Professional Documents
Culture Documents
B. KANAGA SABAPATHY
Tiruchirappalli - 620 001.
Note : Those who are interested for the soft copy of the books Practical
valuation Vol. 18A & 18B (at free of cost), may communicate their willingness to
bkvaluer@gmail.com
(ii)
(iii)
B. KANAGA SABAPATHY
Tiruchirappalli - 620 001.
(iv)
DISCLAIMER
While every effort is taken to avoid errors or omissions in this publication, any
mistake or omission that might have crept in is not intentional. It may be taken note
of that neither the publisher nor the author will be responsible for any damage or
loss of any kind arising to any one in any manner of account of such errors and
omissions.
(v)
AUTHOR’S NOTE
18.09.2018
For the purpose of giving preliminary guidance to those who intend to appear for the
registered valuer examination conducted by Insolvency and Bankruptcy Board of India, I
have come forward to consolidate a few one mark case studies and present them in the
form of a small booklet.
Many case studies are my own, a few case studies are taken from the other books whereas
a few have been shared by the practising valuers. I wish to express my sincere thanks to
Mr. N. Ravindran, Mr. R. Jayaraman, Mr. K. Selvaraj and others.
Maximum efforts have been taken to provide the workout details and answers correctly. It
is upto the participants to take a judicial decision while facing questions during the
examination.
The main book of Practical valuation - Volume 18 contains the multiple choice questions
for Q34 to 94. The book of Practical valuation - Volume 18A contains case studies for Q89
to 94. Those who are interested in obtaining the soft copy of this Volume 18A & 18B, may
communicate their willingness to bkvaluer@gmail.com and the same will be forwarded to
them at free of cost.
Note :
1. The illustrations given in this book are given mainly for the purpose
of preparing for IBBI examination.
2. For the available data, only the outlines have been discussed here.
Depending upon the situation and the probable options given, the
participant must be able to take judicious decision.
- B. Kanaga sabapathy
1
Exercise 1 :
A machine was purchased for Rs. 1,00,000/- @ 15% depreciation of SLM. What is the
written down value after 2 years?
Ans ‘a’
Exercise 2 :
A property has a net income of Rs. 30,000/-. One appraiser decides to use a 12 percent
capitalisation rate, while a second appraiser uses a 10 percent rate. What is the
difference in appraisal value of the two valuers?
First appraiser :
100
Capitalised value = 30,000 x = Rs. 2,50,000/-
12
Second appraiser :
100
Capitalised value = 30,000 x = Rs. 3,00,000/-
10
Ans ‘a’
Exercise 3 :
The net income was reported at Rs. 21,000/- and the property was sold for Rs. 3,00,000.
What capitalisation rate is applied to this sale?
a) 5% b) 8%
c) 6% d) 7%
Ans ‘d’
Exercise 4 :
A mobile phone was purchased for Rs.50,000/-. Its salvage value is Rs. 10,000. Total life
time use 60,000 hours. Used time 20,000 hours. What is the depreciation of the cell
phone?
3
Ans ‘c’
Exercise 5 :
A Contractor took a loan of Rs. 36,00,000/- from a bank for construction of modern building
2 years back. He has to repay the loan at the Interest of 10%. If the sale of the property is
yet to take one year, calculate the amount to be paid by the contractor?
Ans ‘d’
Exercise 6 :
A promoter purchased a residential property for Rs. 60,00,000/- and immediately carried
out certain interior decorations works for Rs. 20,00,000/-.
4
He intends to dispose of the property at the end of 4 years. Calculate the cost for Purchaser
if he expects a return of 12% on his investment.
Ans ‘a’
Exercise 7 :
An Investor has the right to receive Rs. 25,00,000/- from a property after a period of
9 years. Assuming the rate of interest of 8% Find out the amount for which the investor will
be ready to relieve his future right over the property.
Ans ‘b’
5
Exercise 8 :
A property owner is able to save Rs 50,000/-per year from the net income of his property
and he invest this amount each year to earn interest at 7%. Find out the amount which will
be available at the end of 18 years.
Ans ‘c’
Exercise 9 :
A Promoter at Chennai constructed 4 flats of 1700, 1400, 1300, 1600 Sq.ft. in a plot area
of 4000 Sq.ft.
