1 & 2 Mark Case Studies

ADDITIONAL STUDY MATERIALS ON CASE STUDIES
IBBI EXAMINATION
(LAND & BUILDING)
CASE STUDIES
Online Coaching Class on Case Studies (20 marks)

as per revised Syllabus w.e.f. 01.06.2020
STUDY MATERIALS
Part I - 12 & 8 marks case studies
Part II - One mark case studies
B. KANAGA SABAPATHY
bkvaluer@gmail.com
www.bkanagasabapathy.com
154 pages
2
Suggested study materials for IBBI examination
1. Practical valuation - Volume 18 (4th revision) - Multiple choice questions
2. Practical valuation - Volume 22 - 1010 quiz
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3
PART - I
TWELVE MARKS CASE STUDIES

- Pages 1 to 126
EIGHT MARKS CASE STUDIES
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4 AUGUST 2020
B. KANAGA SABAPATHY
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* * *
5
Part - I
CASE STUDIES ON VALUATION
CONTENTS
1. Valuation of Building - 7 - 21
2. Valuation by Land & Building method - 22 - 40
3. Written down value & Book value - 41 - 44
4. Insurance - 45 - 56
5. Valuation by Cost index method - 57 - 60
6. Valuation by Belting method - 61 - 65
7. Valuation of Petrol bunk - 66 - 69
8. Valuation of Leasehold properties - 70 - 80
9. Valuation by Profit method - 81 - 83
10. Bank valuation - 84 - 85
11. Ground rent - 86 - 87
12. Valuation of Tenanted properties - 88 - 93
13. Residual value method - 94 - 95
14. Capital gain - 96 - 109
15. Apartments & J.V. ratio - 110 - 121
16. Miscellaneous topics - 122 - 126

6
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. A few case studies have been taken from the book of Mr. R.K. Gandhi.
7
1. VALUATION OF BUILDING
Exercise 1 :
It is a load bearing structure. Age is 8 years. Life is 60 years.
i) What is the percentage depreciation by straight line method assuming a salvage

value of 10%.
ii) What is the depreciation by constant percentage method if the depreciation rate is
1.5%.
i) Age = 8 years
Life = 60 years
Salvage = 10%
8
Depreciation = x (100 - 10) = 12%
60
r
ii) Depreciation = 1 - (1 - )n
r 100
Formula A = P (1 - 100 )n
1.5
= 1 - (1 - )8
A = depreciated value 100
P = replacement value
n = age = 1 - (0.985)8
r = rate of depreciation
Depreciation factor = 1 - (0.886) = 0.1138 or
Depreciation percentage = 0.1138 x 100 = 11.38%
Exercise 2 :
It is a load bearing structure of 20 years old. Plinth area : 1275 sq.ft.. Replacement rate =
Rs. 1,650/sq.ft. What is the depreciated value of the building (Life : 60 years, salvage
value = 10%) by adopting straight line method (SLM)?
Plinth area = 1,275 sq.ft.

Replacement rate = Rs. 1,650/sq.ft.
Replacement value = Rs. 21,03,750/-
Age of the building = 20 Years
Life of the building = 60 years
Salvage value = 10%
8
20
Depreciation percentage = x (100 - 10) = 30%
60
Depreciated value or = 0.7 x 21,03,720
Net Present Value or = Rs. 14,72,625/-
Depreciated Replacement cost
or NCRC
Exercise 3 :
The built up area of a GF building is 5,000 sq.ft. and the carpet area is 4,000 sq.ft. Plot area
is 10,000 sq.ft. What is the FSI? What is plot coverage?
Builtup area
FSI =
Plot area
5,000
= = 0.5
10,000
GF area
Plot coverage = x 100
Plot area
5,000
= x 100 = 50%
10,000
Exercise 4 :
A building of 8,000 sq.ft (GF & FF - 4,000 sq.ft each) is existing in a plot of 8,000 sq.ft.
What is the plot coverage?
Plinth area of GF
Plot area
4,000
= x 100 = 50%
8,000
Exercise 5 :
20 years factory building of 5,000 sq.ft. is situated in 1 acre of industrial land. The unit
replacement rate of building is Rs. 1,000/-. Assuming the life as 40 years and a salvage
value of 30%, find the depreciated value and salvage value of the building.

9
Replacement value = Rs. 50,00,000

Age of the building = 20 years
Life assumed = 40 years
Salvage value assumed = 30%
20
Depreciation percentage = x (100 - 30) = 35%
40
Depreciated value = 0.65 x 50,00,000 = Rs. 32,50,000
Salvage value = 0.30 x 50,00,000 = Rs. 15,00,000
Exercise 6 : (IBBI)
Building area = 1,200 m2 ; Age = 25 years ; Life = 50 years ; Salvage value = Nil ; Plot area
= 2,000 m2 ; Land rate = Rs. 8,000/m2 ; Replacement cost of building = Rs. 25,000/m2.
What is the value?
Land value = 2,000 x 8,000 = Rs. 1,60,00,000

25
Depreciation percentage = x 100 = 50% (salvage value is nil)
50
Depreciated value of the building = 1,200x25,000x0.5 = Rs. 1,50,00,000
Total value (Land + building) = Rs. 3,10,00,000
Exercise 7 :
The plinth area of a RCC roofed load bearing residential building (16 years old) is
1,000 sq.ft. The life of the building as 60 years and a salvage value of 10%,
Questions :
1) Calculate the depreciated value if the unit replacement cost is Rs. 1,800/-.
2) For the above building, if the age of the first floor is 10 years, what will be the
depreciated value of first floor of built up area 1,200 sq.ft. assuming the unit rate of
construction as Rs. 1,400/-.
Data :
Type of structure = Load bearing

Life = 60 years
10

Salvage value = 10%
Calculations :
GF
Age = 16 years
Life = 60 years
Salvage value = 10%
16
Depreciation percentage = x 90 = 24%
60
Depreciated value = 0.76 x 18,00,000
= Rs. 13,68,000/- (1)
FF
Age = 10 years
Life = 60 Years
Depreciation (as of GF) = 24%
Replacement value = 1,200 x 1,400 = 16,80,000
= Rs. 12,76,800/- (2)
Answers :
1) Rs. 13,68,000/- 2) Rs. 12,76,800/-
Exercise 8 :
A RCC framed structure building consists of front portion (1,500 sq.ft. - 24 years age) and
rear portion (1,200 sq.ft. - 16 years). The replacement unit rate of construction is
Rs. 1,600 per sq.ft. Life - 80 years. Salvage value - 10%.
Questions :
1) What is the depreciated value of rear portion?

11
2) What is the depreciated value of the front portion?
Data :
Number of portions = 2
Type of structure = RCC framed
Area of front portion = 1,500 sq.ft.
Age of front portion = 24 years
Area of rear portion = 1,200 sq.ft.
Age of rear portion = 16 years
Replacement rate of construction = Rs. 1,600/sq.ft. (average)
Life = 80 years
Salvage value = 10%
Calculations :
Rear portion :
Plinth area of rear portion = 1,200 sq.ft.
Replacement value = 1,200 x 1,600
= Rs. 19,20,000
Salvage value = 10%
16
80
Depreciation value = 0.18 x 19,20,000
= Rs. 3,45,600
Depreciated value = 19,20,000 - 3,45,600
= Rs. 15,74,400/- (1)
Front portion :
Plinth area of front portion = 1,500 sq.ft.
= Rs. 24,00,000
Age = 24 years
Life = 80 years
Salvage value = 10%
12
24
80
= Rs. 6,48,000
= Rs. 17,52,000/- (2)
Answers :
1) Rs. 15,74,400/- 2) Rs. 17,52,000/-
Exercise 9 :
It is a residential building of GF & FF. The age of GF is 16 years and FF is 8 years. Plinth
area of each floor is 1,200 sq.ft. Replacement unit rate of GF & FF is Rs. 1,600 & 1,200
respectively. Assume life as 60 years and salvage value as 10%.
Questions :
1. What is the depreciated value of GF?

2. What is the depreciated value of FF?
Data :
Number of floors = GF & FF

Plinth area of ground floor = 1,200 sq.ft.
Age of ground floor = 16 years
Replacement rate of ground floor = Rs. 1,600/-
Plinth area of first floor = 1,200 sq.ft.
Age of first floor = 8 years
Replacement rate of first floor = Rs. 1,200/-
Life = 60 years
Salvage value = 10%
Calculations :
GF FF
Plinth area = 1,200 sq.ft. 1,200 sq.ft.
Replacement rate = Rs.1,600/sq.ft. Rs.1,200/sq.ft.
Replacement value = Rs.19,20,000 Rs.14,40,000
13
Age = 16 years 8 years

Life = 60 years 60 years
Salvage vlaue = 10% 10%
16 8
Depreciation = x 90 = 24% x 90 = 12%
60 60
But, 24% is adopted
(as of GF)
Depreciation value = 19,20,000 x 0.24 14,40,000 x 0.24
Rs. 4,60,800 Rs. 3,45,600
Depreciated value = Rs. 14,59,200/- Rs. 10,94,400/-
(1) (2)
Answers :
1) Rs. 14,59,200/- 2) Rs. 10,94,400/-
Exercise 10 :
A load bearing building (1,500 sq.ft.) of 20 years old is existing in a plot of 2,400 sq.ft. The
unit land rate of plot is Rs. 2,000 and replacement unit rate of construction is
Rs. 1,700 sq.ft. It is a collateral security. Salvage value = 10%.
Questions :
1) Determine the market value assuming it is a marketable property?

2) Determine the forced value (assuming a reduction factor as 15%)?
Data :

Age = 20 years
Plot area = 2,400 sq.ft.
Land rate = Rs. 2,000/-
Replacement rate of construction = Rs. 1,700/sq.ft.
Salvage value = 10%
Purpose = Collateral security to bank
14
Calculations :
Land value = 2,400 x 2,000 = Rs. 48,00,000
Building area = 1,500 sq.ft.

Salvage value = 10%
20
60
Depreciated value of building = 0.7 x 1,500 x 1,700

= Rs. 17,85,000
Total value = Rs. 65,85,000/- (1)
48,00,000 + 17,85,000
Forced sale value 0.85x65,85,000= Rs. 55,97,250/- (2)
Answers :
1) Rs. 65,85,000/- 2) Rs. 55,97,250/-
Exercise 11 :
Plinth area is 1,000 sq.ft. Replacement rate of construction is Rs. 2,000/sq.ft. Age is
20 years. Life is 60 years. Salvage value is 10%.
Questions :
1) What is replacement value?

2) What is depreciation percentage by adopting straight line method?
3) What is the net present value?
4) What is the depreciation percentage by constant percentage method assuming a
rate of depreciation as 1.5%.
5) What is the balance economic life?
Data :

15

Salvage value = 10%
Calculations :

Replacement value = Rs. 20,00,000/- (1)

Life of the building = 60 Years
Salvage value = 10%
Depreciation = (20/60) x 90 = 30% (2)
Depreciation value = 0.3 x 20,00,000 = Rs. 6,00,000

Net present value = 20,00,000 - 6,00,000
= Rs. 14,00,000/- (3)
r n
Depreciation percentage = 1-(1 - )
100
by constant %age method
r
Formula A = P (1 - 100 )n 1.5 20
= 1-(1 - )
A = depreciated value 100
P = replacement value
= 1 - (0.985)20
Depreciation factor = 0.26087
Depreciation percentage = 0.26087 x 100 = 26.09% (4)
Balance economic life = 60 - 20 = 40 Years (5)
Answers :
1) Rs. 20,00,000/- 4) 26.09%

2) 30% 5) 40 Years
3) Rs. 14,00,000/-
Exercise 12 :
Ground floor of a residential bungalow was constructed in 1985 at a (historic) cost of

16
Rs. 3,50,000. First floor was constructed in 1990 at a cost of Rs. 6,00,000/-. Work out
replacement cost of bungalow for the year 2003 by Book value method. The building cost
multiplier factor with 1960 as base year for year 1985, 1990 and 2003 were 14.16, 27.08
and 87.50 respectively. (Courtesy : Mr. R.K. Gandhi).
Questions :
1. What is the replacement cost of ground floor by book value method?

2. What is the replacement cost of first floor by book value method?
3. What is the total replacement cost of the building by book value method?
Data :
Year of construction of GF = 1985

Cost invested for GF = Rs. 3,50,000/-
Year of construction of FF = 1990
Cost invested for FF = Rs. 6,00,000/-
Cost multiplier factor (1960 as base = 14.16
year) for the year 1985
Calculations :
1. Ground floor cost in 1985 = Rs. 3,50,000/-

Cost factor for 1985 = 14.16
Replacement cost of GFin 2003 3,50,000
= x 87.50
by Book value method 14.16
= Rs. 21,62,782/- (1)
2. First floor cost in 1990 = Rs. 6,00,000/-

Replacement cost of FF by 6,00,000
= x 87.50
Book value method 27.08
= Rs. 19,38,700/- (2)
17
3. Total replacement cost = 21,62,782 + 19,38,700

= Rs. 41,01,482/- (3)
Answers :
1. Rs. 21,62,782/- 3. Rs. 41,01,482/-

2. Rs. 19,38,700/-
Exercise 13 : (IBBI)
The ground floor of an RCC framed residential building was constructed in 1978. The first
floor of the building was constructed in 1992 and second floor was in 2010. A major structural
renovation took place in 2015. The areas of ground floor, first floor and second floor are
1200 sq ft., 1200 sq. ft and 800 sq ft respectively. The cost of construction of similar type
of building in 2015 as per CPWD Plinth Area Rate method is INR 1600 per sq ft. The Cost
Index in 2018 is 114. The remaining economic life of the building in 2018 is another
65 years.
Questions :
2010 800
Y
1) What is the physical age of first floor as on date? SF
2) What is the effective age of the building? 1992 1200

Y
3) What is the replacement value of the building in 2018? FF
4) What is the depreciation percentage of the first floor in 2018? 1978 1200
Y
5) What is the depreciated value of the building in 2018? GF
Data :

Year of construction of FF = 1992
Year of construction of SF = 2010
Year of major renovation = 2015
Plinth area of GF = 1,200 sq.ft.
Plinth area of FF = 1,200 sq.ft.
Plinth area of SF = 800 sq.ft.
in 2015
Cost index in 2018 = 114/-
Remaining economic life as on = 65 years
2018
18
Calculations :
1) Year of construction of FF = 1992

Age of FF = 2018 - 1992 = 26 years
Age of the GF = 2018 - 1978 = 40 years
For the purpose of calculating the

depreciation of upper floors, the
age of GF is mainly considered.
.
. . the physical age of FF = 2018 - 1978 = 40 years (1)
2) Age of GF = 40 years
Remaining economic life = 65 years
Effective life of the building = 65 + 40 = 105 years
3) Replacement rate of construction = Rs. 1,600/sq.ft. (2)

in 2015
Cost index in 2018 = 114
1,600
Replacement rate in 2018 = x 114 = Rs. 1,824/-
100
Plinth area of SF = 800 sq.ft.
Total plinth area of the building = 3,200 sq.ft.
Replacement value of the building= 1,824 x 3,200
in 2018
= Rs. 58,36,800/- (3)
4) Age of GF =
40 years
Life of GF =
105 years
Salvage value assumed as =
10%
40
Depreciation percentage = x 90 = 34.29% (4)
105
This %age is assumed as %age of depreciation for FF also.
5) Replacement value of building = Rs. 58,36,800/-

= Rs. 20,01,439/-
19

= Rs. 38,35,361/- (5)
Answers :
1) 40 years 4) 34.29%
2) 105 years 5) Rs. 38,35,361/-
3) Rs. 58,36,800/-
Exercise 14 :
There is a commercial building of GF + 2 in a busy commercial locality. GF (2,000 sq.ft.) is

a load bearing structure of age 40 years. The economic life can be assumed as 60 years
with a salvage value of 10%. The FF (2,200 sq.ft.) & SF (2,200 sq.ft.) is a framed structure
of age 20 years which rest on independent separate foundation. The economic life of this
new structure can be assumed as 80 years. The replacement cost of load bearing
structure is Rs. 1,600/sq.ft. and the average replacement cost of FF & SF is Rs. 1,800/
sq.ft. The external services is 10% for all the floors. The plot area is 4,000 sq.ft. and the
prevalent rate of land is Rs. 5,000/sq.ft. Salvage value for FF is 10%.
12
12 12
12
12
12 12
12
12 SF 12
12
12 2,200 12
12
20Y
12
12 12
12
Questions : 12 12
12
12
FF 12
12
12 12 20Y
12 2,200 12
12
12 12
12
1) What is the value of the plot? 12 12
12
12 12
12
2) What is the depreciated value of GF? 12 GF 12
12 12 40Y
12 2,000 12
3) What is the depreciated value of FF & SF? 12
12 12
12
4) What is the value of the entire building?
5) What is the value of the building for the purpose of fire insurance assuming 20%
as the value of foundation?
6) What is the value of property?
Data :
• Plot area = 4,000 sq.ft.

Rate for land = Rs. 5,000/sq.ft.
• Plinth area of GF = 2,000 sq.ft.

Age of GF = 40 years
Economic life = 60 years
20
Replacement cost = Rs. 1,600/-

External service = 10%
• Plinth area of FF & SF = 2,200 sq.ft. & 2,200 sq.ft.

Age of FF & SF = 20 years
Economic life of FF & SF = 80 years
Type of structure = RCC framed with independent
foundation
Replacement rate = Rs. 1,800/-
External services = 10%
Calculations :

Rate of plot = Rs. 5,000/sq.ft.
Value of plot = 4,000 x 5,000
= Rs. 2,00,00,000/- (1)
GF
Replacement rate = Rs. 1,600/-
= Rs. 32,00,000
Add 10% for external services = Rs. 3,20,000
Total = Rs. 35,20,000/-
Age of ground floor = 40 years
Life of ground floor = 60 years
Salvage value = 10%
40
60
= Rs. 21,12,000/-
Depreciated value of GF = 35,20,000 - 21,12,000
= Rs. 14,08,000/- (2)
FF & SF
Built up area of first floor = 2,200 sq.ft.
Built up area of second floor = 2,200 sq.ft.
Total built up area = 4,400 sq.ft.
Replacement rate = Rs. 1,800
21
Add 10% for external services = Rs. 180

Rate + Service = Rs. 1,980/-
= Rs. 87,12,000/-
Age of FF & SF = 20 years
Life of FF & SF = 80 years
Salvage value = 10%
20
Depreciation percentage = x 90 = 22.5%
80
= Rs. 19,60,200/-
Depreciated value of FF & SF = 87,12,000 - 19,60,200
= Rs. 67,51,800/- (3)
Total value of building

GF - load bearing - 2,000 sq.ft. = Rs. 14,08,000
FF & SF - framed structure - 4,400 sq.ft.= Rs. 67,51,800
Value of building = Rs. 81,59,800/- (4)
Depreciated value of building = Rs. 81,59,800

Less value of foundation (-20%) = (-) Rs. 16,31,960
Value for the purpose of insurance= Rs. 65,27,840 (5)
Value of plot = Rs. 2,00,00,000

Value of building = Rs. 81,59,800
Total value of the property = Rs. 2,81,59,800/- (6)
Answers :
1) Rs. 2,00,00,000/- 4) Rs. 81,59,800/-

2) Rs. 14,08,000/- 5) Rs. 65,27,840/-
3) Rs. 67,51,800/- 6) Rs. 2,81,59,800/-
* * *
22
2. VALUATION BY LAND & BUILDING METHOD
Exercise 1 :
In 2008, Mr. X purchased a residential plot of 3,000 sq.ft. for Rs. 15,00,000/-. In the year
2010, he constructed a residential building of GF for 1,500 sq.ft. and in the year 2012, he
constructed FF for 1,200 sq.ft. In 2018, a valuation report is required. Replacement cost of
GF is Rs. 2,000/sq.ft. and FF is 1,600/sq.ft. Prevailing market rate of plot is Rs. 2,000/sq.ft.
and the guide line rate is Rs. 2,500/sq.ft. Assume the life as 60 years and salvage value is
10%.
Questions :
1. What is the total replacement value of the building?

2. What is the total depreciation value of the entire building?
3. What is the total depreciated value of the entire building?
4. What is the prevailing market value of the plot?
5. What is the total value of the property as on date that can be certified?
6. What is the book value of the plot as on 2018?
Data :

Purchased cost of plot (2008) = Rs. 15,00,000/-
Area of building GF (2010) = 1,500 sq.ft.
Area of building FF (2012) = 1,200 sq.ft.
Replacement cost of building GF (2018) = Rs. 2,000/sq.ft.
Replacement cost of building FF (2018) = Rs. 1,600/sq.ft.
Prevailing market rate of plot = Rs. 2,000/sq.ft.
Guideline rate = Rs. 2,500/sq.ft.
Salvage value = 10%
Date of valuation = 2018
Calculations :
Value of GF
Plinth up area of Ground floor = 1,500 sq.ft.

