Methods to Find the Valuation of Property or Apartment

A property valuation report is given to the property owner to indicate the condition of the house and how much it is worth in the market. The report helps a buyer as well as a seller in assessing the value of a property. Property valuation in India has gained pace with the rapidly increasing demand for Real Estate in India. The property valuation company will give you a comprehensive property valuation report. Based on the property valuation reports, you can estimate the price of your property.

Property Valuation Methods

The property valuation methods and property valuation process depends on the location of the property, the quality of construction, maintenance of the property, proximity to major infrastructure developments and more. Safety and security of the apartment is another factor which is closely looked upon in the present times. A property located in or near the riot prone area has lower rates, even if it is in the best of location and filled with all the modern conveniences and amenities. Good connectivity of the property with the bus depot, railway station and airport adds the face value of the apartment or house. Following are important property valuation methods.

• The Investment Method: The investment method of valuation is directly related to its income producing power. This method is a practical and discreet one, extending a fair view of the value of the property. It involves converting a property’s income flow (rent) into an appropriate capital sum. Based on discounted cash flow method, it takes into account the future cash flows that the real property can bring to the investor.

• The Comparison (or Comparative) Method: This method is best for residential property or purchase of property not usually for investment purposes but for occupation by the owner. In this method, the latest sales figure of property in the market is devised. It takes into account of latest sales figure and comparative values. Based on the comparative values, it derives capital values for properties and rental yield.

• The Residual Method: This method is used when a property has potential for development or redevelopment. Residual valuations for property are regularly made by people who purchase residential properties that they believe could be made more valuable if money were spent on improvements and modernization. This method is generally applicable in development projects.

• The Contractors Method: The Cost Method /Contractors Method of valuation of property assumes that a prospective purchaser would be prepared to pay the same amount for the premises as it would cost him or her to purchase a similar property elsewhere. What is required is not the cost of an exact duplicate of the existing building, but the cost of providing the same accommodation in a similar form using up-to-date construction techniques. It is generally used in rating all the compulsory purchases.

• The Profits Method: For certain types of property, capital value is estimated from the amount of trade or business conducted at the property. In these cases, the profits method is used to take the gross earnings and then deduct the working expenses, which are interest on the capital provided by the tenant and an amount for the tenant’s risk and enterprise. The remaining balance is the amount that can be paid in rent.

Valuation Report is prepared by expert valuers

The valuation report for a property is prepared by expert valuers. If you are obtaining a mortgage, your lender will require a valuation by one of his panel surveyors, to ensure that if the mortgage is unpaid the outstanding amount will be covered. The estimated value of property is only valid as of a given date or period of time, since the market conditions, the investment climate and other factors change frequently.

Valuations are also required during for tax purposes and probate. Wealth tax is to be paid by property owners owning property above a certain value. The valuation report for a property is prepared by chartered surveyor and they offer impartial, specialist advice on a variety of property related issues and the services which they provide are diverse. A chartered surveyor is an expert in the value of property who has wide experience in and knowledge of the property market.

Sometimes, the statute (Law) lays down the methodology to be followed in arriving at the value. In such cases, the valuation report should be prepared taking into account the methodology. For example, for wealth tax purpose, the Wealth Tax Act specifies the procedure to be followed in arriving at the value of a property. The main assumptions and basis for arriving at the value of a property should be clearly mentioned.

Disclaimer: The article  contains data collected from various sources and the use of same is at readers discretion.