Exercise 10 :
A Real estate promoter has approached the landlord for joint venture development of an
apartment for which the unit rate of construction is Rs. 3000. The land rate is
Rs. 6000/Sq.ft. FSI = 2, What will be the joint venture ratio of promoter & Landlord?
a) 35 : 65 b) 40 : 60 c) 50 : 50 d) 37 : 67
FSI = 2
Land rate = Rs. 6,000/sq.ft.
Land component (6,000/2) = Rs. 3,000
Building rate = Rs. 3,000
Land + Building = Rs. 6,000/sq.ft.
3,000
Landlord’s share = x 100
6,000
= 50%
Ans ‘c’
Exercise 11 :
Mr. ‘X’ acquired a property at Coimbatore on 06.09.1972 for 2.25 lakhs. Fair market value
of the property as on 1.4.81 is 9.50 lakhs. The property was sold on 25.11.2014 for a sale
consideration of 105 lakhs. What is the Taxable capital gain? C.I.I. for 1981 & 2014 are
100 & 1,024 respectively.
1,024
Indexed cost of acquisition= 9,50,000 x
100
7
= Rs. 97,28,000/-
Ans ‘c’
Exercise 12 :
a) 5.82 L b) 7.82 L
c) 8.50 L d) Capital Loss
1,024
Indexed cost of acquisition = 9,50,000 x
711
= Rs. 1,36,82,000/-
Taxable capital gain = 1,30,00,000 - 1,36,82,000
= Negative
= Capital loss
Ans ‘d’
Exercise 13 :
Ans ‘c’
Exercise 14 :
A 600 sq.ft. of shop building at T. Nagar Chennai is occupied by a tenant. The net monthly
rent is Rs. 45,000/-. Find out the value of the property by R.C.Method by adopting a rate of
return 6%
a) 85,00,000/- b) 95,00,000/-
c) 90,00,000/- d) 80,00,000/-
Ans ‘c’
Exercise 15 :
Total extent of a site is 0.162 Hectare. Total built-up area of the building is 26,136 sq.ft.
What is the FSI?
Ans ‘b’
9
Exercise 16 :
An apartment building at Tiruchirappalli consists of 4-floor, eight flat of 1125 Sq.ft. at each
floor. Area of the site = 2230 Sq.m. What is the UDS of land for each flat?
4 x 8 x 1,125
FSI =
2,230 x 10.76
= 1.50
1,125
UDS =
1.5
= 750 sq.ft.
Ans ‘d’
Exercise 17 :
A Contractor took a loan Rs 40,00,000/-from the bank, at the rate of Interest 9%. What is
the amount to be paid by the contractor at the end of 4th year?
Ans ‘b’
Exercise 18 :
An immovable property yields a net annual income of Rs 60,000. The income is expected
to continue for next 99 years. What is the present value of the property if the rate of
interest is 6% p.a?
10
a) Rs 8,00,000 b) Rs 10,00,000
c) Rs 12,00,000 d) Rs 15,00,000
Ans ‘b’
Exercise 19 :
a) 11,95,000 b) 13,95,000
c) 12,50,000 d) 12,95,000
i = 0.09
n = 3
So, the amount to which his loan is accumulated
= 10,00,000 x (1 + i)n
= 10,00,000 x (1 + 0.09)3
= 10,00,000 x 1.295
= Rs. 12,95,000/-
Ans ‘d’
Exercise 20 :
5 Years back Mr.Sanjay had constructed a house at an intrinsic cost of Rs 80,00,000/- and
he has incurred an expenditure 2 years back of Rs 15,00,000/- for construction of a boundary
wall around that house. What is the total accumulated cost of his investment today at a
compound interest of 15% per annum?
a) 160.75 L b) 180.75 L
c) 190.75 L d) 165.90 L
11
i = 0.15
n = 5
Accumulated cost of his house = 80,00,000 x (1.15)5
= Rs. 1,60,91,000 (A)
Ans ‘b’
Exercise 21 :
A framed structure building at Coimbatore. Age is 16 years. Assume the life is 70 years.
What is the depreciation by constant percentage method, if the depreciation is 1.5%
a) 29.5% b) 31.5%
c) 24.5% d) 21.5%
r = 1.5%
n = 16
r
Depreciation = 1 - (1 - )n
100
1.5
= 1 - (1 - )16
100
= 1 - (0.785)
= 0.215 or
= 21.5%
Ans ‘d’
Exercise 22 :
A promoter at Chennai expects 15% profit. Building unit rate = Rs 2,500/Sq.ft. FSI is 2.
