept a
fee on the basis of
percentage of

IOV Bangalore
estimated value
of the property
which is against
professional
ethics of

2018
valuation
practices in all
countries 24
INDIAN SCENERIO

12/20/2018
INDIAN

IOV Bangalore
CLIENTS ARE
ALSO FREE

2018
25
 INDIAN SCENERIO

They can

12/20/2018
engage

IOV Bangalore
anybody as
valuer if his
qualification is
accepted by

2018
the end user
26
 INDIAN SCENERIO

12/20/2018
They can
negotiate with

IOV Bangalore
the fee to any
extent as non-
qualified
empanelled
valuers are

2018
ready to work at
any level of fee
27
INDIAN SCENERIO

12/20/2018
They can blame
a valuer for the

IOV Bangalore
financial loss
suffered by
them which
might be
because of

2018
their own wrong
decision
28
 INDIAN SCENERIO

They can reject

12/20/2018
any valuation

IOV Bangalore
report at any
time if it doesn’t
suit their
purpose without

2018
assigning any
reason
29
INDIAN SCENERIO

12/20/2018
They can
force a valuer

IOV Bangalore
to deposit
security
money before
assigning a

2018
job
30
 INDIAN SCENERIO

12/20/2018
They can force
a valuer to

IOV Bangalore
sign an
indemnity bond
binding his
heirs too

2018
31
 12/20/2018
DO WE NEED UNIFORM
STANDARDS OF

IOV Bangalore
PROFESSIONAL
VALUATION PRACTICE
(USPVP) AND CODE

2018
OF ETHICS IN INDIA ?
32
12/20/2018 IOV Bangalore 2018
33
LET IT BE OUR OWN

12/20/2018
IOV Bangalore
SAFFRON BOOK

2018
34
FEATURES OF SAFFRON BOOK

12/20/2018
IT WILL FOLLOW
THE GUIDENCE
OF

IOV Bangalore
INTERNATIONAL
VALUATION
STANDARDS,
2017 BUT WILL
BE AS PER

2018
INDIAN
SITUATION 35
FEATURES OF SAFFRON BOOK

12/20/2018
IT SHALL CONTAIN
DEFINITIONS OF ALL

IOV Bangalore
COMMON VALUATION
TERMS USED IN INDIA
AS WELL AS IN
INTERNATIONAL

2018
VALUATION STANDARDS
36
FEATURES OF SAFFRON BOOK
The USPVP FRAMEWORK

12/20/2018
shall contain generally
accepted valuation concepts

IOV Bangalore
and principles upon which the
USPVP will be based and that
will be considered and
applied when following the

2018
standards
37
FEATURES OF SAFFRON BOOK
The USPVP GENERAL

12/20/2018
STANDARDS shall have
general application for all

IOV Bangalore
asset types and valuation
purposes. The General
Standards shall cover Scope
of Work, Implementation and

2018
Reporting Standards
38
 FEATURES OF SAFFRON BOOK
The USPVP ASSET STANDARDS

12/20/2018
shall consist of a standard and a
commentary. It shall also include

IOV Bangalore
illustrations of how the principles in the
General Standards are generally applied
to the particular as asset class.
Commentary will provide additional
background information on the
characteristics of each asset type and

2018
identifies the common valuation
approaches and methods used
39
FEATURES OF SAFFRON BOOK
Valuation Applications shall be

12/20/2018
produced for common
purposes for which valuations

IOV Bangalore
are required. Each application
shall contain a standard and
guidance.

2018
40
FEATURES OF SAFFRON BOOK
The standard will include any

12/20/2018
additions to or modifications
of the requirements in the GS

IOV Bangalore
and illustrations of how the
principles in the GS and AS
apply when undertaking
valuation for the purpose.

2018
41
FEATURES OF SAFFRON BOOK
The guidance section provides
information on:

12/20/2018
 the valuation requirements of
internationally applicable

IOV Bangalore
regulations or standards issued by
the other bodies that may be
applicable, e.g. International
Financial Reporting Standards,
 other commonly accepted
requirements for valuations for

2018
that purpose,
 appropriate valuation procedures
to meet these requirements. 42
FEATURES OF SAFFRON BOOK

12/20/2018
There shall be an exhaustive

IOV Bangalore
Code of Ethics applicable for
all valuers working in India

2018
43
 12/20/2018
IOV Bangalore
RELEVANCE AT PRESENT CONTEXT

2018
44
 RELEVANCE AT PRESENT CONTEXT

It will end the conflict

12/20/2018
between Judicial Decision

IOV Bangalore
and Common Valuation
Practice.

For Exmple:

2018
45
 RELEVANCE AT PRESENT CONTEXT

‘‘The most likely price, in the

12/20/2018
absence of consultation between
the valuers representing conflicting

IOV Bangalore
interests, would presumably be the
mean price.” - Hays Will Trust vs
Hays and Others (1971) 1WLR 758

2018
46
 RELEVANCE AT PRESENT CONTEXT
‘‘Where more than one approach and
method is used, or even multiple

12/20/2018
methods within a single approach, the
conclusion of value based on those

IOV Bangalore
multiple approaches and/or methods
should be reasonable and the process
of analysing and reconciling the
differing values into a single
conclusion, without averaging, should
be described by the valuer in the

2018
report” – Article 10.4, IVS 105 General
Standards, International Valuation
Standards, 2017 47
 RELEVANCE AT PRESENT CONTEXT

12/20/2018
Now, most of the valuers in India
are compelled to work without

IOV Bangalore
Work Order. But according to IVS,
Work order is a must under ‘Scope
of Work’

2018
48
 RELEVANCE AT PRESENT CONTEXT

12/20/2018
There cannot be any ‘Schedule of
Fees’ related with ‘value’ of the asset
to be estimated. Then it will be

IOV Bangalore
treated as ‘Success Fees’ or
‘Contingent Valuation’ which will
tantamount to violation of ethical
standard.

2018
49
 RELEVANCE AT PRESENT CONTEXT
All valuation reports have to be

12/20/2018
‘Speaking’ in nature. Valuers have
to disclose all the sources of their

IOV Bangalore
evidences and it will be the end
user’s duty to check the reliability
of the sources before acceptance
of the ‘report’. Once accepted, the
end user cannot blame the valuer in

2018
future for use of wrong / fake data
50
 RELEVANCE AT PRESENT CONTEXT
It is going to be the era of

12/20/2018
‘EVIDENCES’. Valuers have to
provide evidence against all his

IOV Bangalore
assessments. Presence of proper
evidence and non-presence of
evidence will make a big difference
in this era of Valuation Standards

2018
51
 RELEVANCE AT PRESENT CONTEXT
All valuers have to use defined

12/20/2018
terminologies and not any terms at
their choices in their valuation

IOV Bangalore
reports.

As for example, they cannot use the

term ‘Loveable Value’ but has to use
the term ‘Special Value’ with the

2018
same meaning but after defining
special value in their report
52
 RELEVANCE AT PRESENT CONTEXT

12/20/2018
Assumptions, Special Assumptions

IOV Bangalore
and Limitations will save the
interest of the Valuers.

2018
53
 Let us go ahead,

12/20/2018
Prepare our own

IOV Bangalore
USPVP and Code of
Ethics and make our
Valuation Reports
CREDIBLE to the

2018
entire WORLD
54
12/20/2018 IOV Bangalore 2018
55
12/20/2018 IOV Bangalore 2018
56