NUST Business School

(FIN-325) – Alternative Investments Valuation

FINAL PROJECT REPORT

Contents

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INTRODUCTION:....................................................................................................................................................3
METHODOLOGY.......................................................................................................................................................... 4
SUBJECT HOUSE...........................................................................................................................................................4
COMPARABLE HOUSE 1.......................................................................................................................................6
COMPARABLE HOUSE 2.......................................................................................................................................9
COMPARABLE HOUSE 3.....................................................................................................................................11
TABLES................................................................................................................................................................... 15
ANALYSIS...............................................................................................................................................................17
CONCLUSION........................................................................................................................................................18

INTRODUCTION:
Real estate valuation is a critical process for property investors, developers, and financial
institutions, as it determines the market worth of a property. The objective of this final project is
to perform a comparative analysis of the valuation of four similar properties located in Bahria
Town Phase 8, Islamabad. The project aims to identify the factors that impact the value of these

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properties, analyze the real estate market trends in the area, and recommend a valuation strategy
for each property.
Bahria Town Phase 8 is a well-established and highly sought-after housing society in Islamabad,
Pakistan. It offers a range of residential properties, including houses, apartments, and plots, with
various sizes and specifications. The locality boasts of modern infrastructure, high-end
amenities, and convenient access to major transportation networks, making it an attractive
destination for property buyers and investors.
Valuation:
Real estate valuation is a process of estimating the market worth of a property, which involves a
comprehensive analysis of various factors such as location, size, condition, and comparable sales
in the area. There are several valuations approaches that real estate professionals use to
determine the fair market value of a property. These approaches are classified into three main
categories:
1. Sales Comparison Approach: This approach is also known as the market approach, and
it involves analyzing the recent sales prices of similar properties in the same area. The
idea behind this approach is that the fair market value of a property is determined by its
similarity to other properties that have recently sold. We will be using this approach to
compare the sales prices of similar houses in Bahria Town Phase 8 to the four properties
that we are evaluating.
2. Income Capitalization Approach: This approach is commonly used for commercial
properties, but it can also be applied to rental residential properties. The income
capitalization approach involves estimating the net income that a property can generate
and then applying a capitalization rate to determine its value. We will be using this
approach to evaluate the rental income potential of each property and to estimate their
overall value based on their income-generating potential.
3. Cost Approach: The cost approach is based on the idea that the value of a property is
equivalent to the cost of replacing it with a similar property. This approach involves
estimating the cost of construction and then subtracting the depreciation from the
property's value. We will be using this approach to estimate the value of each property
based on its construction cost and depreciation.

METHODOLOGY
Using the Sales Comparison Approach to Determine Fair Market Value of Residential
Properties in Bahria Town Phase 8

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For this project, we have selected four similar houses in Bahria Town Phase 8, Islamabad, with
comparable sizes, designs, and locations. Our objective is to evaluate the value of each property
based on its unique features, market demand, and overall market trends.
Based on our project requirements we will focus solely on the sales comparison approach for our
analysis. Our approach will involve analyzing the recent sales prices of similar houses in Bahria
Town Phase 8 to the four properties we are evaluating. By comparing the sales prices of these
comparable properties, we can estimate the fair market value of each property.
The quantitative data related to houses is taken from an architectural firm named "Cubes." The
data extracted from this company will be used to support the analysis and findings of this project
report.

SUBJECT HOUSE
House Number:750 Ali Block

Sale Price: 22,000,000 Rs

The subject house has a selling price of 22 million, which makes it a high-value property.

Location: Bahria Town Phase 8

The subject house is situated in Bahria Town Phase 8, which boasts several commercial elements
that can impact its overall value.

Positive Aspects
 South Facing House

The south-facing orientation of the house can be considered a significant advantage. A south-
facing house is exposed to more sunlight, which can improve the overall energy efficiency of the
property, resulting in lower utility bills. Moreover, it can create a brighter and more comfortable
living environment, which can enhance the overall appeal of the house.
 Proximity to Commercial Hub

The subject house's proximity to the commercial hub is another positive factor, as it provides
easy access to a range of essential services, such as shopping, dining, and entertainment options.
This can increase the convenience and desirability of the property, making it more attractive to
potential buyers.