23
Replacement rate of GF = Rs. 2,000/sq.ft.

Replacement value 1,500 x 2,000 = Rs. 30,00,000
Age 2018 - 2010 = 8 years
Life = 60 years
Salvage value = 10%
Depreciation percentage (8/60) x 90 = 12%
Depreciation value of GF = 0.12 x 30,00,000
= Rs. 3,60,000
Depreciated value of GF = 30,00,000 - 3,60,000
= Rs. 26,40,000/-
Value of FF
Built up area of First floor = 1,200 sq.ft.

Replacement rate of FF = Rs. 1,600/sq.ft.
Replacement value 1,200 x 1,600 = Rs. 19,20,000
Age 2018 - 2012 = 6 years
6
60
Depreciation of GF is adopted (i.e. 12%)
Depreciation value 0.12 x 19,20,000 = Rs. 2,30,400
Depreciated value 19,20,000 - 2,30,400 = Rs. 16,89,600/-
Value of GF + FF
Total replacement value 30,00,000 + 19,20,000 = Rs. 49,20,000/- (1)

Total depreciation value 3,60,000 + 2,30,400= Rs. 5,90,400/- (2)
Total depreciated value 26,40,000 + 16,89,600= Rs. 43,29,600/- (3)
Value of Plot
Extent of plot = 3,000 sq.ft.

Prevailing market rate = Rs. 2,000/sq.ft.
Value - 3,000 x 2,000 = Rs. 60,00,000/- (4)
Total value of property
Value of plot = Rs. 60,00,000

Total value = Rs. 1,03,29,600/- (5)
24
Book value
Book value of plot = Rs. 15,00,000/- (6)
Answers :
1) Rs. 49,20,000/- 4) Rs. 60,00,000/-

2) Rs. 5,90,400/- 5) Rs. 1,03,29,600/-
3) Rs. 43,29,600/- 6) Rs. 15,00,000/-
Exercise 2 : (IBBI)
A doctor purchased a plot of 2,000 Sq.m. in a posh locality in a city in the year 1997 for a
price of Rs. 50,00,000/-. In the year 1998, he constructed a hospital having 500 Sq.m. built up
floor area at ground level and 200 Sq.m. built up area at first floor level at the cost of Rs.
20,00,000/-. Prevalent replacement cost of similar hospital as on 2018 is
Rs. 35,000 per Sq.m. Prevalent land price in the locality at present is Rs.80,000 per Sq.m.
Age of building is 20 years and the total life of the building is 60 years.
Questions :
1. What will be the depreciation amount of the hospital building by adopting straight
line method of depreciation and considering scrap value at 10% ?
2. What will be the depreciation amount of the hospital building by adopting constant
percentage method of depreciation?
3. What will be the total market value of the plot at present?
4. What will be the total market value of the hospital property for bank loan purpose?
5. What is the balance economic life of the building?
6 Which of the following will not be considered for the estimation of present value of
building?
a) Age b) Area of the building

c) Replacement cost d) Land rate
25
Data :
Extent of plot = 2,000 sq.m.

Year of purchase of plot = 1997
Purchased amount = Rs. 50,00,000/-
Year of construction = 1998
Plinth area of the building GF = 500 sq.m.
Built up area of the building FF = 200 sq.m.
Cost of building GF + FF (500 + 200) = Rs. 20,00,000/-
Replacement rate of the building = Rs. 35,000/sq.m.
Prevalent land rate = Rs. 80,000/sq.m.
Calculations :
1. Total built up area = 700 sq.m.

Replacement rate / sq.m. = Rs. 35,000
Replacement value - 700 x 35,000 = Rs. 2,45,00,000
Age = 20 years
Life = 60 years
Salvage value = 10%
20
60
Depreciation amount : 0.3x2,45,00,000= Rs. 73,50,000/- (1)
2. Life = 60 years
100
Rate of depreciation = = 1.66 %
60
1.66 20
Depreciation amount = [
P 1-(1-
100
) ]
r n = 2,45,00,000 [1 - 0.7155]
[
P 1-(1-
100
) ] = 2,45,00,000 x 0.2845
= Rs. 69,70,250/- (2)
3. Extent of plot = 2,000 m2

Prevalent market rate = Rs. 80,000/m2
Market value of land - 2,000 x 80,000= Rs. 16,00,00,000/- (3)
26
4. Land value - 2,000 x 80,000 = Rs. 16,00,00,000

Depreciated value of the building = 0.7 x 2,45,00,000
= Rs. 1,71,50,000
Total value - Land + building = Rs.17,71,50,000/- (4)
5. Total economic life of building = 60 years

Balance economic life : 60 - 20 = 40 years (5)
6. While estimating the present market value of the building,

1. Age is to be considered.
2. Area is to be considered.
3. Replacement cost is to be considered.
Land rate need not be considered. (6)
Answers :
1) Rs. 73,50,000/- 4) Rs. 17,71,50,000/-

2) Rs. 69,70,250/- 5) 40 years
3) Rs. 16,00,00,000/- 6) Land rate need not be
considered.
Exercise 3 :
In the year 2000, a plot of 4,800 sq.ft. was purchased by Mr. X for Rs. 4,80,000/-. In 2008, he
constructed GF for an area of 1,400 sq.ft. In 2015, he constructed FF for an area of 1,200
sq.ft. It is a load bearing structure. The replacement rate of construction of GF & FF is Rs.
1,800 & Rs. 1,500 respectively. The guideline (circle) rate of plot is Rs. 1,540/sq.ft. and the
prevailing market rate is Rs. 1,000/sq.ft. Assume a salvage value 10%, Date of valuation is
2018.
The questions are :
1. What is the land value in 2018?

2. What is the depreciated value of GF?
3. What is the depreciated value of FF?
4. What is the market value of the property assuming it is a marketable property?
5. What is the forced sale value of the property assuming a reduction factor of 15%?
6. What is the book value of the plot in 2018?
27
Data :

Purchased cost (2000) = Rs. 4,80,000/-
Area of GF (2008) = 1,400 sq.ft.
Area of FF (2015) = 1,200 sq.ft.
Replacement rate of GF = Rs. 1,800/sq.ft.
Replacement rate of FF = Rs. 1,500/sq.ft.
Circle rate of plot = Rs. 1,540/sq.ft.
Market rate of plot = Rs. 1,000/-
Calculations :
Value of land in 2018 - (4,800 x 1,000) = Rs. 48,00,000/- (1)

Age of GF - (2018 - 2008) = 10 years
Economic life of load bearing structure = 60 years
Salvage value = 10%
Depreciation percentage - (10/60) x 90 = 15%
Replacement rate of GF = Rs. 1,800/-
Replacement value - 1,400 x 1,800 = Rs. 25,20,000/-
Depreciated value - 25,20,000 x 0.85 = Rs. 21,42,000/- (2)
Age of FF - (2018 - 2015) = 3 years

3
60
Depreciation percentage adopted = 15% (as of GF)
Replacement rate of FF = Rs. 1,500/-
Replacement value - 1,200 x 1,500 = Rs. 18,00,000/-
Depreciated value - 18,00,000 x 0.85 = Rs. 15,30,000/- (3)
Market value of the property (assuming it is marketable) :
Plot value = Rs. 48,00,000

Building - GF = Rs. 21,42,000
Building - FF = Rs. 15,30,000
Total value = Rs. 84,72,000/- (4)
28
Forced sale value 0.85 x 84,72,000 = Rs. 72,01,200/- (5)
Book value of the plot in 2018 = Rs. 4,80,000/- (6)
Answers :
1. Rs. 48,00,000/- 4. Rs. 84,72,000/-

2. Rs. 21,42,000/- 5. Rs. 72,01,200/-
3. Rs. 15,30,000/- 6. Rs. 4,80,000/-
Exercise 4 : (IBBI)
A business man purchased a plot of 1000 sq.mt. in a posh locality of a city in the year 1987
for a price of Rs. 30,00,000. In the year 1988, he constructed a residential bungalow having
300 sq.mt. built up floor area at ground level and 100 sq.mt. built up area at first floor level at
the cost of Rs. 14,00,000. Prevalent replacement cost of similar bungalow as on today is Rs.
30,000 per sq.mt. Prevalent land price in the locality at present is
Rs. 60,000 per sq.mt. Age of building is 30 years and the total life of the building is
60 years.
Questions :
1. What will be the depreciation amount of the bungalow by adopting straight line
method of depreciation and considering scrap value at 10 % ?
2. What will be the depreciation amount of the bungalow by adopting constant

3. What will be the market value of the land at present?
4. What will be the total market value of the bungalow property for the bank loan
purpose?
6. Which of the following will not be considered for the estimation of present market
value of above property?
a) Depreciation b) Replacement cost
c) Current land rate d) Economic obsolescence
Data :
Extent of plot = 1,000 sq.m.

29
Year of purchase of plot = 1987

Purchased amount = Rs. 30,00,000/-
Year of new construction = 1988
Plinth area of the building GF = 300 sq.m.
Built up area of the building FF = 100 sq.m.
Cost of building GF + FF (300 + 100) = Rs. 14,00,000/-
Replacement cost = Rs. 30,000/sq.m.
Calculations :
1. Total built up area = 400 sq.m.

Replacement rate / sq.m. = Rs. 30,000
Replacement value - 400 x 30,000 = Rs. 1,20,00,000
Salvage value = 10%
30
60
Depreciation amount : 0.45x1,20,00,000= Rs. 54,00,000/- (1)
2. Life = 60 years
100
Rate of depreciation = = 1.66 %
60
1.66 30
Depreciation amount = [
P 1-(1-
100
) ]
r n
[
P 1-(1-
100
) ] = 1,20,00,000 x 0.3948
= Rs. 47,37,600/- (2)
3. Extent of plot = 1,000 m2

Prevalent market rate = Rs. 60,000/m2
Market value of land - 1,000 x 60,000= Rs. 6,00,00,000/- (3)
4. Land value - 1,000 x 60,000 = 6,00,00,000

Depreciated value of the building = 0.55 x 1,20,00,000
(SLM) = Rs. 66,00,000
30
Total value - Land + building = Rs. 6,66,00,000/- (4)
5. Total economic life of building = 60 years

Balance economic life 60 - 30 = 30 years (5)
6. While estimating the present market value of the property,

1. Depreciation is to be considered.
2. Replacement cost is to be considered.
3. Current land rate is to be considered.
Economic obsolescence need not be considered. (6)
Answers :
1) Rs. 54,00,000/- 4) Rs. 6,66,00,000/-

2) Rs. 47,37,600/- 5) 30 years
3) Rs, 6,00,00,000/- 6) Economic obsolescence
need not be considered.
Exercise 5 :
Twenty years back, Mr. X purchased a plot of 3,000 sq.ft. for 4 lakhs. In this plot, he con-
structed a residential building of 1,000 sq.ft. 16 years back. The replacement rate of con-
struction including services today is 1,800/sq.ft. Assume the life as 80 years and
salvage value as 10%. The prevalent rate of plot as Rs. 1,500/sq.ft.
1) What is the value of the property (Land + building) as on date?

2) What is the depreciation amount for the building as on date? (by adopting straight
line method)
3) What is the forced sale value of the property assuming 15% as the reduction
factor?
4) What is the auction value of the property assuming 30% as the reduction factor?
5) What will be the upset price if the bank fixes 10% as the reduction factor?
6) What is the cost of the plot for balance sheet purpose?
Data :
Plot (3,000) purchased cost = Rs. 4,00,000

Plinth area of building = 1,000 sq.ft.
31

Replacement rate of building = Rs. 1,800/sq.ft.
Life = 80 years
Salvage value = 10%
Prevalent land rate = Rs. 1,500/sq.ft.
Calculations :
a. Extent of plot = 3,000 sq.ft.

Prevalent market rate = Rs. 1,500/sq.ft.
Value of plot = Rs. 45,00,000/-
b. Plinth area of building = 1,000 sq.ft.

Salvage value = 10%
Depreciation percentage = (16/80) x 90 = 18%
Depreciation value = Rs. 3,24,000
0.18 x 18,00,000
Depreciated value = Rs. 14,76,000/-
(18,00,000 - 3,24,000)
c. Value of the property = Rs. 59,76,000/- (1)

45,00,000 + 14,76,000
The depreciation amount of the building = Rs. 3,24,000/- (2)
Value of the property = Rs. 59,76,000

Forced sale value = 0.85 x 59,76,000
= Rs. 50,79,600/- (3)
Value of the property = Rs. 59,76,000

Auction value = 0.7 x 59,76,000
= Rs. 41,83,200/- (4)
Auction value certified by the valuer = Rs. 41,83,200

Less 10% = (-) 4,18,320
Upset price fixed by the bank = Rs. 37,64,880/- (5)
32
The purchased amount of plot will be the cost for balance sheet purpose.
Cost is Rs. 4,00,000/-.
Answers :
1) Rs. 59,76,000/- 4) Rs. 41,83,200/-

2) Rs. 3,24,000/- 5) Rs. 37,64,880/-
3) Rs. 50,79,600/- 6) Rs. 4,00,000/-
Exercise 6 :
A load bearing building having 1,000 sq.m. built-up floor area is constructed in the year 1992.
Total area of the plot is 5,000 sq.m. Replacement cost of building in March 2012 is Rs. 7,500/
sq.m. Prevalent Land rate is Rs. 1,200/sq.m. in the locality.
Questions :
1. What is the value of the plot?

2. What is the replacement value of building?
3. What is the depreciation percentage by adopting straight line method assuming
the life as 60 years and salvage value as 10%?
4. What is the depreciation value?
5. What is the depreciated value?
6. What is the total value?
Data :
Building type = RCC roofed load bearing

Builtup area of the building = 1,000 sq.m.
Replacement cost of building 2012= Rs. 7,500/sq.m.
Plot area = 5,000 sq.m.
Value to be calculated as on = 2012
Calculations :

Land value = 5,000 x 1,200
= Rs. 60,00,000/- (1)
33
Building area = 1,000 sq.m.

Replacement rate = Rs. 7,500
= Rs. 75,00,000/- (2)
Age of the building = 2012 - 1992 = 20 years

Depreciation percentage = (20 / 60) x 90 = 30% (3)

= Rs. 22,50,000/- (4)
Net present value (NPV) or = 75,00,000 - 22,50,000

Depreciated value
= Rs. 52,50,000/- (5)
Total value of the property = 60,00,000 + 52,50,000

= Rs. 1,12,50,000/- (6)
Answers :
1. Rs. 60,00,000/- 4. Rs. 22,50,000/-

2. Rs. 75,00,000/- 5. Rs. 52,50,000/-
3. 30% 6. Rs. 1,12,50,000/-
Exercise 7 :
A residential load bearing structure having 280 sq.m. built-up floor area is constructed in
1961 at Delhi. Area of plot is 650 sq.m. Calculate value of property as on 01.04.1981, if
prevalent land rate in 1981 in that locality was Rs. 800 per sq.m. Cost index for Delhi in 1981
was 176 with base year 01.10.1976 as 100. Rate for bungalow in 1976 was Rs. 325/sq.m.
Plumbing cost/unit was Rs. 6,000 and electrification cost was Rs. 5,700/unit as per C.P.W.D.
memorandum of 01.10.1976. Life is 60 years & salvage value is 10%.
(Courtesy : Mr. R.K. Gandhi)
Questions :
1. What is the value of the plot as on 1981?

2. What is the replacement value of the building as on 1981?
3. What is the depreciation percentage by adopting straight line method assuming life
as 60 years & salvage value as 10%?
34
4. What is the depreciation value as on 1981?

5. What is the Net present value of the building?
6. What is the total value of the property as on 1981?
Data :
Structure = Load bearing

Builtup area = 280 sq.m.
Place = Delhi
Area of plot = 650 sq.m.
Land rate prevailing (1981) = Rs. 800/sq.m.
Cost index for Delhi with base = 100
year 01.10.1976
Cost index for Delhi (1981) = 176
Rate of bungalow 1976 = Rs. 325/sq.m.
Plumbing cost/unit = Rs. 6,000/unit
Electrification = Rs. 5,700/unit
Calculations :

Rate in 1981 = Rs. 800/sq.m.
Value of plot in 1981 = 650 x 800
= Rs. 5,20,000/- (1)
Building replacement cost in 1976

Basic rate = Rs. 325/sq.m.
Builtup area = 280 sq.m.
Building cost = 280 x 325
= Rs. 91,000
Add for plumbing = Rs. 6,000
Add for electrification = Rs. 5,700
Total replacement cost in 1976 = Rs. 1,02,700
This is for cost index of = 100
Cost index in Delhi in 1981 = 176
... Replacement cost of building 1,02,700
= x 176
in 1981 100
= Rs. 1,80,752/- (2)
35
Age of the building = 1981 - 1961 = 20 years

Salvage value = 10%
20
Depreciation percentage = x (100 - 10) = 30% (3)
60
= Rs. 54,225/- (4)
Net present value or = 1,80,752 - 54,225

Depreciated value
= Rs. 1,26,527/- (5)

as on 1981
= Rs. 6,46,527/- (6)
Answers :
1. Rs. 5,20,000/- 4. Rs. 54,225/-

2. Rs. 1,80,752/- 5. Rs. 1,26,527/-
3. 30% 6. Rs. 6,46,527/-
Exercise 8 :
A bungalow having G + 2 upper floor is for sale. Area of plot is 500 sq.m. Ground floor having
200 sq.m. built-up area was built in 1975. 1st and 2nd floor having total 300 sq.m. built-up
area were raised in 1995. Prevalent land rate in locality, in 2012, is Rs. 46,000/sq.m. and
replacement cost is Rs. 18,000/- per sq.m. Date of valuation is 2012.
Questions :
1. What is the value of the plot as on 2012?

2. What is the replacement value of the building?
3. What is the depreciation percentage that can be adopted for entire building by
adopting straight line method assuming life as 60 years and salvage value as 10%?
4. What is the depreciation value of the building?
5. What is the Net present value of the building?
6. What is the total value that can be certified for the entire property?
36
Data :

Area of GF = 200 sq.m.
Area of FF & SF = 300 sq.m.
Year of construction of FF & SF = 1995
Land rate in 2012 = Rs. 46,000/sq.m.
Replacement cost of building = Rs. 18,00,000/sq.m.
Calculations :

Land rate = Rs. 46,000/sq.m.
Value of plot = 500 x 46,000
= Rs. 2,30,00,000/- (1)
Area of GF = 200 sq.m.

Area of FF & SF = 300 sq.m.
Total area = 500 sq.m.
Replacement rate = Rs. 18,000/sq.m.
Replacement value = 500 x 18,000
= Rs. 90,00,000/- (2)

Valuation as on = 2012
Age as on 2012 = 2012 - 1975 = 37 years
37
Depreciation of GF = x (100 - 10) = 55.5% (3)
60
Depreciation of FF & SF = Adopted same as GF

= Rs. 49,95,000/- (4)
Depreciated value or = 90,00,000 - 49,95,000

Net present value of the building
= Rs. 40,05,000/- (5)
37
Present value of the property = Land value + Building value

= 2,30,00,000 + 40,05,000
= Rs. 2,70,05,000/- (6)
Answers :
1. Rs. 2,30,00,000/- 4. Rs. 49,95,000/-

2. Rs. 90,00,000/- 5. Rs. 40,05,000/-
3. 55.5% 6. Rs. 2,70,05,000/-
Exercise 9 :
An existing two storeyed framed structure stands on land measuring 2 grounds (1 ground
= 2,400 sq.ft.). The ground floor and first floor each has an area of 1,000 sq.ft. The ground
floor was constructed 20 years ago and the first floor 12 years ago. The prevailing land mar-
ket value of a similar adjacent vacant plot was Rs. 90,000 per ground. The
replacement cost of new similar construction (including foundation) is Rs. 300 per sq.ft. for
ground floor and Rs. 250 per sq.ft. for the first floor. External services, amenities, boundary
wall, etc. provided can be taken at 15% of the depreciated cost of the structure. Value the
property. Assume life as 80 years & salvage value as 10%.
Questions :
1. What is the value of plot?

2. What is the net present value of ground floor?
3. What is the depreciation percentage of first floor?
4. What is the net present value of first floor?
5. What is the value of services?
6. What is the total value of property?
Data :
Structure = Framed structure

Plot area = 2 grounds
Age of GF = 20 years
Age of FF = 12 years
Replacement cost of GF = Rs. 300/sq.ft.
Replacement cost of FF = Rs. 250/sq.ft.
38
Prevailing market rate of plot = Rs. 90,000/sq.ft.

Services = 15%
Calculations :
Area of plot = 2 grounds

Prevailing market rate of plot = Rs. 90,000/ground
Value of plot = 2 x 90,000
= Rs. 1,80,000/- (1)
GF : Plinth area of GF = 1,000 sq.ft.

Replacement rate = Rs. 300/sq.ft.
Replacement value = 1,000 x 300
= Rs. 3,00,000
Salvage value = 10%
20
80
Depreciation value = 0.225 x 3,00,000 = 67,500
Depreciated value or = 3,00,000 - 67,500
Net Present Value
= Rs. 2,32,500/- (2)
FF : Plinth area of FF = 1,000 sq.ft.