Land rate is Rs 6,000/Sq.ft. What will be the composite rate?
FSI = 2
Prevailing land rate = Rs. 6,000/sq.ft.
Land component = 6,000 / 2 = Rs. 3,000/-
Building rate = Rs. 2,500/sq.ft.
Land + Building = Rs. 5,500/sq.ft.
Add, profit 15% = Rs. 825/sq.ft.
Composite unit rate = Rs. 6,325/sq.ft.
Ans ‘a’
Exercise 23 :
It is a load bearing residential building at Chennai. Ground floor : 20 years old, First Floor
: 10 years old, Plinth area of Ground floor : 1,000 sq.ft. First floor = 800 sq.ft. Assume
salvage value is 10% Life of the building is 60 years. What is the depreciated value of the
first floor building? Replacement cost of ground floor : 2,000/sq.ft. & first floor : 1,700/
s4q.ft.
a) 8.52 L b) 9.52 L
c) 4.08 L d) 13.60 L
20
Ground floor depreciation = x (100 - 10)
60
= 30%
Replacement value of first floor = 800 x 1,700
building
= Rs. 13,60,000/-
Depreciation value of FF = 13,60,000 x 0.30
= Rs. 4,08,000/-
Depreciated value of the first floor= 13,60,000 - 4,08,000
building
= Rs. 9,52,000/-
Ans ‘b‘
Exercise 24 :
A newly constructed apartment building at Chennai having block “A” & block “B”, consists
of 30 flats in each block of 1200Sq .ft. equal super Built-up area of each flat. Area of the
land : 4800 Sq.ft. Assume 10% land of OSR (Open space reserve). What is the UDS of
the each flat?
13
Ans ‘c’
Exercise 25 :
Ans ‘a’
Exercise 26 :
An apartment building at Chennai, consists of 4 floors, each floor built-up area is 2400
Sq.ft. Area of the plot is 4800 Sq.ft. What is the plot coverage ?
14
a) 60% b) 70%
c) 50% d) 40%
Built up area of GF
Plot coverage = x 100
Area of the site
2,400
= x 100
4,800
= 50%
Ans ‘c’
Exercise 27 :
The net monthly rent of a Ground floor residential building of 1300 Sq.ft. is Rs. 18,000,
and Rs 15,000 for First floor building of same area. Find the approximate value of the
property by rent capitalization method by adopting a rate of return as 4%?
a) 89 L b) 79 L
c) 69 L d) 99 L
Ans ‘d’
Exercise 28 :
An apartment building consists of 8 flats of super built-up area : 1,200 Sq.ft. The gross
monthly rent of each flat is Rs. 9,000. Outgoing are 15% of the gross rent. The prevailing
rate of return is 3.5%. Find the approximate value of a flat by rent capitalization method?
a) 219.8 L b) 229.8 L
c) 209.8 L d) 240 L
Ans ‘c’
Exercise 29 :
A 9,000 sq.ft. of factory building at Tiruchirappalli is situated in the 2 Acres of land. Age of
the building is 15 years. Salvage value 25%. Replacement rate of building is Rs. 900/sq.ft.
Find the salvage value & depreciated value of the building? Life - 30 years.
Exercise 30 :
A Commercial property at Chennai was valued by a valuer for Rs 95L during the year
2009. What will be the value of the property as on 2017 by using the formula? Assume
12% escalation per year.
16
a) 235 L b) 245 L
c) 225 L d) 200 L
r
Amount = P(1+ )n
100
12
= 95,00,000 ( 1 + )8
100
= 95,00,000 (2.4759)
= Rs. 2,35,00,000/-
Ans ‘a’
Exercise 31 :
Mr. “Y” constructed a load bearing building of 232 Sq.mt during the year 1999. Area of the
plot is 5000 Sq.ft. What is the depreciation value & value of the property in the year 2018
for bank loan purpose? Assume life : 60 years, Salvage value : 10%. Land rate -
Rs. 2,300/-. Replacement rate of building is Rs. 2,000/sq.ft.
i) Ans ‘a’
ii) Ans ‘b’
Exercise 32 :
An investor purchased a plot of land for Rs 6L, and spent Rs 75,000/- towards stamp duty
and brokerage charges. He started construction of house on plot after 3 years. Calculate
the amount that is blocked up in land investment after 3 years on the basis of purchase
price of land and other expenses by considering 7% compound rate of interest?