 65-feet Wide Road

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Additionally, the wide 65-feet road is another advantage of the subject house, as it can provide
easier access to the property, especially for larger vehicles. A wider road can also enhance the
visual appeal of the neighborhood, creating a sense of spaciousness and luxury.

Negative Aspect

 Proximity to Commercial Hub

On the downside, being close to a commercial hub can also have some drawbacks, such as
increased traffic, noise, and pollution. Moreover, the value of the house can be negatively
impacted if the commercial area becomes overcrowded or unappealing over time.
 South Facing House

Additionally, being south-facing can also have its disadvantages, such as increased heat in the
summer, which can result in higher cooling costs specially in a country like Pakistan.

House Size: 7 Marla

The subject house possesses various positive attributes, including its size, which contributes
significantly to its overall value and desirability. With a size of 7 marla, the house offers ample
living space, making it an attractive option for families or individuals who require more room for
their daily activities. The house can comfortably accommodate more rooms, allowing for greater
flexibility in its layout and providing more options for its occupants. Furthermore, the larger size
of the house means that it has the potential for expansion or development, which can further
increase its value over time.

Home Age and condition: Constructed and sold a year ago, Overall condition is Excellent
The age and condition of a house are essential factors that impact its overall value. In the case of
the subject house, which was completed in January 2022, it can be considered a brand new
property, which is a significant advantage. Being a new construction, the house is likely to have
modern fixtures, fittings, and finishes, making it more appealing to potential buyers.
Additionally, newer homes tend to have better energy efficiency features, which can result in
lower utility bills, and they require less maintenance compared to older homes. Therefore, the
subject house is likely to be in excellent condition and require less immediate upkeep, making it
a desirable investment option. As it is a newly constructed house, it is also less likely to require
costly repairs or renovations in the near future, further enhancing its overall value. In summary,
the fact that the subject house was completed in January 2022 adds to its attractiveness and value
to potential buyers.

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Amenities: Built In Dishwashers
The subject house is equipped with several modern amenities, which can add to its overall value
and appeal to potential buyers. For instance, having a built-in dishwasher is a significant
convenience factor. This is considered essential by many homebuyers, and its presence in the
house can make it more attractive to potential buyers.

COMPARABLE HOUSE 1
House Number: Usman Block- 3669 D

Sales Price: Rs. 23,800,000

The house has a selling price of Rs.
23,800,000 which makes it an expensive
property.

Location: Bahria Town Phase 8

The location of the house is a prime one.
Location in Bahria Town itself is a plus
point due to the security it has in place.
The presence of international and national
brands makes it a center of commercial
and business activity.

Positive aspects:

1. Situated Close to Commercial Hub:

Distance nowadays has become a challenge not only due to heavy traffic but also because
of inflation and rising fuel costs. This house is situated close to the commercial hub
which will allow the resident to travel quickly to the commercial hub. This will
significantly impact the price of the property and drive it upwards.

2. Located near a football ground:

Sports facilities have become rare
these days and are being sought after.
The availability of a football ground
near the house is a great quality of
this location and will definitely cause
a rise in the price of this house.

3. Spacious Garden: A 2 Marla

Garden between the house and field

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 which adds to the beauty and spaciousness of the property. This could be ideal for social
gatherings and small to mid-sized events and is bound to add value to the price of the
property.

4. Close to the main boulevard:

The main boulevard in any society is home to offices and commercial places. This is an
extremely important factor when people are looing for properties to buy and live in
therefor has a high demand and eventually a high price compared to those house far from
the main boulevard.

5. North Facing house:

The position of this property is towards the North. This increases the value of the house
substantially as a North facing house means that sunlight falls at the back of the house
and most of the houses have a living room upfront. Our country experiences 7 to 8
months of hot weather and a comfortable living room makes North facing houses a high
value property.

