VALUATION:KINDS OF VALUES AND DEFINITIONS
Market Value : It is defined as the sum the property will fetch if it is sold in the open market.
Guideline Value: : It is the value of the land which is recorded in the Register of Registrar's Office and used for the purpose of determining the Stamp Duty at the time of Registration of the Documents.
Book Value:
It shows the original investment of a Company on its assets, including properties and machinery less depreciation for the period passed.
Salvage Value: Value of Machinery realized on sales when its useful span of life is over but still it has not become useless.
Depreciation Value: It is the reduction of Value of the Property due to age, deterioration; lack of maintenance, obsolescence, decay, wear and tear etc., Depreciation Value depends upon the age and its future life.
Present Value: It is replacement value less depreciation value. The other Values are Liquidation Value, Intrinsic Value, Investment Value, Cost Value, Warranted Value, True Value, Written Down Value, Going Concern Value, Commercial Value, Rental Value, Exchange Value, Appraisal Value, Face Value, Utility Value, Use Value, Loss Value, Tax Value, Economic Value, Sale Value, Condemnation Value, Cash Value, Future Value, Capital Value, Mortgage loan Value, Forced Sale value, etc., etc.
DIFFERENT METHODS OF VALUATION
Land and Building Method for Bungalows / Flats.
Bungalows / Houses: In this case the cost of land and building are assessed separately and added to get the present value of the property.
Valuation of Land to be considered
• 1. Guide lines from Registrar's Department (Circle rates)
• 2. Price paid within a reasonable time, in bonafied transactions of purchase of lands acquired.
• 3. Demand, locality, characteristics like shape, size and location of Roads and Parks.
• 4. Opinions of relevant person such as Neighbors, Brokers and recent sales and prevailing trend.
Valuation of Building to be considered
Plinth area rates bases on CPWD or State PWD and adjusted by Index cost, Present Value of Building
Flats
The above method of Land and building method cannot be applied on flats since G. House societies and DDA/ MCD Flats are effected by various factors like common passages, lifts, common places of assembly, parking. Mostly it depends on Social built up of the housing complex also. The rates are assessed from Per Square feet rate of the super area which includes Plinth area + common share of common areas such as Entrance, lifts, passages, stair hall and parking etc. It is generally taken as 15-20% higher than the plinth area. The valuation is done, thus on Prevailing rates of the super area in the locality
• 1) Floor Area
• 2) Plinth Area
• 3) Super Area
Rental Capitalization Method
It consists of capitalizing the net annual Rental Income (NAR) at an appropriate rate of Interest and rate of Capitalization (80% as per Wealth Tax rules for Delhi / NCR) Net
annual Rent income equals to Gross Rental Income - outgoings like Property tax, repairs, maintenance service charges, Insurance premiums, rent collection and management charges etc. app. 40%
Development Method
This method is used to evaluate such property where there is a developmental potential, so that value of property after development will be increased more than the expenditure incurred, for example large portion of land can be divided in small plots and developed fully so as to provide plots of land for residential societies, or a large complex of multistoried buildings, shopping / commercial complex etc.
• (i) Guideline Rate
• (ii) Prevailing market rate
Guideline Rate
Guideline Rate is the unit rate fixed by the local Registration Dept authorities for the purpose of deciding the stamp Duty for any sale transaction between the Buyer and Seller. This rate is fixed based on the recent transactions and sale instants.
Prevailing Market Rate
This is the rate to be adopted while assessing the present market value. This rate is to be arrived from comparable/ recent sale instances, transacted in the surrounding or nearby areas.