Replacement value = 1,000 x 250
= Rs. 2,50,000
Depreciation percentage of FF = Same as GF (i.e. 22.5%) (3)
Depreciation value = 0.225 x 2,50,000 = 56,250

Depreciated value or = 2,50,000 - 56,250
Net Present Value = Rs. 1,93,750/- (4)
Total value of building (GF + FF) = 2,32,500 + 1,93,750

= Rs. 4,26,250/-
External services 15% = 0.15 x 4,26,250
= Rs. 63,938/- (5)
39
Total value of property = 1,80,000 + 4,26,250 + 63,938

(Plot + Building + Services)
= Rs. 6,70,188/- (6)
Answers :
1) Rs. 1,80,000/- 4) Rs. 1,93,750/-

2) Rs. 2,32,500/- 5) Rs. 63,938/-
3) 22.5% 6) Rs. 6,70,188/-
Exercise 10 :
Land extent is 500 sq.m. in which a building of 300 sq.m. is existing. Year of construction is
2002. Present replacement cost is Rs. 20,000/sq.m. Prevailing market rate of land is Rs.
22,000/sq.m. What is the selling price as on today (omit salvage value)?
Data :
Extent of land = 500 sq.m.

Market rate = Rs. 22,000/sq.m.
Building area = 300 sq.m.
Replacement rate of building = Rs. 20,000/sq.m.
Salvage value = Nil
Calculation :
Plot
Extent of land = 500 sq.m.

Market rate = Rs. 22,000/sq.m.
Value : 500 x 22,000 = Rs. 1,10,00,000/-
Building
Area of building = 300 sq.m.

Replacement value = 300 x 20,000
= Rs. 60,00,000/-
40
Age : 2018 - 2002 = 16 years

Salvage value = Nil
16
Percentage of depreciation = x 100
60
= 26.67%
= Rs. 16,00,200/-
Depreciated value = Rs. 43,99,800/-
3.0. Total value
Value of plot = Rs. 1,10,00,000

= Rs. 1,53,99,800/-
* * *
41
3. WRITTEN DOWN VALUE & BOOK VALUE
Exercise 1 :
An assessee has spent Rs. 1,20,00,000 in his new building in the year March 2014. What will
be the written down value (WDV) of the above building as on 31.03.2018 assuming a rate of
depreciation as 10%. This is required for preparing balance sheet for Income Tax
purpose.
Book value as on 31.03 2014 = Rs. 1,20,00,000

Less 10% depreciation = (-) Rs. 12,00,000
WDV as on 31.03.2015 = Rs. 1,08,00,000
WDV as on 31.03.2016 = Rs. 97,20,000
WDV as on 31.03.2017 = Rs. 87,48,000
WDV as on 31.03.2018 = Rs. 78,73,200/-
r n
Formula A = P(1- )
100
10 4
= 1,20,00,000 ( 1 - )
100
= 0.661 x 1,20,00,000
= Rs. 78,73,200/-
Exercise 2 :
In the year 2015, Mr. ‘X’ has spent Rs. 87,00,000/- in purchasing a vacant site of
10,000 sq.ft. which includes registration charges, stamp duty, brokerage, etc. What will be
the book value of the plot as on 2017?
Book value is the amount spent originally in procuring the site.
... Book value = Rs. 87,00,000/-

42
Exercise 3 :
A factory building with 30’ roof height was constructed in 1974 at the cost of Rs. 6,40,000.
Calculate the replacement cost (by book value method) in the year 1995 if prevalent
building construction cost in 1974 and 1995 were Rs. 530/sq.m. and Rs. 5,800/sq.m.
respectively.
Historical cost 1974 = Rs. 6,40,000
Historical cost in 1974

Replacement cost = x cost factor in 1995
Cost factor in 1974
5,800
= 6,40,000 x
530
= Rs. 70,03,774/-
Exercise 4 :
A machine was purchased in year 1993 at the cost of Rs. 2,20,000/-. Cost Index factor for
year 1993 was 37.50 with base year 1960 as 1.00. Calculate replacement cost of machine
in year 2003 if Cost Index factor for year 2003 is 87.50 with same base year.
Book value as on 1993

Replacement cost (2003) = x Cost Index factor for 2003
Cost index factor for 1993
87.50
= 2,20,000 x
37.50
= Rs. 5,13,333/-
Exercise 5 :
In April 2012, Mr. ‘X’ has purchased a residential plot of 3,000 sq.ft. for an amount of
Rs. 9,00,000/- and has paid Rs. 1,22,000 for the registration charges, stamp paper,
brokerage expenses, etc. In this plot, he constructed a commercial building of 2,200 sq.ft.
for an amount of Rs. 25,25,000. The construction was completed in February 2013.
Calculation of book value is required for the purpose of income tax. Assume a
depreciation of, say, 10%.
43
Questions :
1. What is the book value of the property as on 31.03.2013?

Data :
Purchased cost of plot 3,000 sq.ft. = Rs. 9,00,000

in April 2012
Registration expenses stamp duty = Rs. 1,22,000
and brokerage
Commercial building - 2,200 sq.ft. = Rs. 25,25,000
Depreciation percentage = 10%
Purpose of valuation = Income tax
Calculations :
Cost of the plot in April 2012 (i.e. 2012 - 13) = Rs. 10,22,000/-
9,00,000 + 1,22,000
Historic cost of the building in February 2013 = Rs. 25,25,000/-

(i.e. 2012 - 13)
S.no. As on Land Rs. Building Rs. Book value Rs.
1. 31.03.2013 10,22,000 25,25,000 35,47,000 (1)
2. 31.03.2014 10,22,000 25,25,000 x 0.9 32,94,500 (2)

= 22,72,500
3. 31.03.2015 10,22,000 22,72,500 x 0.9 30,67,250 (3)

= 20,45,250
44
4. 31.03.2016 10,22,000 20,45,250 x 0.9 28,62,725 (4)

= 18,40,725
5. 31.03.2017 10,22,000 18,40,725 x 0.9 26,78,653 (5)

= 16,56,653
6. 31.03.2018 10,22,000 16,56,653 x 0.9 25,12,988 (6)

= 14,90,988
Answers :
1. Rs. 35,47,000/- 4. Rs. 28,62,725/-

2. Rs. 32,94,500/- 5. Rs. 26,78,653/-
3. Rs. 30,67,250/- 6. Rs. 25,12,988/-
* * *
45
4. INSURANCE
Exercise 1 :
The value of a building on completion in 2015 is 25 lakhs excluding foundation and the owner
has insured for Rs. 25 lakhs. The value of the building in 2018 is 30 lakhs exclusive of the
value of foundation. In 2018, there is a damage to the building to the extent of
Rs. 3,00,000. How much the owner will get compensation from the insurance company?
Sum insured in 2015

Compensation = x Damage
Value as on 2018
25,00,000
Compensation = x 3,00,000 = Rs. 2,50,000/-
30,00,000
Exercise 2 :
There is a property with the following specification.
a) Plinth area = 1,100 m2

b) Age of the building = 15 years
c) Life of the building = 60 years
d) Replacement rate = Rs 10,500/m2
e) Assume cost of foundation = 15%
f) Salvage value = Nil
Question :
Calculate the insurable value of this property.
Calculations :
Value of building as if new = 1,100 x 10,500

= Rs. 1,15,50,000/-
15
Depreciation = = 25%
60
46
Deduct value of foundation = 15%

= 1,15,50,000 - 17,32,500
= Rs. 98,17,500/-
Deduct depreciation 25% = Rs. 24,54,375/-
Insurable value = Rs. 73,63,125/-
say Rs. 73.63 lakhs.
Answers :
Rs. 73,63,000/-
Exercise 3 :
A standard fire policy is there for 50 lakhs for a factory building 700 Sq.m. of 20 years old.
Replacement rate is Rs 20,000 / sq.m. Fire loss is Rs 10 lakhs.
Questions :
1. Claim payable is how much?

2. If policy excess of Rs.10,000/- is to be considered, then, what is the claim payable?
3. What is the present market worth less foundation before fire damage?
4. What is the replacement cost of new building today deducting 10% for foundation?
5. What is the depreciation of bldg excl. foundation on straight line method?
Life : 60 years; Salvage = Nil
Data :
Sum insured = Rs. 50,00,000/-

Area of the building = 700 sq.m.
Fire loss = Rs. 10,00,000/-
Calculation :

Replacement value = 700 x 20,000 = Rs. 1,40,00,000/-
Life of the building assumed = 60 years
47
Salvage value assumed = Nil

20
60
Depreciation value = 0.3333 x 1,40,00,000
= Rs. 46,66,200/-
Depreciated value = 1,40,00,000 - 46,66,200

= Rs. 93,33,800/-
Less foundation 10% = 0.1 x 93,33,800
= Rs. 9,33,380
Depreciated value of the = Rs. 84,00,420/-

building less foundation
93,33,800 - 9,33,380
Answers :
1) Fire loss = Rs. 10,00,000

Sum insured = Rs. 50,00,000
Depreciated value of the = Rs. 84,00,420
building
50,00,000
Under insurance factor = = 59.52%
84,00,420
... Claim payable = 0.5952 x 10,00,000
= Rs. 5,95,200/- (1)
2) Claim = Rs. 5,95,200

Less policy excess = Rs. 10,000
Net claim payable = Rs. 5,85,200/- (2)
3) Present worth less = Rs. 84,00,420/- (3)

foundation
4) Replacement cost of new

building today deducting = 0.9 x 1,40,00,000
10% for foundation
= Rs. 1,26,00,000/- (4)
5) Depreciation of building excluding foundation on straight line method :

48
Replacement value = Rs. 1,40,00,000

Value excluding foundation = 0.9 x 1,40,00,000
= Rs. 1,26,00,000/-
Depreciation percentage
20
assuming the life as = x 100 = 33.33%
60
60 years & salvage value
as NIL
Depreciation of building = 0.3333 x 1,26,00,000

excluding foundation
= Rs. 41,99,500/- (5)
Exercise 4 :
A standard fire policy was taken for Rs. 161 lakhs for a factory building (RCC roof) 1,400
sq.m. of 15 years old. Replacement cost is Rs. 18,000 / sq.m. Fire loss is Rs. 30 lakhs.
Assume life as 60 years. Salvage value : NIL.
Questions :
1. Claim payable is how much?

2. If policy excess of Rs. 10,000/- is to be considered, then what is the claim payable?
3. What is the present worth less foundation before fire damage?
4. What is the replacement cost of new building today deducting 15% for foundation?
5. What is the depreciation of building excluding foundation on straight line method?
6. What will be the depreciation percentage if the salvage value is 20%?
Data :
Sum insured = Rs. 1,61,00,000/-

Area of the building = 1,400 sq.m.
Fire loss = Rs. 30,00,000/-
Life = 60 years
Calculation :

49

Replacement value = 1,400 x 18,000 = Rs. 2,52,00,000
Salvage value = Nil
15
60
= Rs. 63,00,000/-
= Rs. 1,89,00,000/-
Less foundation 15% = 0.15 x 1,89,00,000
= Rs. 28,35,000
Depreciated value of the = Rs. 1,60,65,000/-
1,89,00,000 - 28,35,000
Answers :
1) Fire loss = Rs. 30,00,000

Sum insured = Rs. 1,61,00,000
Depreciated value of the = Rs. 1,60,65,000
building
.
. . Sum insured = Adequate (There is no under
insurance)
... Claim payable = 100% of Rs. 30,00,000/-
= Rs. 30,00,000/- (1)
2) Claim = Rs. 30,00,000

Less policy excess = Rs. 10,000
Net claim payable = Rs. 29,90,000/- (2)
3) Present worth less = Rs. 1,60,65,000/- (3)

foundation

15% for foundation
= Rs. 2,14,20,000/- (4)
50

= Rs. 2,14,20,000/-
assuming the life as 15
= x 100 = 25%
60 years & salvage value 60
as NIL

= Rs. 53,55,000/- (5)
6) Age of the building = 15 years

Salvage value = 20%
15
Depreciation percentage = (100 - 20) = 20% (6)
60
Exercise 5 :
A standard fire policy with reinstatement clause was taken for Rs. 161 lakhs for a factory
building (RCC roof) 1,400 sq.m of 15 years old. Replacement cost is Rs. 18,000/sq.m. Fire
loss is Rs. 30 lakhs. Assume life as 60 years. Salvage value : Nil. Plinth & foundation : 15%.
Questions :
1) Claim payable is how much?

2) If policy excess of Rs. 10,000/- is to be considered, then, what is the claim payable?
Data :

Replacement rate = Rs. 18,000 /sq.m.
Fire loss = Rs. 30,00,000
51
Life = 60 Years
Salvage value = Nil
Plinth & foundation = 15%
Special clause = Reinstatement value clause
included
Calculation :

= Rs. 2,52,00,000/-
Life of the building = 60 Years
Salvage value = Nil
Reinstated Value of the building

Less foundation 15% = Less 15% of 2,52,00,000
= 2,52,00,000 x (100-15)%
= Rs. 2,14,20,000/-
Answers :
1) Fire loss = Rs. 30,00,000

Reinstated value of the
building less plinth & = Rs. 2,14,20,000/-
foundation
Sum insured = Inadequate (There is under
insurance)
Under Insurance Quotient = Sum insured/Value of the asset
1,61,00,000
= x 100 = 75%
2,14,20,000
Claim payable = Value assessed as loss x
Under Insurance Quotient
= Rs. 30,00,000 x 0.75
= Rs. 22,50,000/- (1)
2) It is a fire policy and the peril for the loss is fire. Hence there is a policy
excess of Rs. 10,000/-
52
Policy excess = Rs. 10,000

Claim payable = 22,50,000 - 10,000
= Rs. 22,40,000/- (2)
Exercise 6 :
One factory got damaged. The sum insured is Rs. 50,00,000/-. Claim made by the owner -
Rs. 10,00,000/-. The property is 20 years old. Present replacement rate of a similar new
building is Rs. 7,000/- per sq.m. Builtup area - 2,000 sq.ft.
1) What is replacement value of the building?

2) What would be the claim approved by insurance company?.
Opinion :
Data :

Claim made by the owner = Rs. 10,00,000/-
Built up area = 2,000 sq.ft.
Solution :
Builtup area = 2,000 sq.ft. or 185.87 sq.m.

Replacement value = 185.87 x 7,000
= Rs. 13,01,090/- (1)
Age = 20 years
Life assumed = 40 years (since it is a factory)
Salvage value = Nil (assumed)
20
40
= Rs. 6,50,545/-
= Rs. 6,50,545/- (2)
53
Answers : 1) The replacement value is Rs. 13,01,090/-.
2) • The depreciated value (including the foundation is Rs. 6,50,545/-.

The owner has insured the building for Rs. 50,00,000/-. The sum
insured in adequate. These is no under insurance.
• Though the owner has claimed Rs. 10,00,000/-, the actual

depreciated value is only Rs. 6,50,545/-. Therefore the sum payable
is Rs. 6,50,545/- (minus the policy excess).
• (Note : If policy is made only for the super structure only, value of the
superstructure (assuming 15% for foundation) = 0.85 x 6,50,545 =
Rs. 5,52,963/-. Sum payable is Rs. 5,52,963/- (less policy excess)).
Exercise 7 : (IBBI)
Factory building of built-up area 700 sq.m. 20 years old, total life of the building 40 years with
a specification equivalent to the current replacement cost of Rs. 20,000/sq.m. is insured for
Rs. 50,00,000/- in a standard fire policy. There is a partial damage to the building to a total
loss of Rs. 10,00,000/- due to peril. 10% cost of foundation. (Courtesy : Mr. S. Pichaiya)
Questions :
1. What is the amount payable by the insurer to the insure for the loss due to fire?
a) Rs. 2,00,000/- b) Rs. 5,00,000/-

c) Rs. 7,70,000/- d) Rs. 10,00,000/-
2. What is the present market worth of the building before fire damage (excluding
foundation)?
3. Reinstatement value of building excluding foundation?
4. What is the depreciation of the building excluding foundation? (Neglecting scrap

value).
5. Which peril is not covered under standard fire policy?
a) Impact damage b) STFI

c) Earthquake d) Fire
54
Data :
Fire loss = Rs. 10,00,000/-
Life = 40 years
Calculation :

Replacement value = 700 x 20,000 = Rs. 1,40,00,000/-
Life of the building assumed = 40 years
Salvage value assumed = Nil
20
40
= Rs. 70,00,000/-

= Rs. 70,00,000/-
Less foundation 10% = 0.1 x 70,00,000
= Rs. 7,00,000/-
Depreciated value of the = Rs. 63,00,000/-

70,00,000 - 7,00,000
Answers :
1) Fire loss = Rs. 10,00,000

Sum insured = Rs. 50,00,000
Depreciated value of the = Rs. 63,00,000
building
50,00,000
Under insurance factor = x 100 = 79.37%
63,00,000
... Claim payable = 0.7937 x 10,00,000
= Rs. 7,93,700/-
= say Rs. 7,70,000/- (1)
55
2) Present worth less = Rs. 63,00,000/- (2)

foundation

10% for foundation
= Rs. 1,26,00,000/- (3)

= Rs. 1,26,00,000/-
20
assuming the life as = x 100 = 50%
40
40 years & salvage value
as NIL

= Rs. 63,00,000/- (4)
5. Earthquake (5)
Exercise 8 :
RCC roofed building of a 30 years is required to be insured under standard fire policy.
Advise on fair ‘Insurable value’ of the factory building on depreciated cost basis from the
following data. Calculate depreciation by SLM. (Courtesy Mr. R.K. Gandhi)
Plinth area of factory : Ground floor = 500 sq.m.

First floor = 300 sq.m.
Replacement cost today = Rs. 7,500/sq.m.
Age of building = 30 years
Total life of building = 60 years
Foundation = 10%
Solution :
Total builtup area : 500 + 300 = 800 sq.m.

56
Total replacement value = Rs. 60,00,000/- (a)

800 sq.m. x Rs. 7,500/sq.m.
Less 10% towards cost of = Rs. 6,00,000/- (b)
foundation & plinth
Net value of the super structure = Rs. 54,00,000/- (c)
Age = 30 years
Life = 60 years
Salvage = Nil
30
60
= Rs. 27,00,000/-
Insurable value = Rs. 27,00,000/-
Advise factory owner to insure the building for Rs. 27,00,000/-
* * *
57
5. VALUATION BY COST INDEX METHOD

Exercise 1 :
A factory building was constructed in the year 1985 at the total cost of Rs. 25,50,000/-. Work
out replacement cost of said factory building in year 2011 if Building Cost index in year 1985
and 2011 were 14.16 and 142 respectively with base year 1960 at 1.00.
Replacement cost of Book value cost

= x Cost Index factor for 2011
factory in year 2011 Cost index for 1985
25,50,000
= x 142
14.16
= Rs. 2,55,72,033/-
Exercise 2 :
A boeing repair shop hanger (Area 10,648 sq.m.) was constructed at Mumbai in year 1999
at the total cost of Rs. 68.00 crores. Find out its replacement cost in year 2011, if cost of
construction of normal residential building was Rs. 8,600/sq.m. in 1999 and Rs.18,300/sq.m.
in year 2011.
Historic cost = Rs. 68,00,00,000
68,00,00,000
Present day replacement cost = x 18,300
8,600
= Rs. 1,44,69,76,744
Exercise 3 :
Building cost for the residential building in Delhi, as per 01.01.1992 cost index as 100, was
Rs. 2,810/sq.m. Now if Cost Index of Mumbai in 2005 is 250 as compared to 1992 base
index 100, work out replacement cost for a residential building at Mumbai for the year 2005.
Flat rate for building cost for residential house in Mumbai for the year 2005 as per
CPWD memorandum of 1992 will be :
58
2,810
= x 250
100
= Rs. 7,025/sq.m.
Exercise 4 :
A residential building was built in the year 1978 at an actual cost of Rs. 5,00,000/-. If Building
Cost Index for year 1978 and 1998 were 125 and 1442 respectively, with 01.10.1976 as
base index 100, work out replacement cost of the building for the year 1998.
5,00,000
Replacement cost in 1998 = x 1,442
125
= Rs. 57,68,000/-
Exercise 5 :
An R.C.C. framed building at Delhi, in 01.01.1992 would cost Rs. 2,810/sq.m. If Cost Index of
V.V. Nagar is 139 in 1997, calculate rate of cost of construction for similar R.C.C.
building at V.V. Nagar for the year 1997.
Rate of cost of construction in 2,810

= x 139
1997 at V.V. Nagar : 100
= say Rs. 3,906/- per sq.m.
Exercise 6 :
A load bearing residential family house was built in year 1969 at Nagpur. Built-up floor area is
200 sq.m. on ground floor and 100 sq.m./floor on each of 1st and 2nd floor. Total plot area is
1,200 sq.m. Calculate sale value of property as in March 1989 if Building Cost Index of Nagpur
was 394 in 1989 with Delhi base year 01.10.1976 as 100. Building cost for base year was
Rs. 385/sq.m. and plumbing and electrification costs were Rs. 6,000/unit and Rs. 5,700/unit
respectively. Prevalent land rate in 1989 was Rs. 800/sq.m. Building is wholly provided with
marble floor. Marble cost was Rs. 250/sq.m. and mosaic tile cost was Rs. 60/sq.m. in 1989.
Questions :
1. What is the value of land as on 1989?