6. Servant Quarter:
This house has a built in servant quarter to attract qualified and experienced helping staff
and provide for their residence. This would be prove to beneficial in retaining employees.
In this increasingly independent world few people have time to spend on the house and
thus increasing the importance of servants. This feature of the property adds significant
value to its price.

Negative aspects:

1. Location near Main Boulevard:

The location near a boulevard can become a hassle at times due to heavy traffic in the
evening, especially when people are returning home from offices. Approaching the house
might become congested. Furthermore, for safety purposes and smooth flow, an increased
number of traffic signals may also slow down the flow of the traffic.

2. North facing house:

The north facing house may face a problem as far as the bedrooms are concerned. The
heat from the sunlight falling at the back of the house is bound to increase the cooling
cost of the house in the long and tough weather of summer. Furthermore during the
construction phase of the property the house enjoyed lesser time of sunlight and may not
have dried as well as a south facing house relatively.

House size: 7 Marla

The house size is a very decent one. The fact that the house is a double story house even 7
marlas are not less to accommodate a family of 7 8 people and can also facilitate guests. The

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 house is a desirable option for families or individuals who need extra space for their
everyday activities because it is large (7 marla). The home can comfortably hold additional
rooms, allowing for a more flexible floor plan and offering its residents more options. The
house's larger size also indicates that there is room for future growth or development, which
might boost its worth even more.

Home Age and condition: Built and sold a year ago, excellent overall condition.

A house's age and condition are crucial elements that affect its overall worth. The subject
house can be regarded as a brand-new property since it was finished in January 2022, which
is a key benefit. Because it is a new building, the home is likely to include contemporary
fixtures, fittings and finishes, which will appeal to more buyers. Additionally, compared to
older homes, newer homes typically have superior energy efficiency features, which can lead
to cheaper utility bills, and they require less upkeep. The subject home is therefore likely to
be in excellent shape and require minimal immediate maintenance, making it an attractive
investment opportunity.

COMPARABLE HOUSE 2

House Number: 2846

Block: Abu Bakr Block

Sale Price: 29,500,000 Rs

The subject house has a selling price of
29.5 million, which makes it a high-
value property.

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Location: Bahria Town Phase 8
The subject house is situated in Bahria Town Phase 8, which boasts several commercial elements
that can impact its overall value.

Positive Aspects
 South Facing House
The south-East-facing orientation of the house offers several advantages such as the house
receives abundant sunlight during the day which creates a bright and inviting atmosphere.
 Energy Efficiency
With sun shining into the house, it naturally helps to warm up the space during winters which
reduces the need for excessive heating. This leads to energy efficiency and lower heating costs.
 Proximity to Commercial Hub
The subject house's proximity to the commercial hub is another attractive feature of the property,
as it provides easy access to a range of essential services, such as shopping, dining, health care
facilities and entertainment options. This convenience can save you time and effort in meeting
your daily needs.
 65-feet Wide Road
Additionally, the wide 65-feet road is another advantage of the subject house, as it can provide
easier access to the property, especially for larger vehicles. A wider road can also enhance the
visual appeal of the neighborhood, creating a sense of spaciousness and luxury.

Negative Aspect
 Proximity to Commercial Hub
On the downside, being close to a commercial hub can also have some drawbacks, such as
increased traffic, noise, and pollution. Moreover, the value of the house can be negatively
impacted if the commercial area becomes overcrowded or unappealing over time.
 South Facing House
Additionally, being south-facing can also have its disadvantages, such as increased heat in the
summer, which can result in higher cooling costs specially in a country like Pakistan.

House Size: 7 Marla

The subject house possesses various positive attributes, including its size, which contributes
significantly to its overall value and desirability. With a size of 7 marla, the house offers ample
living space, making it an attractive option for families or individuals who require more room for
their daily activities. The house can comfortably accommodate more rooms, allowing for greater
flexibility in its layout and providing more options for its occupants. Furthermore, the larger size
of the house means that it has the potential for expansion or development, which can further
increase its value over time.

