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Estate
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2020/SC-A/95
2018/HC-A/291
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2020/SC-A/95 [2021] SC 86
[2021] SC 86
2018/HC-A/291 1
A042950
A128306
A037880 A041596
A025094
A047365
A047366
A050390
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17,280,000.00
7,873,356
3,379,127.00
756,229
Number of floors 2
Total number of apartment 6
Total floor area 4200
Per SQF construction rate (self-development) 890.00
Expected yearly rental income 960,000.00
Right to use period (in years) 18
Expected rental income over 18 years 17,280,000.00
Refunded amount based on HC judgment 3,379,127.00
Expected construction cost 3,738,000.00
Discounting rate 10%
Present
Rental Discounting
Year Value (A
Income (A) factor (B)
x B)
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[2021] SC 52
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Assumptions
1- Estate should incur construction cost to earn the rental income
2- Estate initial investment refunded based on HC judgment
3- It is estimated that there will be some idle periods throughout the 18 years. Therefore, as a
provision for idling period and required maintenance cost, it is estimated that, on average, rent will
be generated for 10 months each year
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4- Estate will be able to generate rental income 10 months a year for next 18 years
5- It is estimated that Estate will be able to rent 6 apartments (2 rooms) for a monthly rental of
MVR 16,000 each
Methodology
Estate will be able to generate yearly rental income of MVR 1,152,000 over the next 18 years.
This expected rental income need to be discounted to determine the present value of future
income. Future income has been discounted at the rate of 10%. Under normal circumstance,
Estate is entitled to get the present value of future income. However, since Estate has already
received the initial investment he made from the owner that need to be deducted. Furthermore,
to earn the future rental income, Estate should incur construction cost to construct 6
apartments. Therefore, that need to be deducted as well. After making necessary deductions
related to amount being refunded and expected construction cost, Estate is entitled to get MVR
756,229 as a compensation
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