Professional Documents
Culture Documents
CHAPTER 13.0
Introduction
• Valuation is the technique of assessing the present fair value of the
property.
• Valuation is an art of determining actual unbiased, legal and logical
value of the property
• Property may be the land, building, both land and building, factory,
machineries, jewelries and other engineering structures of various
types.
• The value of the property depends upon its structure, life span,
location, maintenance etc
Cost and Value
• Cost:
– Cost is the original cost and the original cost may
be either construction cost or a purchase cost.
• Value:
– Value means the present (current) salable value of
the property.
where, ‘ i ‘ is rate of interest for sinking fund (for redemption of capital) and ‘ n
‘ is life of structure
• Sinking Fund
– Accumulation of fund to replace the structure
Where,
Depreciation Method of Valuation
Value of property =
Total plinth area or built up area in meter square * prevailing plinth
area rate per meter square – total depreciation + Value of land
Where,
Numerical for method2 and 3
• A freehold residential property consisting of a
house having plinth area of 300 square meter
constructed 20 years ago on a plot of land
measuring 900 square meters is proposed to be
purchase by Mr. Ganesh for his use. The present
rate of construction of similar building is Rs.
25,000 per square meters and the cost of land is
Rs 1000 per square meters. Life of a building is
75 years and salvage value is 10 %. Advise Mr.
Ganesh on what cost he should purchased the
property (use method 2 and 3)
Rental Method of Valuation
• Value of property = Capitalized value + Value of Land
• Capitalized Value = Net rent/income * Years Purchase
• Net rent/income = Gross rent/income - outgoings
Where :
‘ ip’ highest prevailing rate of interest in decimal
ic ‘ is coefficient of sinking fund
‘ i ‘ is rate of interest for sinking fund and ‘ n ‘ is life of structure (for redemption
of capital)
Profit Based Method of Valuation
• Use in valuation of commercial property like cinema hall, hotel, complex etc