2. What is the replacement cost of the building?
59
3. What is the depreciation percentage by adopting straight line method assuming

economic life as 60 years and salvage value as 10%?
4. What is the depreciation value of the building?
5. What is the depreciated value of the building?
6. What is the total value of the property?
Data :
Place = Nagpur
GF area = 200 sq.m.
FF area = 100 sq.m.
SF area = 100 sq.m.
Cost index in Delhi for base year = 100
01.10.1976
Building cost index for Nagpur = 394
in 1989
Building cost for base year (1976) = Rs. 385/sq.m.
Plumbing cost for base year (1976)= Rs. 6,000/unit
Electrification cost for base year = Rs. 5,700/unit
Flooring cost in 1989 = While marble Rs. 250/sq.m.
Mosaic tile cost in 1989 = Rs. 60/sq.m.
Prevalent land rate in 1989 = Rs. 800/sq.m.
Calculations :
Area of plot = 1,200 sq.m.

Unit rate of plot (1989) = Rs. 800/sq.m.
Value of plot in 1989 = 1,200 x 800
= Rs. 9,60,000/- (1)
Area of ground floor = 200 sq.m.

Area of first floor = 100 sq.m.
Area of second floor = 100 sq.m.
Total area of all floors = 400 sq.m.
Unit rate of building (1976) = Rs. 385/sq.m.
Civil work cost (1976) = 400 x 385
= Rs. 1,54,000
Plumbing 3 floors x 6,000 = Rs. 18,000
Electrification 3 floors x 5,700 = Rs. 17,100
60
Replacement cost at Delhi (1976) = Rs. 1,89,100

This is for cost index for = 100
Cost index at Nagpur (1989) = 394
1,89,100
Replacement cost in Nagpur = x 394
100
= Rs. 7,45,054/-
Add for difference of marble & Mosaic

Rs. 250 - 60 = 190/sq.m.
Carpet area = 85% of built up area

= 0.85 x 400 =340 sq.m.
Extra cost of marble = 340 x 190

= Rs. 64,600
Total building cost = 7,45,054 + 64,600

= Rs. 8,09,654/- (2)
Age = 1989 - 1969 = 20 years

Life assumed = 60 Years
Salvage assumed = 10%
20
Depreciation percentage = x 90 = 30% (3)
60

= Rs. 2,42,896/- (4)
Net present value or = 8,09,654 - 2,42,896

depreciated value = Rs. 5,66,758/- (5)

= Rs. 15,26,758/- (6)
Answers :
1. Rs. 9,60,000/- 4. Rs. 2,42,896/-

2. Rs. 7,45,054/- 5. Rs. 5,66,758/-
3. 30% 6. Rs. 15,26,758/-
* * *
61
6. VALUATION BY BELTING METHOD &

Hypothetical plotting scheme method
Exercise 1 :
Estimate the value of plot 40’ x 150’ by belting method. The prevailing market rate for one
ground plot in the nearby locality is Rs. 600/sq.ft. Standard depth is 60’.
40’
II
90’
400/-
150’
I
60’
600/-
Road
Extent Basic rate Unit rate Estimated

Belts Size sq.ft. for standard adopted value
depth. (Rs.) Rs. Rs.
I Belt 40’ x 60’ 2,400 600 600 14,40,000

II Belt 40’ x 90’ 3,600 600 400 14,40,000
40’ x 150’ 6,000 --- --- 28,80,000
Exercise 2 :
Find out the value of the plot 50’ x 200’ by belting method. The prevailing market rate of the
neighbouring plot 40’ x 60’ located on the main road is Rs. 600/-.
50’
Questions : III 300/- 50’
1. What is the area of I belt? II 400/- 90’

Rs. 600
2. What is the area of II belt?
3. What is the area of III belt? 60’ I 600/- 60’
40’
4. What is the value of I belt?
50’
5. What is the total value of 50’ x 200’?
6. While certifying market value for collateral security to bank, which factor is most
important?
a) Unit rate of land b) Age of the building
c) Location d) Marketability
62
Data :
Size of plot = 50’ x 200’

Market rate of 40’ x 60’ plot = Rs. 600/-
Standard depth assumed as = 60’
Calculations :
Standard depth is assumed as 60’
Size of I belt = 50’ x 60’

Area of I belt = 3,000 sq.ft. (1)
Unit rate 100%of 600 = Rs. 600/sq.ft.
Value of I belt - 3,000 x 600 = Rs. 18,00,000/- (4)
Size of II belt = 50’ x 90’
Area of II belt = 4,500 sq.ft. (2)
Unit rate (2/3) x 600 = Rs. 400/sq.ft.
Value of II belt- 4,500 x 400 = Rs. 18,00,000/-
Size of III belt = 50’ x 50’

Area of III belt = 2,500 sq.ft. (3)
Unit rate 50% of 600 = Rs. 300/sq.ft.
Value of III belt- 2,500 x 300 = Rs. 7,50,000/-
Total value of plot 50’ x 200’ = Rs. 43,50,000/- (5)

18,00,000 + 18,00,000 + 7,50,000
Marketability is the most important factor while certifying the (6)

market value for collateral security to bank purposes.
Answers :
1. 3,000 sq.ft 4. Rs.18,00,000/-

2. 4,500 sq.ft. 5. Rs. 43,50,000/-
3. 2,500 sq.ft. 6. Marketability
Exercise 3 : (IBBI)
Value the plot of 150 m x 350 m by belting method. The depth of first belt X is 50 m. The depth
of second belt is 2X. The depth of third belt is 4X.
63
Land rate for I belt = Rs. 300/m2 150 m
200 m
2 x (2X)
Rate for II belt = 40% less from I belt
4X
III belt
Rate for III belt = 40% less from II belt
350 m
100 m
2X
2X
II belt
Questions :
50 m
I belt
X
X
150 m
1. What is the value of I belt?
Road
2. What is the value of II belt?
3. What is the value of III belt?
4. What is the total value of the plot 150 m x 350 m?
5. What is the name of the method?
Answers :
1. I belt : 150 x 50 x Rs. 300/sq.m. = Rs. 22,50,000/-
2. II belt : 150 x 100 x (300 x 0.6) = Rs. 27,00,000/-
3. III belt : 150 x 200 x (180 x 0.6) = Rs. 32,40,000/-
4. Value of the entire plot

22,50,000 + 27,00,000 + 32,40,000 = Rs. 81,90,000/-
5. Hypothetical Plotting Scheme.
Exercise 4 : (IBBI)
In a situation, subject land is located in such a place where, instances of sale of large size
plots in the locality are not available. Small sized road side developed plots are available at
the rate of Rs. 300 per sq.m. Plot is located in developing area of town where demand for
housing site exists. The subject land is not surrounded by agricultural lands. The subject plot
is of sufficiently large size which can be divided into several small size plots. The depth of the
plot is 450 meters considerably more as compared to the road frontage of 150 meters.
Questions :
1. What is value of 1st portion from road side if the plot is considered as 50 metres in
depth in Rs.?
a) Rs. 22,50,000/- b) Rs. 20,50,000/-

c) Rs. 15,00,000/- d) Rs. 18,75,000/-
64
2. What is value of 2nd portion from road side if the plot is considered as 100 metres
in depth and rate considered for 40 per cent lesser than the 1st one in Rs.?
a) Rs. 27,00,000/- b) Rs. 8,00,000/-

c) Rs. 30,00,000/- d) Rs. 45,00,000/-
3. What is value of 3rd portion from road side if the plot is considered as rest of the
plot and rate considered for 40 per cent lesser than the 2nd one in Rs.?
a) Rs. 32,40,000/- b) Rs. 14,40,000/-

c) Rs. 21,60,000/- d) Rs. 54,00,000/-
4. What is the value of entire land?
a) Rs. 98,10,000/- b) Rs. 88,10,000/-

c) Rs. 78,10,000/- d) Rs. 68,10,000/-
5. As Gujarat HC said this method of valuation is arbitrary & artificial, instead of that
which method of valuation is accepted in case of huge plot area to be valued?
a) Plotting scheme method b) Sales comparison method

c) Net present value method d) Transfer of development
right method
Solution :
300 III Portion
Hypothetical plotting scheme :

450 100 II Portion
Unit rate = Rs. 300/sq.m.
50 I Portion
150’
Road
1. Area of I portion = 50 x 150 = 7,500 sq.m.

Unit rate = Rs. 300/m2
Value of I portion = 7,500 x 300
= Rs. 22,50,000/-
Ans : “a”
65
2. Area of II portion = 100 x 150 = 15,000 sq.m.

Unit rate = 40% less then I portion
(0.6 x 300 = 180/sq.m.)
Value of II portion = 15,000 x 180
= Rs. 27,00,000/-
Ans : “a”
3. Area of III portion = 300 x 150 = 45,000 sq.m.

Unit rate = 40% less than II portion
(0.6 x 180 = Rs. 108/sq.m.)
Value of III portion = 45,000 x 108
= Rs. 48,60,000/-
Answer not tallying.
4. Value of I portion = Rs. 22,50,000

Value of II portion = Rs. 27,00,000
Value of III portion = Rs. 48,60,000
Value of all portions = Rs. 98,10,000/-
Ans : “a”
5. Ans “a” - Plotting scheme method.
* * *
66
7. VALUATION OF PETROL BUNK
Exercise 1 :
1,500 m2 of plot abutting a Highways is proposed to be taken on lease by a firm. Fix the
lease rent of the plot, if yield rate is 6% & land rate is Rs. 4,000/m2.
Solution :
Value of land = 1,500 x 4,000
= Rs. 60,00,000/-
6 1
Lease rent = 60,00,000 x x
100 12
= Rs. 30,000 / month
Exercise 2 : (IBBI)
A client wants to purchase a petrol bunk outlet situated on the main road in the center of town.
The main road has traffic of 300 PCU. For the land, the company pays the rent
Rs. 4,00,000/ per annum. Total annual income from sale of petrol and diesel and other items
is Rs. 2,00,00,000/-. Property tax Rs. 50,000/6 months. Staff salary and other out goings are
Rs. 60,000/ per month. Other expenses for running the business is Rs. 1,70,00,000/-. Rate of
capitalisation is 12%.
Question :
1. What is the total income for the owner?

2. What is the total expense for the owner?
3. What is the net profit?
4. What is the method to be used?
5. What is Y.P.?
6. What is the amount the client can pay to purchase the bunk?
Answers :
Given data :
Ground rent = Rs. 4,00,000 / annum

67
Income from sale of petrol = Rs. 2,00,00,000 / annum

Property tax = Rs. 50,000 / 6 months
Staff salary & other out goings = Rs. 60,000 / month
Other expenses = Rs. 1,70,00,000 / yearly
Rate of capitalisation = 12%
Solution :
1.0. Income to the owner of the bunk
Ground rent = Rs. 4,00,000

Income from sale of petrol&diesel = Rs. 2,00,00,000
Total income for the owner = Rs. 2,04,00,000 (1)
2.0. Expenses for the owner
Property tax (50,000 x 2) = Rs. 1,00,000

Staff salary & other out goings = Rs. 7,20,000
(60,000 x 12)
Other expenses for running the = Rs. 1,70,00,000
business
Total expenses = Rs. 1,78,20,000 (2)
3.0. Net profit
Net income / Net profit = 2,04,00,000 - 1,78,20,000

Net profit = Rs. 25,80,000 (3)
100
4.0. Years purchase = = 8.33 (4)
12
5.0. Method = Profit method (5)
6.0. Value
Value of the bunk by capitalising = 25,80,000 x (100 / 12)

@ 12%
Capitalised value = Rs. 2,15,00,000/-

68
... The amount that can be paid for the = Rs. 2.15 crores (6)
purchase of the bunk
Exercise 3 :
A petrol bunk is situated on the main road. Mr. ‘X’ is the dealer of the bunk and he gets a lease
rent (ground rent) from the petroleum company. Other details are :
Sale of Petrol = 2,42,000 litres @ Rs. 76/lit

Sale of Diesel = 3,75,000 litres @ Rs. 47/lit
Lease rent paid to the dealer = Rs. 4,00,000 /year
by company for the land
Sale of car parts, oil and lubricants= Rs. 6,00,000/year

Profit of sale of goods = 15%
Cars to be serviced/year = 1,600 nos.
Charge for servicing the car = Rs. 700/car
Cost of petrol = Rs. 71/lit

Cost of diesel = Rs. 42/lit
Staff salary = Rs. 50,000/month
Property taxes = Rs. 35,000/half yearly
Electricity charges = Rs. 41,000/year
Telephone, postage & stationery = Rs. 26,000/year
Travelling & maintenance = Rs. 21,000/year
Insurance premium = Rs. 8,000/year
Grease & Oil for car service = Rs. 40 /car
Miscellaneous expenses = Rs. 36,000/year
Rate of return = 12%
Questions :
1. What is the net profit for the dealer?

2. What is the years’ purchase, If the rate of capitalisation is 12%?
3. What is the value of the property for the purpose of purchasing assuming a rate of
return as 12%?
69
1.0. Income
Petrol sale amount : 2,42,000 lit x 76/lit = Rs. 1,83,92,000

Diesel sale amount : 3,75,000 lit x 47/lit = Rs. 1,76,25,000
Ground rent for land received from the petrol = Rs. 4,00,000
company
Sale of oil & lubricants of car parts = Rs. 6,00,000
Income from car services : 1,600 x Rs. 700 = Rs. 11,20,000
Gross income = Rs. 3,81,37,000
2.0. Expenses
Cost of petrol : 2,42,000 x 71 = Rs. 1,71,82,000

Cost of diesel : 3,75,000 x 42 = Rs. 1,57,50,000
Staff salary : 50,000 x 12 = Rs. 6,00,000
Property tax : 35,000 x 2 = Rs. 70,000
Electricity & water charges = Rs. 41,000
Telephone, postage & stationery = Rs. 26,000
Travelling & Maintenance expenses = Rs. 21,000
Insurance premium = Rs. 8,000
Car service - grease / oil (1,600 x 40) = Rs. 64,000
Misecellaneous expenses = Rs. 36,000
Expenses for sale of oil & lubricants = Rs. 5,10,000
85% of 6,00,000
Gross expenses total = Rs. 3,43,08,000
3.0. Net profit = 3,81,37,000 - 3,43,08,000

= Rs. 38,29,000/year (1)
4.0. Years’ purchase
Rate of capitalisation = 12
Years purchase (100 / 12) = 8.33 (2)
5.0. Capitalising at 12% yield, value of business = Rs. 38,29,000 x (100/12)

= Rs. 3,19,08,333
say Rs. 3,19,00,000/- (3)
... Purchase price for the outlet is Rs. 3,19,00,000/-.
* * *
70
8. VALUATION OF LEASEHOLD PROPERTIES
Exercise 1 :
A freehold site is rented out for 99 years to a developer at a ground rent of Rs. 1,00,000 per
annum, net of outgoings. It is renewable. The lessee developer has constructed a building
fetching an annual rent of Rs. 5,00,000/-. Value the freeholder’s interest
assuming an yield of 6%.
Value in the hands of lessor :

Net income from ground rent = Rs. 1,00,000
Yield = 6%
100
Years purchase = = 16.67
6
Value in the hands of lessor = 1,00,000 x 16.67
= Rs. 16,67,000/-
Exercise 2 :
Value the freehold interest of a shop which has been let out for a rent of Rs. 1,00,000 (Net)
per month. The rent is renewable. Yield is 5%.
Yearly rent = 1,00,000 x 12 = Rs. 12,00,000

Net income = Rs. 12,00,000
100
Y.P. for a yield of 5% = = 20
5
Capitalised value = 12,00,000 x 20
= Rs. 2,40,00,000/-
Exercise 3 :
An industrial corporation has decided to lease 40,000 sq.ft. plot for an user for 60 years
period. The land rate is 2,000 per sq.ft. Assuming an yield of 6%, what will be the monthly
lease?
Extent of land = 40,000 sq.ft.

Market rate = Rs. 2,000/sq.ft.
Value of land = Rs. 8,00,00,0000
71
Lease rent yield = 6%

6
Annual rent = 8,00,00,000 x
100
= Rs. 48,00,000
48,00,000
Monthly rent = = Rs. 4,00,000/-
12
Exercise 4 :
A private trust had leased 10,000 sq.ft. plot for 99 years lease which can be renewed for
further period. Fix lease rent if the land rate is Rs. 1,500/sq.ft. Assume lease rent as 8%.

Land rate = Rs. 1,500/sq.ft.
Land value = Rs. 1,50,00,000
Lease rent yield assumed = 8%
8
Annual lease rent = 1,50,00,000 x
100
= 12,00,000
Monthly lease rent = Rs. 1,00,000/-
Exercise 5 :
A lessor leased his 3,000 sq.ft. of land to a lessee for 99 years on a monthly rent of
Rs. 1,000 per month. Lease is renewable.
In this land, the lessee has constructed a residential building and rented out on a total rent of
Rs. 5,500 / month. All outgoings are 40% of rental income excluding ground rent.
Questions :
1. What is the value of lessor’s interest? Rate of return (yield) is 7%.

2. What is the lessee’s interest assuming a rate of return as 8%.
Data :
Period of lease = 99 years - renewable

Monthly rent = Rs. 1,000
Rate of return = 7%
Lessor’s interest = ?
72
Calculations :
Lessor :
Yearly rent = 1,000 x 12 = Rs. 12,000
Type of lease = Perpetual. can be treated as free
hold
Rate of return / yield = 7%
100
Value of lessor’s right = 12,000 x
7
= Rs. 1,71,428/- (1)
Lessee :
Yearly rent = 5,500 x 12 = Rs. 66,000
Less outgoings 40% = (-) Rs. 26,400
Less ground rent 1,000 x 12 = (-) Rs. 12,000
Net annual income = Rs. 27,600
Rate of return = 8%
100
Value of lessee’s interest = 27,600 x
8
= Rs. 3,45,000/- (2)
Answers :
1) 1,71,428/- 2) Rs. 3,45,000/-
Exercise 6 : (IBBI)
State government industrial development corporation leased industrial plot to the

industrialist in the year 1998 for a period of 99 years by charging one time premium of
Rs. 450/sq.mt. for a total land area of 4,000 sq.mt. Lease rent was fixed at Rs.1 per year.
Lessee built a factory (total built up area 2,000 sq.mts) on the plot in 1998 at the cost of Rs.
60,000/-. Land rate as on 2018 is Rs. 1,250/sq.mt and replacement cost of building for 2018
is Rs. 25,000/sq.mt.. Total life of the factory building is 40 years. Lease provides that the
lessor is entitled to charge 50 percent unearned increase in land value as transfer/assign-
ment charges in case of sale/tranfer of the property.
Questions :
1. What is the lessor’s interest in the property in 2018?

73
a) Rs. 32,00,000/- b) Rs. 16,00,000/-

c) Rs. 50,00,000/- d) Nil
2. What is the market value of the property in 2018 if land was not of leasehold tenure
and it was a free hold land? Salvage value - 10%.
a) Rs. 7,75,00,000/- b) Rs. 10,00,00,000/-

c) Rs. 7,50,00,000/- d) Rs. 5,00,00,000/-
3. What is the lessee’s interest in property in 2018?
a) Rs. 5,00,00,000/- b) Rs. 7,75,00,000/-

c) Rs. 2,75,00,000/- d) Rs. 7,59,00,000/-
4. Depreciation amount of the factory value in 2018 on striaght line method of

depreciation and assuming 10% scrap value?
a) Rs. 2,50,00,000/- b) Rs. 2,25,00,000/-

c) Rs. 2,75,00,000/- d) Rs. 50,00,000/-
5. Which of the following statement is correct?
a) Lessor’s interest in the property is right to receive 50% unearned increase in

land value only.
b) Lessor’s interest in the property is value of right to receive lease rent in

property plus right to receive 50% unearned unearned increase in land value.
c) Lessee’s interest is estimated by estimating capitalised value of profit rent

receivable for 20 years.
d) Lessee’s interest in the property is to be increased by amount of 50%

unearned increase in land value payable to lessor as per P. N. Sikand’s
case.
6. Which of the following statement is true?
a) Lessor is entilted to take income tax of the depreciation of the building.

b) Lessor' s interest in the property is nil.
c) Lessee is virtually having a right to use property for life time only.
d) Balance economical life is 20 years.
74
Data :
Year of lease = 1998

Period of lease = 99 years
One time premium = Rs.450/sq.m. for land extent
Land area = 4,000 sq.m.
Lease rent = Re. 1/year
Lessee built a factory of builtup area = 2,000 sq.m.
Year of construction of factory by the = 1998
lessee
Cost of factory (Lessee) = Rs. 60,000/-
Land rate as on 2018 (date of valuation) = Rs. 1,250/sq.m.
Replacement cost of building in 2018 = Rs. 25,000/sq.m.
Total life of the building = 40 years
Condition : Lessor is entitled to charge 50% unearned increase in land

value in case of sale / transfer.
Opinion :
1. Lessor’s interest :
This case of lease of land is by state government. It is assumed as a perpetual

lease and reversionary value of land is negligible. The lease rent is only Re. 1/year
and hence its capitalised value will be negligible. Lessor’s interest in land value
would be therefore is restricted to claim 50% of unearned increase in land value in
case of sale.