Home Age and condition: Constructed and sold a year ago, Overall condition is Excellent

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The age and condition of a house are essential factors that impact its overall value. In the case of
the subject house, which was completed in January 2022, it can be considered a brand new
property, which is a significant advantage. Being a new construction, the house is likely to have
modern fixtures, fittings, and finishes, making it more appealing to potential buyers.
Additionally, newer homes tend to have better energy efficiency features, which can result in
lower utility bills, and they require less maintenance compared to older homes. Therefore, the
subject house is likely to be in excellent condition and require less immediate upkeep, making it
a desirable investment option. As it is a newly constructed house, it is also less likely to require
costly repairs or renovations in the near future, further enhancing its overall value. In summary,
the fact that the subject house was completed in January 2022 adds to its attractiveness and value
to potential buyers.

Amenities:
 Built in dishwashers
The subject house is equipped with several
modern amenities, which can add to its overall
value and appeal to potential buyers. For
instance, having a built-in dishwasher is a
significant convenience factor. This is
considered essential by many homebuyers, and
its presence in the house can make it more
attractive to potential buyers.

 Built in Washing machine

A built-in washing machine provides an enhanced aesthetics appeal as it blends seamlessly with
the surroundings. Potential buyers often appreciate this attention to detail and the modern,
organized appearance it provides. It also saves space and maximizes the use of available square
footage. Build in appliances are often associated with high end and luxury homes and this
increases the value of the home.

 Mezzanine floor
Adding a mezzanine floor to a house can potentially increase the value of a house in several
ways;
1. Additional usable space: By
incorporating a mezzanine floor,
effectively the space increases
without extending the blueprint.
This additional space can be used
for bedrooms or as office space.
2. Improved layout and flow: A
mezzanine floor can overall layout
and flow of the house. It creates
distinct zones within the property.
This improved spatial arrangement

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 can make the house more efficient and conductive to modern living which positively
impacts its value.
3. Increased visual and architectural appeal: a well-designed and aesthetically pleasing
mezzanine floor can add a sense of architectural interest to the property. It creates an
additional level, often with open views the lower floor, adding depth and dimension to
the interior space. The feature can make the stand out from others and attract buyers who
appreciate unique design elements.

COMPARABLE HOUSE 3
House Number: 315 Ali Block

Sale Price: 30,000,000 Rs.

With a selling price of 30 million, this house can be considered a premium property.

Location: Bahria Town Phase 8

Being situated in Bahria Town Phase 8, the house benefits from the various commercial elements
present in the area, which can positively impact its overall value.

Positive Aspects:

 North facing: A north-facing

property is usually preferred
as it receives maximum
sunlight during the day,
especially in the winter
months when the sun is lower
in the sky. This can help keep
the house warm and reduce
energy bills. Additionally, the
house will be cooler in the
evenings, making it more
comfortable to live in during
the summer months.

 65-feet Wide road: A wide road of 65 feet provides ample space for parking and easy
movement of vehicles, reducing the chances of congestion and making it easier for
residents to move around.

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  Not on boulevard: Being away from the boulevard can provide some privacy and
reduced noise levels, especially during peak traffic hours. It also means that there will be
less traffic passing by, reducing the chances of accidents and making it safer for children
to play outside.

 Proximity to Commercial Hub: Its

proximity to a commercial hub can
increase its overall value as it offers easy
access to various amenities and services.

 Powder Room. The house has an

additional powder room which adds to the
value of the property.

Negative Aspect

 Wide road: A wide road can bring in more traffic and noise, which could be a nuisance
for residents, especially during peak hours. It could also lead to increased air pollution
and decreased air quality.

 Not on boulevard: Being away from the boulevard may result in a longer commute to
the main road, which could be inconvenient for some. It could also mean that there are
fewer amenities and services in the immediate vicinity.

 Village facing: Being village facing may have certain drawbacks, such as less access to
modern amenities and infrastructure that are often found in urban areas. This could make
it difficult to access essential services such as healthcare and education, especially for
those who live far from the city center. Additionally, it could limit employment
opportunities and make it harder for residents to find work close to home.

 Proximity to Commercial Hub: Living near a commercial hub may have some
drawbacks, including higher levels of traffic, noise, and pollution. Furthermore, if the
commercial area becomes overcrowded or unattractive over time, the value of the house
may decrease.

