We determine the fair price or value of the property, such as building, a factory, other engineering structures of various types, land, etc. By valuation, the present value of a property is defined. The property’s current value may be decided by its selling price or income or rent it may fetch. The value of a property depends on its structure, life, maintenance, location, bank interest, etc.

The purpose of valuation helps in buying or selling property. When it is required to buy or to sell a property, its assessment is necessary for the following:

• Rent fixation: to determine the rent of a property, valuation is required. Rent is usually fixed on a certain percentage of valuation.
• Security of loans or mortgage: The valuation is required while taking loans against the property for security purposes.
• Compulsory acquisition: To determine the amount of compensation valuation of property is required. Valuation of a property is also necessary for insurance etc.
• Sinking fund: A certain amount of gross rent is set aside annually as a sinking fund to accumulate the total cost of construction when the life of the building is over.
• Scrape value: Scrape value is the value of the dismantled material. After dismantling, we will get the steel, brick, timber, etc. in case of machines, the scrape value is metal or dismantle parts.
• Market value: The market value of a property is the amount obtained at any particular time from the open market if the property is put for sale. This value is changed from time to time for various reasons such as a change in the industry, change in fashion, means of transport, cost of material and labor, etc.
• Book value: The book value of the property at a particular year is the original cost minus the amount of depreciation year. At the end of the utility period of the property the book value will only be scrape value after allowing necessary depreciation.
• Obsolescence: The value of property or structures becomes less by it growing out of date in style, in structure in design, etc. This is termed as Obsolescence.
• Valuation of Real Property: Valuation of a building depends on the type of building, its structure, and durability, on the situation, size, shape, width of roadway, quality of material used in the construction, and present-day price of the content used. Other factors include:
• The locality if it is in the market area having high value then the residential field.
• The specialties in the building like sewer, water supply, and electricity, etc.
• The building’s value is determined by working out its cost of construction at the present-day rate and allowing a suitable depreciation.
• Fixation of rent: The rent of building is fixed based on a certain percentage of annual interest on the capital cost and all yearly possible 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.
• The cost of construction also includes the expenditures on the following: a) raising, leveling, and dressing of site b) construction of the compound wall, fences, and gates c) stormwater drainage d) approach roads and other roads within the compound.
• 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.

“Valuation of property is a skill that comes with experience”

Ram Phal Sharma
Jitender Rana