Prevailing land rate 2018 = Rs. 1,250/sq.m.
One time premium charged in 1998 = Rs. 450/sq.m.
Unearned increase 1,250 - 450 = Rs. 800/sq.m.
The percentage the lessor is entitled to = 50%
charge in case of transfer
Unearned increase the lessor can enjoy = 0.5 x 800 = Rs. 400/sq.m.
The lessor’s value 4,000 x 400 = Rs. 16,00,000/- (1)
.
. . The answer is ‘a’.
75
2. Value of property assuming it is a freehold :
(i) Land :

Unit rate of land = Rs. 1,250/sq.m.
Land value - 4,000 x 1,250 = Rs. 50,00,000/-
(ii) Building :

= Rs. 5,00,00,000/-
Age of the building : 2018 - 1998 = 20 years
Life of the factory = 40 years
20
40
= Rs. 2,25,00,000/-
Depreciated value = Rs. 2,75,00,000/-
5,00,00,000 - 2,25,00,000
(iii) Total value :
Value of land = Rs. 50,00,000/-

Depreciated value of building = Rs. 2,75,00,000/-
Total value = Rs. 3,25,00,000/- (2)
(Note : The options given in the question is not tallying with this answer).
3. Value of lessee’s interest :
Total value of land : 4,000 x 1,250 = Rs. 50,00,000/-

Value of lessee’s interest = Total value of land - Value of
lessor’s interest
= 50,00,000 - 16,00,000
= Rs. 34,00,000/-
76
Lessee also holds in the building value.
Total value :
Land = Rs. 34,00,000
= Rs. 3,09,00,000/-
(Note : The options given in the question is not tallying with this answer).
4. Depreciation amount by straight line method
20
= 2,000 x 25,000 x ( x 90)
40
= 0.45 x 5,00,00,000
= Rs. 2,25,00,000/-
.
. . The answer is ‘b’.
5. Lessor’s interest in the property is right to receive 50% unearned increase in land
value only.
.
. . The answer is ‘a’.
6. Total life = 40 years

Age 2018 - 1998 = 20 years
Balance economic life = 40 - 20 = 20 years
.
. . The answer is ‘d’.
Exercise 7 :
A government M.I.D.C. gives 8,000 sq.m. of land on 99 years lease @ 1/- P.A. lease rent and
charged one time premium of Rs. 450 / sq.m. in the year 1998. The lessee in the year 1998
constructed an industrial shed 4,000 sq.m. of BU area with his own expenditure. The age of
the shed is 20 years as on year 2018 and total life of the shed is 40 years. The land rate is
Rs. 2,000 / sq.m. and replacement cost is Rs. 25,000 / sq.m. Lease provides that the lessor
is entitled to charge 50% unearned increase in land value as transfer / assignment charges in
case of sale / transfer of the property. Calculate the following :
77
1. What is the lessors interest?

2. What is the total value of property considering a freehold property?
3. What is the lessee interest?
4. What is the reversionary value of the leasehold land?
5. What is the depreciated value of shed?
Data :
Year of lease = 1998

Period of lease = 99 years
One time premium = Rs.450/sq.m. for land extent
Lease rent = Re. 1/year
Lessee built a factory of builtup area = 4,000 sq.m.
Year of construction of factory by the = 1998
lessee
Land rate as on 2018 (date of valuation) = Rs. 2,000/sq.m.
Replacement cost of building in 2018 = Rs. 25,000/sq.m.
Total life of the building = 40 years
Age of the shed 2018 - 1998 = 20 years
Opinion :
1. Lessor’s interest :
This case of lease of land is by state government. It is assumed as a perpetual

lease and reversionary value of land is negligible. The lease rent is only Re. 1/year
and hence its capitalised value will be negligible. Lessor’s interest in land value
would be therefore is restricted to claim 50% of unearned increase in land value in
case of sale.

Prevailing land rate 2018 = Rs. 2,000/sq.m.
One time premium charged in 1998 = Rs. 450/sq.m.
Unearned increase 2,000 - 450 = Rs. 1,550/sq.m.
The percentage the lessor is entitled to = 50%
charge in case of transfer
Unearned increase the lessor can enjoy = 0.5 x 1,550 = Rs. 775/sq.m.
The lessor’s value - 8,000 x 775 = Rs. 62,00,000/- (1)
78
2. Value of property assuming it is a freehold :
(i) Land :

Unit rate of land = Rs. 2,000/sq.m.
Land value - 4,000 x 1,250 = Rs. 1,60,00,000/-
(ii) Building :

= Rs. 10,00,00,000/-
Age of the building : 2018 - 1998 = 20 years

Life of the factory = 40 years
20
40
= Rs. 4,50,00,000/-
Depreciated value = Rs. 5,50,00,000/-
10,00,00,000 - 4,50,00,000
(iii) Total value :
Value of land = Rs. 1,60,00,000/-

Total value = Rs. 7,10,00,000/- (2)
3. Value of lessee’s interest :
Total value of land : = Rs. 1,60,00,000/-

8,000 x 2,000
Value of lessee’s interest = 1,60,00,000 - 62,00,000

= Rs. 98,00,000/-
Lessee also holds in the building value.

79
Total value :
Land = Rs. 98,00,000

Building = Rs. 5,50,00,000
= Rs. 6,48,00,000/-
4. Reversionary value is negligible and hence not considered.
5. Depreciated value of shed = Rs. 5,50,00,000/-
Exercise 8 : (IBBI)
A warehouse property is situated close to a port facility in a major port twn. It is let out on a
50 years lease. The lessee is paying to the lessor an exclusive ground rent @ INR 2,000
per annum, after payment of an one time premium of INR 25,00,000. The rack rental value
on full repairing terms amounts to INR 1,20,000 per annum. The yield from freehold ware
houses in similar locations is considered to be 10% and for long term lease is 15%.
(Valuation of Real property : Page no. 69 - Mr. Symales Datta)
Questions :
1. What is the outgoing for lessor?

2. What is the net income for the lessor during the term period?
3. What is the YP during the term period?
4. What is the YP during the reversionary value calculations?
5. What is the value of freeholder’s interest?
6. What is the market rent?
Calculation :
Data :
Lease = 50 years
Ground rent to lessor = Rs. 2000/- per annum
Premium paid to lessor = Rs. 25,00,000/-
Rack Rent on full repairing terms = Rs. 1,20,000/- per annum
Yield for freehold ware houses = 10%
Yield for long term lease = 15%
80
Answers :
1. What is the outgoing for lessor?
The outgoing for lessor is nil on the assumption that the lease is on full repairing
terms, however this is not specifically mentioned in the question. But could be
inferred as such, as the rack rent mentioned is on full repairing terms.
2. What is the net income for the lessor during the term period?
Rs. 2000/- per annum
3. What is the YP during the term period?
Y.P. = 100 / 15 = 6.66
4. What is the YP during the reversionary value calculations?
The YP during reversionary value calculations is 100 / 10 = 10.
5. What is the value of freeholder’s interest?
Value of freeholder’s interest = value of term + value of reversion
i) Value of term (lessor’s interest) = 2000 x 6.66 = 13,320
ii) Value of reversion

Market value = Rs. 1,20,000/-
Y.P. @ 10% = 100 / 10 = 10
Capitalised value = 1,20,000 x 10 = 12,00,000
Y.P. in perpetuity deferred 1
= = 0.008518
50 years @ 10% (1 + 0.1)50
Value of reversion = 12,00,000 x 0.008518
= 10,222
iii) Value of freeholder’s interest = 13,320 + 10,222

= Rs. 23,542/-
6. What is the market rent?
Rs. 1,20,000/- per annum.
(Courtesy : Mr. Mahendra Kakule)
* * *
81
9. VALUATION BY PROFIT METHOD
Exercise 1 :
A hotel has 100 rooms. Room rent is Rs. 1,500/day. Occupancy ratio is 65%. Income from
restaurant is Rs. 200 lakhs/year. Conference hall rental income is Rs. 150 lakhs/year.
Corpoartion tax, Electricity, insurance and other expenses are Rs. 200 lakhs. Staff salary Rs.
125 lakhs. Food & beverage expenses are Rs. 150 lakhs. Miscellaneous expenses Rs. 50
lakhs. Ascertain the value of the hotel by profit method assuming an yield as 10%.
1. Gross income :
a. From Rooms
Number of rooms = 100

Daily rent = Rs. 1,500/day
Income from 100 rooms/day = 1,500 x 100 = Rs. 1,50,000
Income from 100 rooms/year = 1,500 x 100 x 365
Occupancy ratio = 65%
Yearly income for 65% = 1,500 x 100 x 365 x 0.65
= Rs. 3,55,87,500/-
b. Income from restaurant = Rs. 2,00,00,000/-
c. Income from conference hall = Rs. 1,50,00,000/-
Gross income = Rs. 7,05,87,500/-
2. Expenses :
Corporation tax, electricity, etc. = Rs. 2,00,00,000

Staff salary = Rs. 1,25,00,000
Food & beverage expenses = Rs. 1,50,00,000
Miscellaneous expenses = Rs. 50,00,000
Total expenses = Rs. 5,25,00,000/-
82
3. Net income :
Gross income = Rs. 7,05,87,500

Expenses = Rs. 5,25,00,000
Net income = Rs. 1,80,87,500/-
4. Value :
Net income = Rs. 1,80,87,500

Yield = 10%
100
Value = 1,80,87,500 x
10
= Rs. 18,08,75,000/-
Exercise 2 :
It is a marriage hall in a town. The daily rental charge is Rs. 25,000/-. The number of booking
per year is 50 percent. Expenses are : Property tax - Rs. 25,000/half year, Staff salary - Rs.
40,000/month, Yearly Insurance - Rs. 35,000/-, Repairs & Maintenance - Rs. 15,000/month,
Electricity - Rs. 50,000/month, Miscellaneous expenses - Rs. 25,000/month, Management
expenses : Rs. 1,00,000/month.
Determine the value by profit method assuming an yield of 12%.
1. Gross income :
Daily rental charges = Rs. 25,000

Yearly rental charge = 25,000 x 365
Occupation ratio = 50%
Gross income = 25,000 x 365 x 0.5
= Rs. 45,62,500/-
2. Expenses :
Property tax 25,000 x 2 = Rs. 50,000

Staff salary 40,000 x 12 = Rs. 4,80,000
Insurance = Rs. 35,000
Repairs & maintenance = Rs. 1,80,000
15,000 x 12
83
Electricity - 50,000 x 12 = Rs. 6,00,000

Miscellaneous expense = Rs. 3,00,000
25,000 x 12
Management expense = Rs. 12,00,000
1,00,000 x 12
Total expenses = Rs. 28,45,000/-
3. Net income :
Gross income = Rs. 45,62,500

Expenses = Rs. 28,45,000
4. Value :

Yield = 12%
17,17,500
Value = x 100
12
= Rs. 1,43,12,500/-
* * *
84
10. BANK VALUATION
Exercise 1 :
In a plot of 2,400 sq.ft., Mr. X has proposed to construct a building of 1,200 sq.ft. He has
obtained loan. Basement completed (25%). Land rate is Rs. 1,000/sq.ft. The unit
construction cost is Rs. 1,800/-. Determine the stage value of the property for primary secu-
rity purpose to bank.
Land value = 2,400 x 1,000 = Rs. 24,00,000

Building value = 0.25 x 1,200 x 1,800 = Rs. 5,40,000
Total value = Rs. 29,40,000/-
Exercise 2 :
The plot area is 3,000 sq.ft. The land rate is Rs. 1,500/sq.ft. The owner wishes to
construct a building of 3 floors of 1,200 sq.ft. each. The average unit rate of construction is
Rs. 1,600/-. The total estimated amount is Rs. 57.60 lakhs and the bank has sanctioned a
loan of 43.20 lakhs. The owner has completed 40% of the civil works. In order to pay the first
installment of loan, the bank directs the valuer to certify the stage cost of the building alone.
Number of floors = 3
Built up area of each floor = 1,200 sq.ft.
Total built up area 3 x 1,200 = 3,600 sq.ft.
Unit rate of construction = Rs. 1,600/-
Total value of completion = 3,600 x 1,600
= Rs. 57,60,000/-
Stage precentage completed = 40%
Stage value = 0.4 x 57,60,000
= Rs. 23,04,000/-
Exercise 3 :
In the year April 2018, Mr. X has purchased plot of 2,400 sq.ft. for Rs. 24,00,000. In the same
year (April to December) he has constructed a residential building for Rs. 18,00,000. He
wants to sell. He quoted (Jan 2019) Rs. 48,00,000/-. The borrower approached the bank and
the bank directed its panel valuer to inspect the site and give a report. The valuer certified as
Rs. 45,00,000/-as on February 2019.
85
Now,
1) What is the cost of the property for 2018 - 19?

2) What is the price?
3) What is the value?
Answers :
1) Cost = 24,00,000 + 18,00,000 = Rs. 42,00,000/-

2) Price is Rs. 48,00,000/-
3) Value is Rs. 45,00,000/-
* * *
86
11. GROUND RENT
Exercise 1 :
Mr. ‘X’ is owning a vacant site of 8,000 sq.ft. near the bus stand. He wants to let out. The
prevailing unit market rate is Rs. 1,000 and the guideline rate is Rs. 1,500/sq.ft. Mr. Y
wants this site for parking vehicles. Mr. Z also wants this site and wishes to construct a
shed. Assume rate of return of 4% for secured ground rent and 5% for unsecured ground rent.
Questions :
1. What is the market value to determine the rent for Mr. Y?

2. What is the market value to determine the rent for Mr. Z?
3. What is the yearly ground rent that can be fixed for Mr. Y?
4. What is the monthly ground rent that can be fixed for Mr. Y?
5. What is the yearly ground rent that can be fixed for Mr. Z?
6. What is the monthly ground rent that can be fixed for Mr. Z?
Data :
Extent of site = 8,000 sq.ft.

Market rate of site = Rs. 1,000/sq.ft.
Rate of return for secured = 4%
ground rent
Rate of return for unsecured = 5%
ground rent
Calculations :
For Y & Z :
Extent of site = 8,000 sq.ft.

Prevailing unit rate = Rs. 1,000/sq.ft.
Market value (for Y & Z) = Rs. 80,00,000/- (1&2)
8,000 x 1,000
87
For Y :
Market value = Rs. 80,00,000

Type of rent = Unsecured
Rate of return assumed = 5%
Yearly ground rent = 80,00,000 x (5/100)
= Rs. 4,00,000/- (3)
Monthly ground rent = 4,00,000 / 12

= Rs. 33,333/- (4)
For Z :
Market value = Rs. 80,00,000

Type of rent = Secured
Rate of return assumed = 4%
Yearly ground rent = 80,00,000 x (4/100)
= Rs. 3,20,000/- (5)
Monthly ground rent = 3,20,000 / 12

= Rs. 26,667/- (6)
Answers :
1) Rs. 80,00,000/- 4) Rs. 33,333/-

2) Rs. 80,00,000/- 5) Rs. 3,20,000/-
3) Rs. 4,00,000 /- 6) Rs. 26,667/-
* * *
88
12. VALUATION OF TENANTED PROPERTIES
Exercise 1 :
The monthly rent (Net) of a shop of 540 sq.ft. is Rs. 12,000/-. Calculate the approximate value
by rent capitalisation method by adopting a rate of return as 5%.

Yearly rent = 12,000 x 12
= Rs. 1,44,000/-
Rate of return adopted = 5%
100
Capitalised value = 1,44,000 x
5
= Rs. 28,80,000/-
Exercise 2 :
The net monthly rent of a residential building of 1,250 sq.ft. is Rs. 16,500/-. Find the approxi-
mate value of the property by rent capitalisation method by adopting a rate of return as 3%.

Yearly rent = 16,500 x 12
= Rs. 1,98,000/-
Rate of return = 3%
100
Capitalised value = 1,98,000 x
3
= Rs. 66,00,000/-
Exercise 3 :
A new shop was purchased for Rs. 10,00,000 which was rented out for Rs. 5,000 per month.
What is the yield?
Capital value = Rs. 10,00,000

Yearly rent = Rs. 5,000 x 12 = Rs. 60,000
60,000
Yield = x 100
10,00,000
= 6%
89
Exercise 4 : (IBBI)
A fully developed building in a plot has a total of 4 floors. Total plot area is 1,000 sq.m. and
total builtup for area of the building is 250 sq.m / per floor. Permissible FSI is 1.00. There are
4 tenants per floor and tenants of lower 2 floors pay a rent of Rs. 750 / month / tenement.
which includes property tax. Top 2 floors are occupied by the owners of the property itself.
Total property taxes are Rs. 25,000 / 6 months for 4 floors.
Tenant’s rent includes 50% of total tax, Non - agricultural (N.A.) tax of the plot is Rs. 800 / year
and building insurance premium is Rs. 1,000 / year.
Assume repair cost at 6% of the gross rent and collection & management charges at 3% of
the gross rent. Stamp duty paid at the time of purchase is Rs. 9,000/-. The land is of freehold
tenure. Prevalent land rate of freehold land in the locality at present is Rs. 8,000/sq.m. The
rate of ownership flats in the locality for similar construction as on today is
Rs. 30,000/sq.m.
Questions :
1. What will be the total annual rent receivable by the landlord from all the tenants?
a) Rs. 6,000/- b) Rs. 72,000/-

c) Rs. 1,44,000/- d) Rs. 12,000/-
2. What will be the total outgoings including repairs allowance & collection charges
for the tenanted portion of the building?
a) Rs. 32,380/- b) Rs. 57,380/-

c) Rs. 33,280/- d)
3. What will be the present market value of the tenanted portion of the building if
rental income is assumed to be in perpetuity & rate of capitalisation is adopted
@ 8%
a) Rs. 9,90,500/- b) Rs. 1,50,00,000/-

c) Rs. 77,50,000/- d) Rs. 4,95,250/-
4. What will be the present market value of the owner occupied portion of the
building?
90
a) Rs. 75,00,000/- b) Rs. 1,50,00,000/-

c) Rs. 10,00,000/- d) Rs. 78,00,000/-
5. Which of the following is not considered as outgoing for computing net rent
received by the landlord?
a) Property tax b) Repair cost

c) Stamp duty paid d) Management charges
6. What is the market value of the balance potential in the property?
a) Rs. 1,50,000/- b) Rs. 15,00,000/-

c) Zero d) Reversionary value of the land
Data :
Property tax for 4 floors = Rs. 25,000 / 6 months

Non Agricultural tax for Mumbai = Rs. 800 / year
Building insurance = Rs. 1,000 / year
Repair cost & maintenance = 6% Gross rent
Rent collection charge = 3% Gross rent
Market rate of land = Rs. 8,000 / sq.m.
Prevalent unit rate of flat = Rs. 30,000 / sq.m.
Opinion :
1. Rent received by the owner :
Tenants occupied portions = GF & FF

Number of tenants in each flat = 4
Total number of flats in all flats = 2x4=8
Monthly rent for each flat = Rs. 750/-
Monthly rent for all flats = 750 x 8 = Rs. 6,000
Yearly rent for all flats = 6,000 x 121 = Rs. 72,000/-
The answer is “b”.
2. Outgoings :
Property tax = Rs. 50,000

N.A. (Non-Agricultural tax) = Rs. 800
Insurance premium = Rs. 1,000
= Rs. 51,800
91
Since the tenants are bearing 50% of the

above expenses, the actual outgoings
of the owner = Rs. 25,900
Maintenance charges 6% of gross rent = Rs. 4,320
0.06 x 72,000
Rent collection charge 3% of gross rent = Rs. 2,160
0.03 x 72,000
Total outgoings = Rs. 32,380/-
The answer is “a”.
3. Capitalisation amount :
Gross income = Rs. 72,000

Outgoes = Rs. 32,380
Net income = Rs. 39,620
Yield = 8%
Capitalised amount = 39,620 x (100 / 8)
= Rs. 4,95,250/-
The answer is “d”.
4. Value of the building - free holder (land owner) :
FSI = 1
Area of the flat 2 x 250 = 500 sq.m.
Unit rate of flat = Rs. 30,000/sq.m.
Value 500 x 30,000 = Rs. 1,50,00,000/-
The answer is “b”.
5. While computing net rent received by the landlord, Stamp duty is not to be
considered.
.
. . The answer is “c”.
6. The market value of the balance potential in the property is zero.
.
. . The answer is “c”.
92
Exercise 5 : (IBBI)
An apartment carries 4 floors built on a plot of area 1,000 sq.m. Each floor area is
250 sq.m. The GF & FF have been rented and SF & TF is in possession of the owner. Each
floor carries 4 tenements, and tenants pay @ Rs. 750 / tenement as rent. The property tax
being paid is @ Rs. 25,000 / six month. Rs. 900 / year is non agri - tax. 6% per annum
towards management cost. Rs. 9,000/- stamp duty cost. 3% towards rent collection
charge. Cost of land is Rs. 2,000 / sqm and cost of construction is Rs. 25,000 / sqm, FSI is 1.
Calculate the following :
1. What is the total rent?