House Size: 7 Marla

Spaciousness: A 7 marla house typically provides a spacious living area with enough rooms to
accommodate a family of five or six comfortably.

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Flexibility: With a 7 marla house, you have the
flexibility to design and decorate your home
according to your personal taste and needs. You
can choose from a wide range of architectural
styles, floor plans, and interior designs.
Value: A 7 marla house is a great investment for
your future. The value of a property tends to
appreciate over time, which means that you can
expect to receive a good return on your
investment when you decide to sell it.
Privacy: A 7 marla house offers more privacy
compared to an apartment or a smaller house.
You have more space between you and your
neighbors, which means that you can enjoy a greater level of privacy and independence.
Amenities: A 7 marla house typically offers more amenities compared to smaller houses or
apartments. You can have a dedicated parking space, a backyard, a terrace, and a garden, among
other features.

Home Age and condition: Constructed and sold recently, Overall condition is Excellent
This is a brand new property. Since the home is in excellent condition, it is less likely to require
repairs or maintenance in the near future. This can save the homeowner money on upkeep costs
in the long run. Newer homes are often built with energy-efficient materials and appliances,
which can help lower energy bills and reduce the home's carbon footprint. The home is in an
excellent condition and has modern amenities so it is more attractive to potential buyers. This
can increase the home's resale value and help it sell more quickly.

Amenities: Built In Dishwashers and washing machine

Built-in dishwashers and washing machines are
designed to be efficient in terms of water and
energy consumption. This can help reduce your
utility bills and conserve resources. They take up
less space compared to standalone appliances. This
can be particularly beneficial for smaller homes
where space is at a premium. Having built-in
appliances can increase the overall value of the
property. Homebuyers often look for modern and
updated features in a house, including built-in
appliances. Overall, having built-in dishwashers
and washing machines in a house can provide
several benefits in terms of convenience,
efficiency, hygiene, space-saving, and property value. It can make household chores easier and
more efficient, while also enhancing the overall functionality and attractiveness of the home.

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TABLES
Comparable Houses
Subject House
Ali Block - Usman Block- Abu Bakr
Ali Block-750
315 3669 Block- 2846
1 2 3
Adjustments:
Sales Price 22,000,000 23,800,000 23,600,000 29,000,000
Add: South Facing Premium @8% - - 1,888,000 -
Add: Garden Premium @5% - 1,190,000 - -
Add: Corner Plot Premium @10% - - - -
Add: Mezzanine Floors
- - 3,068,000 3,770,000
Premium@13%
Add: Powder Room Premium @5% - - - 1450000
Add: Time Factor @10% - 2,075,219 1,450,895 2,138,400

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 Value After Adjustment 22,000,000 27,065,219 30,006,895 36,358,400

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 Comparable Houses
Subject House
Usman Block- Abu Bakr Block-
Ali Block - 315 Ali Block-750
3669 2846
1 2 3
Bahria Town, Bahria Town, Bahria Town, Bahria Town,
Sector
Phase 8 Phase 8 Phase 8 Phase 8
Completion Date January,2019 January,22 November, 2022 January, 2023
Selling Date May, 2019 Feburary,22 January, 2023 April, 2023
Cost of Production 15,500,000 16,500,000 23,600,000 24,000,000
Selling Price 22,000,000 23,800,000 29,500,000 30,000,000
Plot Size 7 Marla 7 Marla 7 Marla 7 Marla
Bedrooms 5 5 5 5
Living Rooms 1 2 2 2
Powder Room - - - Yes
Bathrooms 6 6 6 6
Servant Quarters 1 1 1 1
No. of Floors 2 2 2 2
Double Unit Yes Yes Yes Yes
Garage Size 2 Cars 2 Cars 2 Cars 2 Cars
Garden No Yes No No
Swimming Pool No No No No
Built in Dishwasher Yes Yes Yes Yes
Built in Washing
Machine No Yes Yes Yes
Mezzanine Floors No No Yes Yes
Garden No No No No
Building Material
Grade B+ B+ B+ B+

ANALYSIS

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The plots identified in our valuation all share similar features, many of which include the layout design, a lack of
heightened infrastructure, cosmetic traits and high quality infrastructure. Therefore, the increase in cost of
production of the plots have changed (mainly) through inflationary pressures as well as added features such as
mezzanine floors, powder rooms and built in washing machines.

