Influences of property valuations in India
In a recent report, the property valuation of the real estate in India is said to be low due to various reasons like sector’s financing and construction costs have been going up. The property valuation in India is done based on an array of reasons. The report suggests that Indian realty sector cost of debt is north of 16% for construction and 20% for acquisition finance along with the developer’s input costs staggering.
However, the property valuation methods in India are dissimilar like that of Indian property laws in various states. Most of the real estate agents and brokers do not rely on the property valuation method for the prices quoted by the concerned authorities, as the property valuations given by the administration do not coexist with the property market.
What is property valuation?
It is a process wherein the estimation value of real estate property is done through various methods like;
Comparable property method and discounted value of rentals and the remaining life of the building based in the structural strength of the building design and the type of material used along with the age of the property. In most cases the title of the property is optionally considered.
What is the need for property valuation?
There are various home finance companies which require an approved valuer to appraise the value of the property along with an establishment of the ownership of the property as in most cases; the security of the loan is against the property. Also the remaining life of the property is estimated due to the non-expiration of the loan.
Factors considered for property valuation:
There are various factors which are to be taken in to consideration for the property valuation. Factors like the location of the property, the quality of the construction, the maintenance of the property and the adoption of infrastructural changes are considered for the valuation of the property. The method of property valuation has gained importance India over the past few years. There are various major global investors who are attracted towards the investment options in the real estate sector. This in turn has led to an importance and encouragement of the property valuation services. Most of the property valuation companies provide you an absolute report through which one can estimate the price of the property.
Contents of the property valuation services;
- Assets for acquisition and disposal
- Financial reporting & public listing
- Corporate restructuring
- Partnership and Joint Venture
- Mortgage & capital raising
- Insurance replacement / reinstatement
- Lease negotiations
- Litigation support
Factors which influence the property valuation in India:
Firstly, the infrastructure development of the surrounding areas is an important aspect which influences the property valuation. The development can be in the form of road, airport, bus terminal, malls, retail markets and so on. Also today there are many cities coming up with metro and this factor plays a major role in the infrastructure development. The property valuations are based on this factor to a greater extent.
The commercial real estate development:
This is one of the most important factors influencing property valuation. The emergence of commercial spaces and SEZs play an important role. Maximum numbers of people prefer staying closer to their workplace which is too evident in cities like Mumbai, Pune, Bangalore, Gurgaon and so on.
The quantum of disposable income:
This is one of the key factors of the property value influence. It is a proved fact that an area with more number of IT hubs has superior valuation when compared to the manufacturing and agricultural hubs.
The availability of land:
The availability of land drives the property valuation as the areas with large amount of land for residential purposes tends to appreciate slowly compared to areas with scarce land. Few of the examples are cities like Delhi and Mumbai.
The connectivity:
The connectivity of the areas is another major factor for property evaluation. Most of the areas which have entertainment and business hubs have the higher valuation when compared to other areas.
Apparently other factors like the home loan interest rates and inflation also have a major effect in property valuation.