2. What is the total outgoes?
3. What is the valuation of owner occupied portion?
4. What is the balance potential in building?
5. What is the depreciated cost of building?
6. What is the tenanted portion value @ rate of return of 8% PA?
Data :
Property tax = Rs. 25,000 / 6 months

Non Agricultural tax (for Mumbai) = Rs. 900 / year
Management cost = 6%
Stamp duty = Rs. 9,000/-
Cost of land = Rs. 2,000/sq.m.
Cost of construction = Rs. 25,000/sq.m.
Rent collection charge = 3%
Opinion :
1. Rent received by the owner :
Tenants occupied portions = GF & FF

Number of tenants in each flat = 4
Total number of flats in all flats = 2x4=8
Monthly rent for each flat = Rs. 750/-
Monthly rent for all flats = 750 x 8 = Rs. 6,000
Yearly rent for all flats = 6,000 x 12 = Rs. 72,000/-
2. Outgoings :
Note : (It is assumed that the tenents are bearing 50% of the property tax, N.A.
tax). It is the practice in Maharashtra.
93
Property tax = Rs. 50,000

N.A. (Non-Agricultural tax) = Rs. 900
= Rs. 50,900
Since the tenants are bearing 50% of the

above expenses, the actual outgoings
for the owner = Rs. 25,450
Management charges 6% of gross rent = Rs. 4,320

0.06 x 72,000
Rent collection charge 3% of gross rent = Rs. 2,160

0.03 x 72,000
Total outgoings = Rs. 31,930/-
3. Value of the building - free holder (land owner) :
FSI = 1
Area of the flat 2 x 250 (SF & TF) = 500 sq.m.
Unit rate of flat = Rs. 25,000/sq.m.
Value - 500 x 25,000 = Rs. 1,25,00,000/-
4. The market value of the balance potential in the property is zero.
5. Data is not adequate to calculate the depreciated cost of the building.
6. Capitalisation amount :
Gross income = Rs. 72,000

Outgoes = Rs. 31,930
Net income = Rs. 40,070
Yield = 8%
Capitalised amount = 40,070 x (100 / 8)
= Rs. 5,00,875/-
* * *
94
13. RESIDUAL VALUE METHOD
Exercise 1 :
Plot area = 3,000 sq.ft. Building area = 2,400 sq.ft. The age of the building = 20 years (Life
can be assumed as 60 years & salvage value as 10%). Replacement cost including services
is Rs. 1,800/sq.ft. This property was sold for Rs. 60,24,000. Calculate the land rate by
residual technique.
Replacement rate = 1,800/sq.ft.
Replacement value 2,400 x 1,800 = Rs. 43,20,000/-
Salvage value = 10%
Depreciation percentage = (20 / 60) x 90 = 30%
Depreciation value 0.3x43,20,000 = Rs. 12,96,000/-
Depreciated value of building = Rs. 30,24,000
Sale value (land + building) = Rs. 60,24,000
Value of land alone = Rs. 30,00,000

60,24,000 - 30,24,000
Rate of land 30,00,000 / 3,000 = Rs. 1,000/sq.ft.

95
Exercise 2 :
In a plot of 4,000 sq.ft., a flat promoter constructed 8 flats of 1,000 sq.ft. each. Building rate
including all services is Rs. 2,500/sq.ft. He sold one flat for Rs. 66,00,000/-. Assuming his
profit margin as 20%, calculate the land rate by residual technique.
Area of 8 flats 8 x 1,000 = 8,000 sq.ft.
Area of plot = 4,000 sq.ft.
FSI : 8,000 / 4,000 = 2
Selling price [(Land + Building) + = Rs. 66,00,000

+ Profit]
Unit rate of flat 66,00,000/1,000 = Rs. 6,600 (This is composite rate)
Promoter’s profit = 20%
Land & building excluding profit = 6,600 / 1.2

= Rs. 5,500/-
Deduct building unit rate = (-) Rs. 2,500
Land component alone = Rs. 3,000
FSI = 2
Land rate - 3,000 x 2 = Rs. 6,000/-
* * *
96
14. CAPITAL GAIN
Exercise 1 :
On 07.12.1989, a property was acquired by Mr. X for 8.08 lakhs. In June 1992,
improvements were made for 12.06 lakhs. On 10.12.2014, the property was sold to
1.93 crores. (172, 223, 1024 are the cost inflation index for 1989 - 90, 1992 - 93, 2014 - 15
respectively).
Questions :
1. What is the Indexed cost of acquisition?

2. What is the indexed cost of improvement?
3. What is the total cost of acquisition & improvement?
4. What is the taxable capital gain?
5. What is the tax to be paid by Mr. ‘X’?
6. If the property is owned by a company, what is the capital gain tax?
Calculations :
Date of acquisition = 07.12.1989 (1989 - 90)

Cost of acquisition (12/1989) = Rs. 8,08,000
Cost of improvements (6/1992) = Rs. 12,06,000 (1992 - 93)
Date of transfer = 10.12.2014 (2014 - 15)
Sale consideration = Rs. 1,93,00,000
Cost inflation index 1989 - 90 = 172
Cost inflation index 2014 - 15 = 1,024
1. Indexed cost of acquisition = 8,08,000 x (1,024/172)

= Rs. 48,10,419/- (1)
2. Indexed cost of improvement = 12,06,000 x (1,024/223)

= Rs. 55,37,865/- (2)
3. Total indexed cost of acquisition = 48,10,419 + 55,37,865

& indexed cost improvement
= Rs. 1,03,48,284/- (3)
97
4. Taxable capital gain = 1,93,00,000 - 1,03,48,284

= Rs. 89,51,716/- (4)
5. Tax in the hand of Mr. ‘X’ - 20% = 0.2 x 89,51,716

= Rs. 17,90,343/- (5)
6. If it is owned by a company, = 0.4 x 89,51,716

tax - 40%
= Rs. 35,80,686/- (6)
Answers :
1) Rs. 48,10,419/- 4) Rs. 89,51,716/-

2) Rs. 55,37,865/- 5) Rs. 17,90,343/-
3) Rs. 1,03,48,284/- 6) Rs. 35,80,686/-
Exercise 2 :
On 09.01.1990, a property was acquired by Mr. X for 9.49 lakhs. In August 1992,
1.97 crores. 172, 223, 1024 are the cost inflation index for 1989 - 90, 1992 - 93, 2014 - 15
respectively.
Questions :
1. What is the indexed cost of acquisition?

3. What is the total indexed cost of acquistions & improvement?
Calculations :

Cost of acquisition (12/1989) = Rs. 9,49,000/-
Date of transfer = 17.12.2014 (2014 - 15)
98
1,024
Indexed cost of acquisition = 9,49,000 x
172
= Rs. 56,49,860/- (1)
Indexed cost of improvement 1,024

= 14,76,000 x
223
= Rs. 67,77,686/- (2)
Total indexed cost of acquisition

= 56,49,860 + 67,77,686
& improvement
= Rs. 1,24,27,546/- (3)
Taxable capital gain = 1,97,00,000 - 1,24,27,546

= Rs. 72,72,454/- (4)
Answers :
1) Rs. 56,49,860/- 3) Rs. 1,24,27,546/-

2) Rs. 67,77,686/- 4) Rs. 72,72,454/-
Exercise 3 :
On 10.10.1982, Mr. X acquired a property consisting of 3,000 sq.ft. of plot and 4,500 sq.ft. of
building in Chennai for a cost of Rs. 10,00,000/-. On 06.02.2017, he sold his property for a
sale consideration of Rs. 2,00,00,000/-. 109 & 1125 are the cost inflation index for 1982 - 83
& 2016 - 17 respectively.
Questions :
1. What will be the indexed cost of acquisition?

2. What is the capital gain?
Calculations:

Cost of acquisition = Rs. 10,00,000
C.I.I. for 1982 - 83 = 109
Date of transfer = 06.02.2017 (2016 - 17)
C.I.I. for 2016 - 17 = 1,125
99
10,00,000
1) Indexed cost of acquisition = x 1,125
109
= Rs. 1,03,21,100/- (1)
2) Capital gain = 2,00,00,000 - 1,03,21,100

= Rs. 96,78,900/- (2)
Answers :
1) Rs. 1,03,21,100/- 2) Rs. 96,78,900/-
Exercise 4 :
Mr. ‘X’ acquired a property in June 1990 for 12.05 lakhs. On 10.12.2014, this property was
sold for a sale consideration of 85.14 lakhs. 182, 1024 are the cost inflation index for
1990 - 91 & 2014 - 15.
Questions :
1. What is the cost of acquistion?

Calculations :
Date of acquisition = June 1990 (1990 - 91)

Fair market value as on 1.4.81 = Not applicable here
Date of transfer = 10.12.2014 (2014 -15)
Sale consideration = Rs. 85,14,000
1,024
182
= Rs. 67,79,780/- (1)
Taxable capital gain = 85,14,000 - 67,79,780

= Rs. 17,34,220/- (2)
100
Answers :
1) Rs. 67,79,780/- 2) Rs. 17,34,220/-
Exercise 5 :
An individual owned property was originally acquired in 01.10.1972 for 1.02 lakhs. The fair
market value of the property as on 01.04.1981 is 5.25 lakhs. On 10.12.2014, this property
was sold for a sale consideration of 75.05 lakhs. 100, 1024 are the cost inflation index for
1981 - 82 & 2014 - 15.
Questions :

Calculations :
Date of acquisition = 01.10.1972

Fair market value as on 1.4.81
= Rs. 5,25,000 (1981 - 82)
as worked out
Date of transfer = 10.12.2014 (2014 - 15)
1,024
100
= Rs. 53,76,000/- (1)

= Rs. 21,29,000/- (2)
Answers :
1) Rs. 53,76,000/- 2) Rs. 21,29,000/-
Exercise 6 :
On 12.12.2010, a property was acquired by Mr. Y for 75.28 lakhs. On 10.12.2014, the same
101
was sold for 1.03 crores. 711, 1024 are the cost inflation index for 2010 - 11
& 2014 - 15.
Questions :

Calculations :

Date of transfer = 10.12.2014 (2014 -15)
1,024
711
= Rs. 1,08,42,014/- (1)

= (-) Rs.5,42,014 (2)
It is a loss, there is no taxable gain
(Capital loss)
Answers :
1) Rs. 1,08,42,014/- 2) (-) Rs. 5,42,014

It is a loss, there is no taxable gain.
Exercise 7 : (IBBI)
A flat was purchased in 1981 for Rs. 2,40,000/-. As a gift from his uncle, the assessee re-
ceived this flat having an area of 80 sq.m. in June 2001.The assessee has made
improvements in the flat in August 2005 at a cost of Rs. 15,00,000/-. He sold this flat in 2018
for Rs. 2,40,00,000/-. Society transfer charges was Rs. 50,000/- and the brokerage charges
were Rs. 1,00,000/-. Prevailing rate of flat as on 2001 is Rs. 40,000/m2.
Cost inflation index as on 2001 is 100. Cost inflation index on 2005 is 117 and cost
inflation index on 2018 is 272.
102
Questions :
1) What is the indexed cost of improvement?

2) What is the indexed cost of acquisition?
3) Compute capital gain at 20%?
4) What are the deductions as per Section 48(i)?
5) Whether the assessee is liable for paying capital gains?
Solution :
1. Indexed cost of improvements :
Cost of improvement made in 2005 = Rs. 15,00,000

Cost inflation index in 2005 = 117
. 15,00,000
. . Indexed cost of improvements in 2018 = x 272
117
= Rs. 34,87,179/- (1)
2. Indexed cost of acquisition :
Flat was purchased in = 1981 - Rs. 2,40,000/-

Flat was gifted in = 2001 - 80 sq.m.
Flat was sold in = 2018 - Rs. 2,40,00,000/-
For the purpose of computing capital gain, the FMV as on 01.04.2001 is to be

determined.
Area of the flat = 80 sq.m.

Rate prevailing in 2001 as given = Rs. 40,000/sq.m.
.
. . Value of the flat as on 2001 = 80 x 40,000
= Rs. 32,00,000/-
. 32,00,000
. . Indexed cost of Acquisition = x 272
100
= Rs. 87,04,000/- (2)

103
3. Computation of capital gain :
Indexed cost of acquisition = Rs. 87,04,000

Indexed cost of improvements = Rs. 34,87,179
Total indexed cost of acquisition = Rs. 1,21,91,179/-
& improvements
Less expenses : = (-) Rs. 1,50,000
Society transfer charges = Rs. 50,000
Brokerage = Rs. 1,00,000
Total expenses = Rs. 1,50,000
Net income from sale = Rs. 2,38,50,000/-

(2,40,00,000 - 1,50,000)
Less indexed cost of acquistion & = Rs. 1,21,91,179

improvements
Capital gains = Rs. 1,16,58,821
Capital gain tax percentage = 20%
Capital gain tax 0.2 x 1,16,58,821 = Rs. 23,31,764/- (3)
4. Deductions :
Brokerage = Rs. 1,00,000

Society transfer for charges = Rs. 50,000
Total = Rs. 1,50,000/- (4)
5. The assessee is liable for paying capital gains. (5)
Exercise 8 : (IBBI)
Gift from the year 2000 a flat of carpet area of 80 sq.m. purchased by his uncle in 1981 for a
price of Rs. 2,40,000/-. Flat was transferred in the name of A in the year June 2001.
Assessee started using the flat in 2000 only.
In 2005, he carried out substantial improvement works inside the flat by spending a total sum
of Rs. 15,00,000/-. (Courtesy : Mr. S. Pichaiya)
104
Flat was sold by A in the month of February 2018 for a total price of Rs. 2,40,00,000/-. Prevailing
rate of similar ownership flats in the locality in April 2001 was Rs. 40,000/sq.m.
Questions :
1. Which of the following statement is false?
a) Cost of acquisition to the assessee is Rs. 2,40,000/-

b) Capital gain tax would be levied at the rate of 20%
c) The assessee is entitled to deduct index cost of improvement
d) The assessee is liable to pay capital gain tax in the matter
Ans : (a)
2. Which of the following statement is true?
a) Cost of acquisition to the assessee is Rs. 32,00,000/-

b) Cost of acquisition to the assessee is Rs. 2,40,000/-
c) The assessee is entitled to deduct indexed cost of improvement only
d) The assessee is not liable to pay in the matter since it was received by his
as gift
80 sq.m. x Rs. 40,000 / sq.m. = Rs. 32,00,000/-
Ans : (a)
3. What will be the indexed cost of flat sold in 2018 for the purpose of calculating gain
tax by the assessee A if cost of inflation index for the financial year 2017 / 2018 is
272 for the years 2001 / 2002 it was 100
a) Rs. 32,00,000/- b) Rs. 87,04,000/-

c) Rs. 6,52,800/- d) Rs. 62,00,000/-
Indexed cost of flat = 32,00,000 x (272 / 100)

= Rs. 87,04,000/-
Ans : (b)
4. What will be the indexed cost of improvement works carried out in the flat for cost
inflation index for the year 2005 / 2006 was 117 and 2018 is 272
105
a) Rs. 34,87,179/- b) Rs. 40,87,179/-

c) Rs. 15,00,000/- d) Rs. 30,00,000/-
Indexed cost of improvement = 15,00,000 x (272 / 117)

carried out in 2005
= Rs. 34,87,179/-
Ans : (a)
5. What will be the deduction permissible to the assessee while computing capital
gain from the sale price of flat under capital gain tax provision if assessee has
spent Rs. 1,20,000/- for the brokerage charges and Rs. 25,000/- paid to the society
for transfer charges
a) Rs. 87,04,000/- b) Rs. 1,23,36,179/-

c) Rs. 1,21,91,179/- d) Rs. 1,45,000/-
34,87,179 + 87,04,000 + 1,20,000 + 25,000 = Rs. 1,23,36,179/-
Ans : (b)
6. What was the total capital gain tax 20% rate if assessee has not invested sales
proceeds anywhere
a) Rs. 48,00,000/- b) Rs. 30,60,000/-

c) Rs. 23,32,764/- d) Rs. 40,00,000/-
2,40,00,000 - 1,23,36,179 = Rs. 1,16,63,821/-

Capital gain tax @ 20% is = Rs. 23,32,764/-
Ans : (c)
Exercise 9 :
On 04.01.2005, a property was acquired by Mr. X for 8.08 lakhs. In June 2010,
83 lakhs. (113, 167, 280 are the cost inflation index for 2004 - 05, 2010 - 11, 2018 - 19
respectively).
106
Questions :
1. What is the Indexed cost of acquisition?

3. What is the total indexed cost of acquisition & improvement?
5. What is the tax to be paid by Mr. ‘X’?
6. If the property is owned by a company, what is the capital gain tax?
Calculations :

Cost of acquisition (01/2005) = Rs. 8,08,000
Date of transfer = 28.08.2018 (2018 - 19)
1. Indexed cost of acquisition = 8,08,000 x (280/113)

= Rs. 20,02,124/- (1)
2. Indexed cost of improvement = 12,06,000 x (280/167)

= Rs. 20,22,036/- (2)
3. Total indexed cost of acquisition = 20,02,124 + 20,22,036

& indexed cost improvement
= Rs. 40,24,160/- (3)
4. Taxable capital gain = 83,00,000 - 40,24,160

= Rs. 42,75,840/- (4)
5. Tax in the hand of Mr. ‘X’ - 20% = 0.2 x 42,75,840

= Rs. 8,55,168/- (5)
6. If it is owned by a company, = 0.4 x 42,75,840

tax - 40%
= Rs. 17,10,336/- (6)
107
Answers :
1) Rs. 20,02,124/- 4) Rs. 42,75,840/-

2) Rs. 20,22,036/- 5) Rs. 8,55,168/-
3) Rs. 40,24,160/- 6) Rs.17,10,336/-
Exercise 10 :
On 11.06.2004, a property was acquired by Mr. X for 9.49 lakhs. In August 2012,
67 lakhs. 113, 200, 272 are the cost inflation index for 2004 - 05, 2012 - 13, 2017 - 18
respectively.
Questions :

3. What is the total indexed cost of acquistions & improvement?
Calculations :

Cost of acquisition = Rs. 9,49,000/-
Date of transfer = 01.04.2017 (2017 - 18)
272
113
= Rs. 22,84,319/- (1)
Indexed cost of improvement 272

= 14,76,000 x
200
= Rs. 20,07,360/- (2)
Total indexed cost of acquisition

= 22,84,319 + 20,07,360
& improvement
= Rs. 42,91,679/- (3)
108

= Rs. 24,08,321/- (4)
Answers :
1) Rs. 22,84,319/- 3) Rs. 42,91,679/-

2) Rs. 20,07,360/- 4) Rs. 24,08,321/-
Exercise 11 :
On 10.10.1982, Mr. X acquired a property consisting of 3,000 sq.ft. of plot and 4,500 sq.ft. of
building in Chennai for a cost of Rs. 10,00,000/-. On 31.03.2017, he sold his property for a
sale consideration of Rs. 2,00,00,000/-. 109 & 1125 are the cost inflation index for 1982 - 83
& 2016 - 17 respectively.
Questions :
1. What will be the indexed cost of acquisition?

2. What is the capital gain?
Calculations:

C.I.I. for 1982 - 83 = 109
Date of transfer = 31.03.2017 (2016 - 17)
C.I.I. for 2016 - 17 = 1,125
10,00,000
1) Indexed cost of acquisition = x 1,125
109
= Rs. 1,03,21,100/- (1)
2) Capital gain = 2,00,00,000 - 1,03,21,100

= Rs. 96,78,900/- (2)
Answers :
1) Rs. 1,03,21,100/- 2) Rs. 96,78,900/-

109
Exercise 12 :
An individual owned property was originally acquired in 01.10.1972 for Rs. 45,000/-. The fair
market value of the property as on 01.04.2001 is 5.25 lakhs. On 01.04.2017, this property
was sold for a sale consideration of Rs. 25,05,000/-. 100, 272 are the cost
inflation index for 2001 - 02 & 2017 - 18.
Questions :

Calculations :
Date of acquisition = 01.10.1972

Cost of acquisition = Rs. 45,000
Fair market value as on 1.4.2001
= Rs. 5,25,000 (2001 - 02)
as worked out
Date of transfer = 01.04.2017 (2017 - 18)
272
100
= Rs. 14,28,000/- (1)

= Rs. 10,77,000/- (2)
Answers :
1) Rs. 14,28,000/- 2) Rs. 10,77,000/-
* * *
110
15. APARTMENTS & J V RATIO
Exercise 1 :
i) In a plot of 3,000 sq.ft., 3 flats of same built up area 1,500 sq.ft each are
constructed. What is the Undivided share (UDS) of land for each flat?
ii) If 3 flats of 1,500, 800, 700 are constructed in the plot of 3,000 sq.ft., what is the
UDS of land for 1,500 sq.ft. of flat?
i) Built up area = 3 x 1,500 = 4,500 sq.ft.

FSI = 4,500/3,000 = 1.5
UDS = 1,500 / 1.5 = 1,000 sq.ft.
ii) Built up area = 1,500 + 800 + 700= 3,000 sq.ft.