Our comparison, utilizing, Plot-315, will re-assess the key factors that impact the valuation of the highlighted plot.
The quality assurance and construction criteria grade meets the “B+-grade” for these load bearing houses. The
company utilizes cement from best-ways, a grade construction bricks, and does not compromise on the internal
electrical and plumbing quality. Plot-315, earns a profit of 6.5 million rupees, Plot-3669, earns 7.2 million, and
Plot-750 earns 6 million as well. Thus, the commercial value and subsequent features does not let the profit
margin of an investment in phase 8 fall below 6 million RS. In addition, it is visible that each year, both the cost of
production and selling price of the similar houses are increasing. Prior to the completion date, each house was
constructed in a period of 1.5 to 2 years. It is visible that every house completed after January 22 has included the
excessive inflationary pressures. Comparing 315 to 2846, the cost of production has jumped from 15.5 million to
22 million (Jan 23). Albeit, this plot bears excess costs of the mezzanine floor, it is not enough to create such a large
different. Drawing further comparisons with 2846 and 750, the cost of production has increased by 400,000 Rs,
through inflation, where both plots had the previously stated mezzanine floors. Thus proving the effect of inflation
on a time frame of 4 months. In short, with a period of approximately 3 years, there has been an estimated
inflation of 35-40%.

The general directional preference in the northern Punjab region is of a “South-facing” building, where the building
gets the maximum amount of temperature throughout the day. Excluding plot 2846, the rest do not meet this
premium criterion. Further investigation in the local market suggested that the “South-facing” phenomena is only
second to the corner plot premium. While some may argue that the cooling to heating ratio costs balance out in
when comparing polar opposites, the market perception cannot be changed.

The newest plot, 750, has both the powder room and the mezzanine floor. These are infrastructural changes that
do not raise the cost of production to a very high degree and provide consumers with an attractive alternative to
tradition. Both these changes have resulted in the brand image of the company to increase as part of their design
campaign. Other factors, such as washing machine inclusions have not had a direct impact on the selling price, and
can be labeled as an attractive feature only. These inclusions have allowed the company to maintain their margin
of 6-7 million even when the market is unstable.

Time factor elements have a great part to play in the valuation of our plots. The volatile inflation has suggested
that valuation has to incorporate inflationary pressures onto the selling prices through rising cost of production. At
it’s true valuation, plot 3669 and 750 each have distinct differences such as garden premiums and powder rooms.
They are, however, undervalued by 3.2 and 6.5 million. This is mainly due to the market not responding to higher
selling prices, at the same rate cost of production increases. It may also be attributed to individual factors such as
village facing and preference of south facing. As such, in order to attract an unstable market, a lower selling price is
adopted.

Ultimately, our valuation and the selling prices of the plots differ by some margin. While each plot is located in the
same region, distinct drawbacks and benefits have changed the levels of valuation.

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CONCLUSION
The current housing market is declining at a rapid rate. Due to high inflation, uncertainty with the exchange rate
and an increased supply, the cost of production is rising continuously while the selling price of these plots are
failing to catch-up at the same speed. The company addresses these losses by maintaining a close 6-7 margin on all
of their projects, reducing their selling prices against their truer valuations. However, in comparison to the market,
these plots sell for a rate of Rs. 1 million higher – a feat possible through their brand image of unique designs, high
quality products and presence in the market.

The factor with the greatest impact on improved valuation is the mezzanine floor. This aid’s in creating an artificial
structure within the house giving it a more lifted and chic look while hiding natural beams and further increasing
the usability of the space. In our valuation, the second contender is the garden premium, however, these areas are
subject to the scrutiny of the designated land authorities and can be withheld for use if there are changes in the
overall use of free land.

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