a) 9.27 L b) 7.27 L
c) 8.27 L d) 9.10 L
Ans ‘c’
Exercise 33 :
A residential building at Chennai yields a net rental income (Annuity) of 2.4L/year. What is
the capitalised value of the property at 7% rate of interest?
a) 39.29 L b) 34.29 L
c) 43.29 L d) 31.29 L
Y.P. = 100 / R
18
= 100 / 7 = 14.286
Present value of the building = 2,40,000 x 14.286
= Rs. 34,28,640/-
say Rs. 34,29,000/-
Ans ‘b’
Exercise 34 :
Ground floor is a load bearing structure of age 30 years. Life - 60 years. First floor is a
framed structure with independent foundation. Age is 10 years. Life is 80 years. What is
the depreciation for FF, assuming a salvage value of 10%.
a) 11.25% b) 45%
c) 33.75% d) 30%
Ground floor :
30
Depreciation = x 90 = 45%
60
First floor :
10
Depreciation = x 90 = 11.25%
80
Ans ‘a’
Exercise 35 :
Lessee receive an income of Rs. 30,000 per annum. He pays Rs. 16,000/- rent to
landlord. If the lessee receives a rent of 8% return, how much the landlord will expect his
return.
a) 0.09 b) 0.07
c) 0.01 d) 0.10
The return of lessee is (atleast) 1% more than the rate of return of lessor.
Ans ‘b’
19
Exercise 36 :
The lessor receives a ground rent of Rs. 50,000/- from the lessee. The lessee is going to
construct a building and let it out. If the lessor receives a rate of return of 6% from his
lessee, what will be the rate of return that can be expected by the lessee.
a) 6% b) 4%
c) 5% d) 7%
The lessee expects a rate of return of atleast 1% more than the rate of return of
lessor. Hence the rate of return is 7%.
Ans ‘d’
Exercise 37 :
Plot area is 4,800 sq.ft., building 2,400 sq.ft., age is 20 years, life is 60 years, salvage
value is 15%, land rate is Rs. 1,200/sq.ft., replacement rate of building is Rs. 2,100/sq.ft.
Valuation is for security to bank. What is the forced sale value assuming the reduction
factor is 15%.
Ans ‘a’
Exercise 38 :
Total age of this building is 4 years. After four years, the depreciated value is equal to 24%
of the cost. Find out the percentage of depreciation (near to answer) by WDV method.
20
a) 24 b) 25
c) 30 d) 35
Method 1 :
r
Formula A = P (1 - )n
100
r 24
a) For 24% (1 - )4 = (1 - )4
100 100
76 76 76 76
= x x x
100 100 100 100
= 0.3336 = 33%
25
b) For 25% = (1 - )4
100
75 75 75 75
= x x x
100 100 100 100
= 0.3164 = 32%
30
c) For 30% = (1 - )4
100
70 70 70 70
= x x x
100 100 100 100
= 0.2401 = 24%
35
d) For 35% = (1 - )4
100
65 65 65 65
= x x x
100 100 100 100
= 0.1785 = 18%
Method 2 :
After 1 year 76 75 70 65
Less depreciation - 18.24 - 18.75 - 21 - 22.75
Exercise 39 :
Total age of this building is 3 years. After 3 years, the depreciated value is equal to 34.30%
of the cost. Find out the percentage of depreciation by WDV method.
a) 15 b) 20 c) 25 d) 30
After 1 year 85 80 75 70
Less depreciation - 12.75 - 16 - 18.75 - 21
Exercise 40 :
A building is 40 years old. It has a total life span of 80 years. Current replacement cost of
the building is INR 40,00,000. The salvage value of the materials of the building at the end
of the life is 10% of CRC. What is the depreciation in percentage today?
a) 55% b) 45%
c) 35% d) 65%
Age = 40
Life = 80
Salvage value = 10%
40
Depreciation = x 90 = 45%
80
Answer is ‘b’
Exercise 41 :
A machine was purchased of Rs. 18,000/- before 2 years. It is sold for Rs. 16,000/-
considering 10% depreciation (of Rs. 18,000/-) per annum. The machinery was sold for
Answer is ‘c’
* * *