FSI = 3,000/ 3,000 = 1
UDS for = 1,500 / 1 = 1,500 sq.ft.
1,500 sq.ft. flat
Exercise 2 :
Land rate = Rs. 5,500 / sq.ft. FSI is 2. Building unit rate is Rs. 2,000/sq.ft. Assuming the
promoter’s profit as 20%, what is the composite rate?
Prevailing land rate = Rs. 5,500 / sq.ft.

FSI = 2
Land component = 5,500 / 2 = Rs. 2,750
Building rate = Rs. 2,000
Land + building component = Rs. 4,750
Add promoter’s profit, 20% = Rs. 950
Composite rate = Rs. 5,700/-
Exercise 3 :
In an apartment building, the sum of the plinth area of all the flats is 5,000 sq.ft. Common
111
area is 500 sq.ft. The super plinth area is 5,500 sq.ft. What is percentage of common area in
the apartment building?
Sum of plinth area of all flats = 5,000 sq.ft.

Common area = 500 sq.ft.
500
Percentage of common area = x 100 = 10%
5,000
Exercise 4 :
An apartment building consists of 12 flats of super built up area 1,050 sq.ft. The net monthly
rent of a flat is Rs. 9,000. The prevailing rate of return is 2.5%. Find the
approximate value of one flat by rent capitalisation method.
Net monthly rent = Rs. 9,000

Yearly rent = Rs. 1,08,000
Rate of return = 2.5%
100
Value = 1,08,000 x
2.5
= Rs. 43,20,000/-
Exercise 5 :
In a plot of 3,600 sq.ft., an apartment building of GF + 2 is existing. 3 flats of 600, 800, 1000
are existing in one floor. What is the UDS of land for i) flat 600 sq.ft & ii) flat
1,000 sq.ft.?
Built up area = (600 + 800 + 1000) x 3 = 7,200 sq.ft.

FSI = 7,200 / 3,600 = 2
UDS = 600 / 2 = 300 sq.ft.
= 1,000 / 2 = 500 sq.ft.
Exercise 6 :
In a plot of 8,608 sq.ft., the landlord Mr. ‘X’ intends to construct an apartment through joint
venture for a total built up area of 17,216 sq.ft. There will be 16 flats of super built up area of
1,076 sq.ft. The prevailing market rate for plot is Rs. 10,000 per sq.ft. and the guideline rate
112
is Rs. 20,000 per sq.ft. The building construction rate is Rs. 2,500/-. Assume the promoter’s
profit as 20%.
Questions :
1. What is FSI?
2. What is the undivided share (UDS) for each flat?
3. What is the composite rate?
4. What is the selling price of each flat?
5. What is Joint venture Ratio? (Promoter : Landlord)
6. Whether there is any impact of Guideline rate while fixing the composite rate and
joint venture ratio?
Data :

Proposed builtup area = 17,216 sq.ft.
No. of flats proposed = 16
Built up area of each flat = 1,076 sq.ft.
Market rate of plot = Rs. 10,000/sq.ft.
Building construction rate = Rs. 2,500/sq.ft.
Calcluations :
1. Total built up area = 17,216 sq.ft.

FSI 17,216 / 8,608 = 2 (1)
2. Super built up area of one flat = 1,076 sq.ft.

FSI = 2
UDS of a flat 1,076 / 2 = 538 sq.ft. (2)
3. Land component 10,000 / 2 = Rs. 5,000

Land rate + Building rate = Rs. 7,500
Add 20% for promoter’s profit = Rs. 1,500
Composite rate = Rs. 9,000 / sq.ft. (3)
113
4. Super built up area of one flat = 1,076 sq.ft.

Composite rate = Rs. 9,000/sq.ft.
Selling price 1,076 x 9,000 = Rs. 96,84,000/- (4)
5. Landlord’s share 10,000/2 = Rs. 5,000

Promoter’s share = Rs. 2,500
Total - Land lord + developer = Rs. 7,500
Landlord’s percentage share
5,000/7,500 = 67%
Promoter’s percentage share
2,500/7,500 = 33%
.
. . Joint venture Ratio is = 33 : 67 (5)
6. Guideline rate is meant for fixing stamp duty only and hence plays no role
while fixing the composite rate and joint venture ratio. (6)
Answers :
1) 2 4) Rs. 96,84,000/-
2) 538 sq.ft. 5) 33 : 67
3) Rs. 9,000/sq.ft. 6) Guideline rate plays no role while
fixing the composite rate and joint
venture ratio
Exercise 7 :
In a plot of 8,000 sq.ft., the promoter has constructed an apartment building of super built up
area 20,000 sq.ft. It consists of 16 flats of super plinth area 1,000 sq.ft. and 8 flats of super
plinth area of 500 sq.ft. The market rate of plot is Rs. 6,000/sq.ft. and the guideline rate is Rs.
7,500/sq.ft. The building rate is Rs. 2,500/sq.ft. The promoter’s profit is 15%.
Questions :
1. What is FSI?
2. What is UDS for 1,000 sq.ft. of flat?
3. What is UDS for 500 sq.ft. of flat?
4. What is the composite rate for the flat?
5. Assuming a common area of 4,000 sq.ft., what is the common area percentage?
6. What is the joint venture ratio?
114
Data :

Number of flats = 16 + 8
Builtup area of each flat = 1,000 sq.ft + 500 sq.ft.
Market rate of plot = Rs. 6,000/sq.ft.
Guideline rate = Rs. 7,500/-

Building rate = Rs. 2,500/-
Calculations :
1. Total built up area = 20,000 sq.ft.

FSI - 20,000 / 8,000 = 2.5 (1)
1,000
2. UDS for 1,000 sq.ft. of flat = = 400 sq.ft. (2)
2.5
500
3. UDS for 500 sq.ft. of flat = = 200 sq.ft. (3)
2.5
4. Land component = 6,000/2.5 = Rs. 2,400

Building component = Rs. 2,500
Land & Building component = Rs. 4,900
Promoter’s profit 15% = Rs. 735
Composite rate = Rs. 5,635/- (4)
5. Total super built up area of all flats= 20,000 sq.ft.

Common area = 4,000 sq.ft.
Plinth area of all flats = 16,000 sq.ft.
4,000
Common area percentage =
16,000
= 25% (5)
6. Joint venture ratio

Land rate = Rs. 6,000
FSI = 2.5
115
Land component = 6,000/2.5 = 2,400

Building component = 2,500
Land & Building = 4,900
Promoter’s ratio = 2,500/4,900 = 0.51 (51%)
Landlord’s share = 2,400/4,900 = 0.49 (49%)
Joint venture Ratio - (Promoter : Lordlord) = 51 : 49 (6)
Answers :
1. 2.5 4. Rs. 5,635/-

2. 400 sq.ft. 5. 25%
3. 200 sq.ft. 6. 51 : 49
Exercise 8 :
It is an apartment building with GF + 2 floors. Mr. ‘X’ has booked a flat (1,320 sq.ft.). UDS
(Undivided share) of land is 660 sq.ft. The composite rate is Rs. 6,000/sq.ft. The land rate is
Rs. 5,000/sq.ft. Sale deed for UDS of land has been executed (Rs. 33,00,000/-) and the
builder’s agreement has been signed. Total value of the flat on completion is
1,320 x 6,000 = Rs.79,20,000/-. Mr. X has applied loan from a bank. The bank directs the
valuer to certify the value in stages (break up for Rs. 77,20,000 : Land UDS (660) =
Rs. 33,00,000/- and Building (1,320) = Rs. 46,20,000/-).
Questions :
1) Before commencement of the building construction, what is the stage value?
2) Mr. X has booked a flat (1,320 sq.ft.) in first floor. Basement completed (18%). UDS
sale deed executed. What is the stage value?
3) Mr. X has booked a flat in first floor (1,320 sq.ft.). Frame works of all floors
completed. RCC roof for all the floors has been cast. For the concerned flat in FF,
brick work has been completed, doors & windows frames have been fixed, inside
plastering of walls and ceiling finish have been completed. Percentage of works
completed is 75%. What is the stage value?
4) Construction is fully completed in all respects. Flat is fit for use. What is the value to
be certified?
116
5) Mr. Y has booked a flat in 3rd floor. RCC columns have been raised upto second
floor. What is the stage value?
6) What is the cost to be certified on completion for the purpose of income tax?
Data :
Number of floors = 3
UDS = 660 sq.ft.
Sale deed for 660 sq.ft. of UDS = Rs. 33,00,000/-
Value of flat on completion = Rs. 79,20,000/-
Calculations :
1) UDS of land has been executed.

.
. . the value = 660 x 5,000 = Rs. 33,00,000/- (1)
2) UDS 660 x 5,000 = Rs. 33,00,000

Building - 0.18 x 46,20,000 = Rs. 8,31,600
Total stage value = Rs. 41,31,600/- (2)
3) UDS of land = 660 x 5,000 = Rs. 33,00,000

Building = 0.75 x 46,20,000 = Rs. 34,65,000
4) Composite rate = Rs. 6,000 / sq.ft.

Value on completion = 1,320 x 6,000
Value to be certified = Rs. 79,20,000/- (4)
5) UDS of land = 660 x 5,000 = Rs. 33,00,000

Value upto basement (18%) = Rs. 8,31,600
6) The cost to be certified for the = Rs. 79,20,000/- (6)

purpose of income tax
117
Answers :
1) Rs. 33,00,000/- 4) Rs. 79,20,000/-

2) Rs. 41,31,600/- 5) Rs. 41,31,600/-
3) Rs,. 67,65,000/- 6) Rs. 79,20,000/-
Exercise 9 :
It is a joint venture proposal. The landlord is having a plot of 8,250 sq.ft. and he wishes to
construct an apartment for an FSI of 2. The land rate is Rs. 5,000/sq.ft. A promoter has
approached the landlord for developing an apartment for which the unit rate of
construction is Rs. 2,500/-.
Questions:
1. What will be the promoter’s share?

2. What will be the landlord’s share?
Data :
Proposal for = Joint venture

Plot area owned by landlord = 8,250 sq.ft.
FSI proposed = 2
Unit rate of construction = Rs. 2,500/-
Calculations :
Land rate = Rs. 5,000 / sq.ft.

FSI = 2
Land component = 5,000 / 2 = Rs. 2,500
Land + building = Rs. 5,000
2,500
Promoter’s share = x 100 = 50% (1)
5,000
2,500
Landlord’s share = x 100 = 50% (2)
5,000
118
Answers :
1) 50% 2) 50%
Exercise 10 :
An apartment building consisting of 70 flats of equal super built up area of 1,000 sq.ft. each is
proposed to be constructed on a land of 35,000 sq.ft. 10% of the area of land has to be left as
OSR (Open Space Reservation) and separate deed has to be executed in favour of the
corporation.
Question :
1) What is the UDS for each flat?
Data :
Number of flats proposed = 70 Nos.

Built up area of each flat = 1,000 sq.ft.
Land area = 35,000 sq.ft.
OSR = 10%
Calculations :
Super built up area of one flat = 1,000 sq.ft.

Super built up area of seventy flats = 70,000 sq.ft.
FSI : 70,000 / 35,000 = 2
Percentage to be left for OSR = 10%
Area of land to be left for OSR = 3,500 sq.ft.
Net extent of land left with the
= 31,500 sq.ft.
Promoter 35,000 - 3,500
FSI now : 70,000 / 31,500 = 2.22
UDS for 1,000 sq.ft. of flat (31,500/70) = 1,000 / 2.22
= 450 sq.ft.
Answer :
1. 450 sq.ft.
119
Exercise 11 :
Mr. ‘X’ is having a commercial building of 20,000 sq.ft. situated in a plot of 10,000 sq.ft. He
wants to sell one shop of plinth area 1,000 sq.ft. to Mr. ‘Y’. He approaches a valuer to suggest
him the UDS of land of the shop for the purpose of executing a sale deed in favour of ‘Y’. The
common area percentage is 10%.
Question :
1. What is the UDS of land?
Data :

Built up area of building = 20,000 sq.ft.
Plinth area of 1 shop = 1,000 sq.ft.
Common area of 1 shop = 10%
Calculations :

FSI = 20,000 / 10,000 = 2
Plinth area of shop = 1,000
Common area percentage = 10%
Super builtup area = 1,000 x 1.1 = 1,100 sq.ft.
Super builtup area
UDS =
FSI
1,100
= = 550 sq.ft.
2
Answer :
1. 550 sq.ft.
Exercise 12 :
An apartment of built up area of 25,000 sq.ft. is proposed to be constructed in a land of

12,500 sq.ft. Prevailing market rate of land is Rs. 10,000/sq.ft. Unit rate of construction is Rs.
3,000/sq.ft. Assume the profit of the promoter as 25%.
120
Question :
1. What is the composite rate of the flat?
Data :

Land area = 12,500 sq.ft.
Rate of construction = Rs. 3,000/sq.ft.
Calculations :

25,000
FSI = = 2
12,500
Prevailing market rate of plot = Rs. 10,000
Land rate 10,000
Land component = =
FSI 2
= Rs. 5,000
Building rate = Rs. 3,000 / sq.ft.

Land & Building (5,000 + 3,000) = Rs. 8,000
Add promoter’s profit 25% = Rs. 2,000
Composite rate = Rs. 10,000/-
Answer :
1. Rs. 10,000/-
Exercise 13 :
A landlord has a plot of 15,000 sq.ft. A promoter has approached the landlord for a joint
venture stating that he wishes to construct an apartment building for 30,000 sq.ft. The prevail-
ing market rate of land is Rs. 14,000/sq.ft. and the guideline rate is
Rs. 24,000/sq.ft. The construction cost is Rs. 3,000/sq.ft.
121
Question :
1. What is the Joint Venture ratio (Promoter : Landlord)?
Data :

Proposed building area = 30,000 sq.ft.
Guideline rate = Rs. 24,000/-
Construction cost = Rs. 3,000/-
Calculations :
Plot area = 15,000

Building area = 30,000
30,000
FSI = = 2
15,000
Land rate = Rs. 14,000
FSI = 2
Proportionate land rate for the
purpose of joint venture 14,000
= = Rs. 7,000
(landlord) 2
Building rate (Promoter) = Rs. 3,000

Landlord + Promoter = Rs.10,000
3,000
Promoter’s share = x 100 = 30%
10,000
7,000
Landlord’s share = x 100 = 70%
10,000
... Ratio - Promoter : Landlord = 30 : 70
Answer :
1. 30 : 70
* * *
122
16. MISCELLANEOUS TOPICS & SOME MORE EXERCISES
Exercise 1 :
What is the amount of Rs. 5,000 at the end of 5 years @ 5% compound interest per annum?
r n
Amount A = P (1+ )
100
5 5
= 5,000 ( 1 + )
100
= 5,000 x (1.05)5
= 5,000 x 1.276
= Rs. 6,380/-
Exercise 2 :
In 2013, a valuer valued a residential property in a mofusil town for Rs. 68.56 lakhs. Assuming
an annual escalation of 10% per year, what will be the value of the property as on 2018 by
applying the formula?
P = Rs. 68.56 lakhs

r = 10%
n = 2018 - 2013 = 5 years
r n
Amount A = P (1+ )
100
10 5
= 68.56 ( 1 + )
100
= 68.56 x (1.1)5
= 68.56 x 1.6105
= Rs. 110.42 lakhs
Exercise 3 :
Mr. X is selling 2,400 sq.ft. of plot to Mr. Y for a mutually agreed amount of Rs. 24,00,000. But
in sale deed, they mention as Rs. 12,00,000/-. Guideline rate is Rs. 510/-. What is the
intrinsic value?, What is the agreement value? & What is stamp duty value?
a. Intrinsic value = Rs. 24,00,000/-

b. Agreement value = Rs. 12,00,000/-
c. Stamp duty value = 2,400 x 510
= Rs. 12,24,000/-
123
Exercise 4 :
A business man purchased a plot of 1,000 sq.mt. in a posh locality of a city in the year
1987 for a price of Rs.30,00,000. In the year 1988, he constructed a residential
bungalow having 300 sq.mt. built up floor area at ground level and 100 sq.mt. built up
area at first floor level at the cost of Rs. 14,00,000. Prevalent replacement cost of similar
bungalow as on today is Rs. 30,000 per sq.mt. Prevalent land price in the locality at
present is Rs. 60,000 per sq.mt. Age of building is 30 years and the total life of the building
is 60 years.
1. What will be the depreciation amount of the bungalow by adopting straight line
method of depreciation and considering scrap value at 10% ?
a) Rs. 60,00,000 b) Rs. 54,00,000

c) Rs. 45,00,000 d) Rs. 12,00,000
Ans (b)
2. What will be the depreciation amount of the bungalow by adopting constant

a) Rs. 54,00,000 b) Rs. 47,37,600

c) Rs. 60,00,000 d) Rs. 54,46,000
Ans (b)
3. What will be the market value of the land at present?
a) Rs. 240,00,000 b) Rs. 600,00,000

c) Rs. 480,00,000 d) Rs. 410,00,000
Ans (b)
4. What will be the total market value of the bungalow property for the bank loan
purpose?
a) Rs. 600,00,000 b) Rs. 666,00,000

c) Rs. 612,00,000 d) Rs. 566,10,000
Ans (b)
124
a) 60 years b) 30 years
c) Zero d) 45 years
Ans (b)
6. Which of the following will not be considered for the estimation of present market
value of above property?
a) Deprecation b) Current Replacement cost of the building

c) Economic obsolescence d) Current land rate
Ans (c)
Exercise 5 :
An owner purchased a piece of land admeasuring about 350 m² and constructed a

bungalow of ground and one upper floor for his personal use some 30 years back. The
bungalow is of first-class construction having a future economic life of 40 years and has
got the total built-up area of 300 m². The owner now desires to sell the same and has
received an offer of Rs. 55 lakhs with vacant possession or in the alternative he has
been offered a gross yearly rent of Rs. 2,00,000 for the bungalow and the plot together.
There is good demand for such property in the locality.
Value of land in the locality for similar plots = Rs.8000 per sq.m.
Present replacement cost of such a bungalow = Rs.15,000 per sq.m.
Total outgoings = 15 per cent of the gross rent
Annual sinking fund for redemption of Re. 1 at

5 per cent in 70 years = 0.0017
Amount of Re. 1 per annum in 30 years at = Rs.66.439
5 per cent
Year’s purchase at 3% in perpetuity = 33.33
1. What is the amount of depreciation of the bungalow?
a) 42.86 per cent b) 11.29 per cent

c) 15.30 per cent d) Nil
Ans (b)
125
2. What will be the depreciated replacement cost of the bungalow?
a) Rs. 39,91,950 b) Rs. 38,11,500

c) Rs. 35,12,250 d) Rs. 45,00,000
Ans (a)
3. What will be the insurable value for reinternment policy?
a) Rs. 39,91,950 b) Rs. 45,00,000

c) Rs. 65,00,000 d) Rs. 38,11,500
Ans (b)
4. What will be the market value of the property by income approach?
a) Rs. 66,66,000 b) Rs. 56,66,000

c) Rs. 55,00,000 d) Rs. 50,00,000
Ans (b)
Exercise 6 :
A fire broke out in Hemant's factory and damaged half of the stock which was to be shipped
to a nearby cloth dealer. His fire insurance policy had the average clause in it. Actual value of
the stock: Rs.3,00,000, Sum insured for the stock: Rs.2,00,000, Loss incurred : Rs.1,50,000
(As half the stock was destroyed). The claim amount will be Rs. ______.
a) Rs. 1,00,000 b) Rs. 3,00,000

c) Rs. 2,00,000 d) Rs. 1,50,000
Ans (a)
Exercise 7 :
A company is prepared to pay a rent of Rs.15,000 per annum, provided renovation

work around into Rs.50,000 is carried out by the owners. The owner desires that the
renovation should be carried out by the company and is prepared to accept a low rent.
What rent so the company offer based on 9 per cent rate of interest? Present value of
Rs.1 per annum at the 9 per cent and 5 per cent for 15 years is 7.334.
126
a) Rs. 8,182/- b) Rs. 3,668/-

c) Rs. 11,667/- d) Rs. 12,141/-
Ans (a)
Exercise 8 :
Mr. A. developed a real estate project. Gross development value of completed project
is Rs. 500 crore, construction cost and other developmental costs Rs. 200 crore, and
Developer’s profit is 10 per cent of value of completed project. Calculate the residual
land value?
a) Rs. 250 crore b) Rs. 200 crore

c) Rs. 150 crore d) Rs. 270 crore
Ans (a)
* * *
1
PART - II
ONE MARK CASE STUDIES - Pages 1 to 28

2
This page is kept vacant intentionally.

3
Part - II
ONE MARK CASE STUDIES
Exercise 1 : (IBBI)
A machine was purchased for Rs. 1,00,000/- @ 15% depreciation of SLM. What is the writ-
ten down value after 2 years?
a) Rs. 70,000/- b) Rs. 80,000/-

c) Rs. 60,000/- d) Rs. 90,000/-
Depreciation for 1 year by = 1,00,000 x 0.15

Straight line method
Depreciation amount = Rs. 15,000/year
Depreciated value after 1 year = 1,00,000 - 15,000

= Rs. 85,000/-
Depreciated value after the = 85,000 - 15,000

second year
= Rs. 70,000/-
Written down value after 2 years = Rs. 70,000/-
Ans ‘a’
Exercise 2 : (IBBI)
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?
a) Rs. 50,000/- b) Rs. 60,000/-

c) Rs. 40,000/- d) Rs. 70,000/-
4
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
By using a higher rate of return, the value is decreased by Rs. 50,000/-.
Ans ‘a’
Exercise 3 : (IBBI)
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%
Capitalised value = Rs. 3,00,000/-

Net income = Rs. 21,000/-
Net income
Capitalised value = x 100
X
21,000
3,00,000 = x 100
X
21,000 x 100
X =
3,00,000
= 7%
Ans ‘d’
Exercise 4 : (IBBI)
A mobile phone was purchased for Rs.50,000/-. Its salvage value is Rs. 10,000. Total life
time used 60,000 hours. Used time 20,000 hours. What is the depreciation of the cell phone?
5
a) Rs. 20,000/- b) Rs. 3,333/-

c) Rs. 13,333/- d) Rs. 23,333/-
Phone purchased for = Rs. 50,000/-

Salvage value = Rs. 10,000/-
Net value = Rs. 40,000/-
Used time = 20,000 hours
Total life = 60,000 hours
20,000 1
Depreciation = =
60,000 3
40,000
Depreciation value =
3
= Rs. 13,333/-.
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?
a) Rs. 46,00,000 b) Rs. 48,91,600

c) Rs. 49,00,000 d) Rs. 47,91,600
Amount borrowed = Rs. 36,00,000

Amount to which Re. 1/- will = (1 + i)n
accumulate @ 10% in 3 years
= (1 + 0.1)3
= 1.331
Amount to be repaid by the = (1.331 x 36,00,000)

contractor
= Rs. 47,91,600/-
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/-.
6
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.
a) Rs. 1,25,92,000 b) Rs. 1,35,92,000

c) Rs. 1,20,00,000 d) Rs. 1,55,63,000
Initial investment = 60,00,000 + 20,00,000

= 80,00,000
Amount to which Re. 1/- will = (1 + 0.12)n

accumulate @ 12% in 4 years
= (1 + 0.12)4
= 1.574
Cost for the purchaser = 1.574 x 80,00,000

= Rs. 1,25,92,000/-
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.
a) Rs. 13,50,000 b) Rs. 12,50,000

c) Rs. 14,00,000 d) Rs. 15,00,000
Amount receivable in 9 years time = Rs. 25,00,000/-

1
P.V. of Re. 1/- in 9 years @ 8% =
(1 + i)n
1
=
(1 + 0.08)9
= 0.5
P.V. (Present value) = 25,00,000 x 0.5
= Rs. 12,50,000/-
Ans ‘b’
7
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.
a) Rs. 18,00,000 b) Rs. 16,00,000

c) Rs. 17,00,000 d) Rs. 20,00,000
Annual saving = Rs. 50,000/-

Amount Re. 1/- P.A. at 7% for 18 years
Formula (1 + i)n - 1 (1 + 0.07 )18 - 1
APA = =
i 0.07
2.3799
=
0.07
= 34
Total amount available after 18 years :

= 34 x 50,000
= Rs. 17,00,000/-
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.
(i) What is the FSI?
a) 1.2 b) 1.3 c) 1.6 d) 1.5
(ii) What is UDS of land for the flat of 1600 Sq.ft.?
a) 1066.7 Sq.ft. b) 1055 Sq.ft.

c) 1000 Sq.ft. d) 1006 Sq.ft.
Area of the site = 4,000 sq.ft.

(1,700 + 1,400 + 1,300 + 1.600)
8
Total built up area

FSI =
Area of the site
6,000
= = 1.5
4,000
Flat area 1,600
UDS = =
FSI 1.5
= 1066.7 sq.ft.
i) Ans ‘d’
ii) Ans ‘a’
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 component (6,000/2) = 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.
a) Rs. 6,62,000/- b) Rs. 5,00,000/-

c) Rs. 7,72,000/- d) Rs. 8,00,000/-
1,024
Indexed cost of acquisition= 9,50,000 x
100
9
= Rs. 97,28,000/-
Taxable capital gain = 1,05,00,000 - 97,28,000

= Rs. 7,72,000/-
Ans ‘c’
Exercise 12 :
A Businessman acquires a property at Tiruchirappalli on 24.12.2010 for Rs. 95 lakhs. The

same was sold for Rs. 130 lakhs in 2014. What is the capital gain? C.I.I. for 2010 & 2014 are
711 & 1,024 respectively.
a) 5.82 L b) 7.82 L
c) 8.50 L d) Capital Loss
1,024
711
= Rs. 1,36,82,000/-
= Negative
= Capital loss
Ans ‘d’
Exercise 13 :
Built-up area of an apartment building at Chennai 9000 Sq.ft. is proposed to be constructed

in a site of 4500 Sq.ft. Prevailing market rate of land is Rs 6000/Sq.ft. Unit rate of construction
is Rs 2800/Sq.ft. Promoter’s profit = 20% What is the composite rate of the flat?
a) 7960 Sq.ft. b) 6500 Sq.ft.

c) 6960 Sq.ft. d) 7600 Sq.ft.

FSI = 9,000 / 4,500 = 2
Prevailing market rate of land = Rs. 6,000/sq.ft.
Land rate 6,000
Land component = =
FSI 2
= 3,000/sq.ft.
10
Building rate = Rs. 2,800/sq.ft.

Land + Building = 3,000 + 2,800
= Rs. 5,800
Add 20% profit = Rs. 1,160
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/-
Monthly rent = Rs. 45,000/-

Yearly rent = 12 x 45,000
= Rs. 5,40,000/-
Rate of return = 6%
100
Value of the property = 5,40,000 x
6
= Rs. 90,00,000/-
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?
a) 1.2 b) 1.5 c) 2.0 d) 1.0
Total built up area

FSI =
Area of the site
26,136 x 0.0929 26,136
= or
0.162 x 10,000 0.162 x 2.47 x 43,560
= 1.5
Ans ‘b’
11
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?
a) 1500 Sq.ft. b) 1200 Sq.ft.

c) 600 Sq.ft. d) 750 Sq.ft.
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?
a) 40.8 L b) 56.48 L c) 60.8 L d) 56.8 L
Amount to which Re. 1/- will accumulate at 9% in 4 years

= (1 + r)n
= (1 + 0.9)4
= 1.412
Amount to be repaid by contractor = (1.412 x 40,00,000)

= Rs. 56,48,000/-
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?
12
a) Rs 8,00,000 b) Rs 10,00,000
c) Rs 12,00,000 d) Rs 15,00,000
Year’s purchase (Y.P.) = 100 / R

= 100 / 6
= 16.67
Present value = Net annual income x Y.P.
= 60,000 x 16.67
= Rs. 10,00,200/-
say Rs. 10,00,000/-
Ans ‘b’
Exercise 19 :
An Investor has invested an amount of Rs 10,00,000 in purchasing an urban site on taking a

loan of 9% compound rate of interest from a bank. What amount he will have to repay to the
bank after 3 years?
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
13
i = 0.15
n = 5
Accumulated cost of his house = 80,00,000 x (1.15)5
= Rs. 1,60,91,000 (A)
Accumulated cost of his = 15,00,000 x (1.15)2

boundary wall
= Rs. 19,84,000 (B)
Total cost of his investment A + B = Rs. 1,80,75,000/-
Ans ‘b’
Exercise 21 :
A framed structure building is 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 16
= 1 - (1 - )
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?
a) Rs. 6,325 b) Rs 5,325

c) Rs 7,325 d) Rs 5,900
14
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/sq.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 :
48,000 sq.ft. Assume 10% land of OSR (Open space reserve). What is the UDS of the each
flat?
15
a) 820 Sq.ft. b) 620 Sq.ft.

c) 720 Sq.ft. d) 1100 Sq.ft.
Super built up area of block A & B = 2 x 30 x 1,200

= 72,000 sq.ft.
FSI = 72,000 / 48,000 = 1.5
OSR % = 10%
Area of the land to be left for OSR = 4,800 sq.ft.
Net extent of land = 48,000 - 4,800
= 43,200 sq.ft.
FSI now = 72,000 / 43,200 = 1.6667
UDS = 1,200 / 1.667 = 719.85,
say 720 sq.ft.
Ans ‘c’
Exercise 25 :
A businessman is having a commercial building at Coimbatore. It consists of 5 shops of

equal plinth area 1200 Sq.ft./each shop. He proposed to sell the 2 shops. What will be the
UDS of land for which he has to mention in the sale deed? Plot area is 3,000 sq.ft.
a) 1200 Sq.ft. b) 1280 Sq.ft.

c) 1480 Sq.ft. d) 1300 Sq.ft.
Total built up area = 5 x 1,200

= 6,000 sq.ft.
FSI = 6,000 / 3,000 = 2
Plinth area of 2 shops = 2 x 1,200
= 2,400 sq.ft.
UDS = 2,400 / 2
= 1,200 sq.ft.
Ans ‘a’
Exercise 26 :
An apartment building at Chennai, consists of 4 floors, each floor built-up area is 2,400 sq.ft.
Area of the plot is 4,800 sq.ft. What is the plot coverage?
16
a) 60% b) 70%
c) 50% d) 40%
Built up area of GF
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
Monthly rent = Rs. 18,000 + 15,000

= Rs. 33,000/-
= Rs. 3,96,000
Rate of return = 4%
Value = 3,96,000 x (100 / 4)
= Rs. 99,00,000/-
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
Gross monthly rent = 8 x 9,000

= Rs. 72,000
17
Outgoings 15% (-) = Rs. 10,800

Net monthly rent = Rs. 61,200
= Rs. 7,34,400
Rate of return = 3.5%
Value = 7,34,400 x (100 / 3.5)
= Rs. 2,09,82,857/-
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.
(i) a) 18.25 L b) 20.25 L

c) 25 L d) 23.25 L
(ii) a) 40.63 L b) 20.25 L

c) 50.63 L d) 60.63 L

Age = 15 years
Life = 30 years
Salvage value = 25%
Depreciation = (15/30) x 75 = 37.5%
Salvage value = 0.25 x 81,00,000
= Rs. 20,25,000/-
Depreciated value of the building = 0.625 x 81,00,000
= Rs. 50,63,000/-
i) Ans ‘b’ ii) Ans ‘c’
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.
18
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 5,000 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) Depreciation value

a) 14.23 L b) 24.23 L
c) 18.23 L d) 10.23 L
(ii) Value of the property

a) 14.71 L b) 150.71 L
c) 165 L d) 160.71 L

Land value = 5,000 x 2,300
= Rs. 1,15,00,000/-
Builtup area = 232 sq.m. = 2,497 sq.ft.
Unit rate of construction = Rs. 2,000/sq.ft.
= Rs. 49,94,000/-
Age 2018 - 1999 = 19 years
Life = 60 years
Depreciation percentage = (19/60) x 90
= 28.5%
19

= Rs. 14,23,000
Present value of the building = 49,94,000 - 14,23,000

= Rs. 35,71,000/-
Total value of the property = 1,15,00,000 + 35,71,000
= Rs. 1,50,71,000/-
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
Principal sum = 6,00,000 + 75,000

= Rs. 6,75,000/-
Value of land (A) after 3 years = 6,75,000
7 3
= (1 + )
100
= 6,75,000 x 1.225
= Rs. 8,27,000/-
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
20
= 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.
Hence the rate of return for lessor is 7%.
Ans ‘b’
21
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%.
a) Rs. 78,94,800/- b) Rs. 92,88,000/-

c) Rs. 1,08,00,000/- d) Rs. 91,80,000/-
Land value = 4,800 x 1,200

= Rs. 57,60,000/-
Building depreciation = (20/60) x 90
= 30%
Depreciated value of building = 0.7 x 2,400 x 2,100
= Rs. 35,28,000/-
Value of land & building = Rs. 92,88,000/-
57,60,000 + 35,28,000
Forced sale value = 0.85 x 92,88,000
= Rs. 78,94,800/-
Ans ‘a’
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.
22
a) 24 b) 25
c) 30 d) 35
Method 1 :
r
Formula A = P (1 - )n
100
Depreciated value = Replacement cost x Depreciation

= Replacement cost x 24%
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%
The answer is 30% - ‘c’

23
Method 2 :
24% 25% 30% 35%
Value 100 100 100 100

Less depreciation - 24 - 25 - 30 - 35
After 1 year 76 75 70 65
Less depreciation - 18.24 - 18.75 - 21 - 22.75
After 2 years 57.76 56.25 49.0 42.25

Less depreciation - 13.86 - 14.06 -14.7 -14.79
After 3 years 43.90 42.19 34.3 27.46

Less depreciation - 10.54 - 10.55 - 10.3 - 9.61
After 4 years 33.36 31.64 24 17.85
The answer is 30% - ‘c’.
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
15% 20% 25% 30%
Value 100 100 100 100

Less depreciation - 15 - 20 - 25 - 30
After 1 year 85 80 75 70
Less depreciation - 12.75 - 16 - 18.75 - 21
After 2 years 72.25 64 56.25 49

Less depreciation - 10.84 - 12.80 - 14.06 -14.70
After 3 years 61.41 51.20 42.19 34.30
The answer is 30% - ‘d’.

24
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’
A machine was purchased of Rs. 18,000/- before 2 years. It is sold for Rs. 16,000/- consid-
ering 10% depreciation (of Rs. 18,000/-) per annum. The machinery was sold for
a) 2,000 less b) 1,600 less

c) 1,600 profit d) No loss and no gain
Purchased cost two years back = 18,000

Less 10% depreciation = 1,800
Value after one year = 16,200
Less 10% depreciation = 1,800
Value after two years = 14,400
Sold for = Rs. 16,000
... Profit = 16,000 - 14,400 = Rs. 1,600
Answer is ‘c’
The property value is Rs. 1,00,000, expected salvage is Rs. 2,000 after 5 years, what is rate
of depreciation?
25
a) 20 b) 19.60 1,00,000 - 2,000

c) 30 d) 15 5
98%
5 = 19.6%
Ans : b
A mobile phone was purchased for Rs. 60,000/-. It is salvage is Rs. 10,000/-. Total life time
use 40,000 hours. Used time 20,000/-. What is the depreciation of the cell phone?
a) Rs. 12,000/- b) Rs. 15,000/-

c) Rs. 18,000/- d) None of above
60,000 - 10,000 20,000

Ans = 1 x 40,000
= Rs. 25,000/-
Ans : d
Cost of acquisition is Rs. 8,000/-. Salvage value is Rs. 1,000/-. Life of the machine is 3 years.
For WDV, what is the depreciation rate?
8,000
-50% 4,000
a) 50% b) 25% 4,000
-50% 2,000
c) 66% d) 100% 2,000
-50% 1,000
Salvage value 1,000
Ans : a
The net income was reported at Rs. 24,000/- and the property sold for Rs. 3,00,000. What
capitalisation rate is applied to this sale?
24,000 x 100
Ans = 3,00,000
a) 7% b) 8%
c) 9% d) 10%
Ans : b
26
The age of the building is 20 years. The life of the building is 40 years. The replacement cost
of the building as on 2018 is Rs. 5,000/-. The salvage value is Rs. 500/-. Using straight line
method, what is depreciated rate?
5,000 - 500 20
1 x 40
a) Rs. 2,250/- b) Rs. 2,500/-
c) Rs. 2,750/- d) Rs. 3,000/-
Ans : c
A person seeks an income of Rs. 1,000 per annum from an investment. He wishes this is to
be an 8% return on his investment. What is the amount he has to invest?
a) Rs. 1,000/- b) Rs. 80/-

c) Rs. 12,500/- d) Rs. 10,000/-
Annual income = Rs. 1,000

Rate of return = 8%
1,000
Capital value = x 100
8
= Rs. 12,500/-
Ans : c
What would be the written down value of a machine purchased at the cost of Rs. 30,000/-
after 3 years of service life at 5% rate of depreciation?
a) Rs. 26,720/- b) Rs. 25,720/-

c) Rs. 27,720/- d) Rs. 28,720/-
Cost = Rs. 30,000

Less 5% = 1,500
WDV - 1st year = 28,500
Less 5% = 1,425
WDV - 2nd year = 27,075
27
Less 5% = 1,355
WDV - 3rd year = 25,720
Ans : b
A machine was purchased 2 years back at cost of Rs. 4,00,000/-. Total life is 20 years.
Salvage value = 10%. What is the depreciated present value after 2 years
a) Rs. 3,74,000/- b) Rs. 3,54,000/-

c) Rs. 3,64,000/- d) Rs. 3,44,000/-
Purchased cost = Rs. 4,00,000/-

Age = 2 years
Life = 20 years
Salvage value = 10%
2
20
= Rs. 3,64,000/-
Ans : c
Workout N.P.V. of a building having 20 years of age and 60 years of total life. Its replacement
cost as on today is Rs. 4,30,000/-. Salvage value 10%. Adopt SLM
a) Rs. 3,11,000/- b) Rs. 4,11,000/-

c) Rs. 3,01,000/- d) Rs. 4,01,000/-
Replacement value = Rs. 4,30,000/-

Age = 20 years
Life = 60 years
Salvage value = 10%
20
60
Net present value = 0.7 x 4,30,000
= Rs. 3,01,000/-
Ans : c
28
What is the N.P.V. by constant percentage method (linear method). Replacement cost is
Rs. 3,50,000/-. Life : 75 years. Age : 15 years.
a) Rs. 3,86,300/- b) Rs. 4,86,300/-

c) Rs. 1,86,300/- d) Rs. 2,86,300/-
100
Depreciation percentage = = 1.33
75
r n
A = P(1- )
100
1.33 15
= 3,50,000 ( 1 - )
100
= 3,50,000 ( 0.9867)15
= 3,50,000 x 0.818
= Rs. 2,86,300/-
Ans : d
A single storeyed house was constructed in 1993, cost Rs. 10,00,000/-, What is the value in
the year 2000 by cost index method of CPWD? Index in 1993 - 244, Index in 2000 - 447,
Base index is 100 for 1981 .
a) Rs. 10,00,000 x (447 - 244) b) Rs. 10,00,000 x (244 / 447)

c) Rs. 10,00,000 x (244 + 447) d) Rs. 10,00,000 x (447 / 244)
Cost of the building in 1993 = Rs. 10,00,000/-

Value of the building in 2000 447
= 10,00,000 x
by applying CPWD cost index 244
= Rs. 18,31,967/-
Ans : d
* * *

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01. Practical Valuation Vol. 01 - General topics - Rs. 450/-

CASE STUDIES ON VALUATION

2. Valuation by Land & Building method - 22 - 40

3. Written down value & Book value - 41 - 44

5. Valuation by Cost index method - 57 - 60

6. Valuation by Belting method - 61 - 65

7. Valuation of Petrol bunk - 66 - 69

8. Valuation of Leasehold properties - 70 - 80

9. Valuation by Profit method - 81 - 83

10. Bank valuation - 84 - 85

11. Ground rent - 86 - 87

12. Valuation of Tenanted properties - 88 - 93

13. Residual value method - 94 - 95

14. Capital gain - 96 - 109

15. Apartments & J.V. ratio - 110 - 121

16. Miscellaneous topics - 122 - 126

It is a load bearing structure. Age is 8 years. Life is 60 years.

i) What is the percentage depreciation by straight line method assuming a salvage

Plinth area = 1,275 sq.ft.

Plinth area = 5,000 sq.ft.

Replacement value = Rs. 50,00,000

Land value = 2,000 x 8,000 = Rs. 1,60,00,000

Total value (Land + building) = Rs. 3,10,00,000

Type of structure = Load bearing

Age of the building = 16 years

1) Rs. 13,68,000/- 2) Rs. 12,76,800/-

1) What is the depreciated value of rear portion?

2) What is the depreciated value of the front portion?

1) Rs. 15,74,400/- 2) Rs. 17,52,000/-

1. What is the depreciated value of GF?

Number of floors = GF & FF

Age = 16 years 8 years

1) Rs. 14,59,200/- 2) Rs. 10,94,400/-

1) Determine the market value assuming it is a marketable property?

Type of structure = Load bearing

Land value = 2,400 x 2,000 = Rs. 48,00,000

Building area = 1,500 sq.ft.

Depreciated value of building = 0.7 x 1,500 x 1,700

Forced sale value 0.85x65,85,000= Rs. 55,97,250/- (2)

1) Rs. 65,85,000/- 2) Rs. 55,97,250/-

1) What is replacement value?

Plinth area = 1,000 sq.ft.

Age of the building = 20 years

Plinth area = 1,000 sq.ft.

Age of the building = 20 Years

Depreciation value = 0.3 x 20,00,000 = Rs. 6,00,000

Balance economic life = 60 - 20 = 40 Years (5)

1) Rs. 20,00,000/- 4) 26.09%

Ground floor of a residential bungalow was constructed in 1985 at a (historic) cost of

1. What is the replacement cost of ground floor by book value method?

Year of construction of GF = 1985

1. Ground floor cost in 1985 = Rs. 3,50,000/-

2. First floor cost in 1990 = Rs. 6,00,000/-

1 & 2 Mark Case Studies

1 & 2 Mark Case Studies