VALUATION OF LAND LOCKED AREA: OPINION BY BK SIR

KNOWLEDGE BANK FROM B KANAGA SABAPATHY

LET KNOWLEDGE SPREAD

Message from B. Kanaga sabapathy 03.03.2023

Question :

The valuation is for collateral security. A borrower took me to his property which is a vacant land of 10,500 sq.ft. situated 40’ away from the main road where the land unit rate is Rs. 2,000/-. On seeing the topo sketch and sale deed, I have found that the subject property is a landlocked land since there is no connectivity from the approach road. I was about to certify the market by adopting 25% of the prevailing market rate (10,500 x 500 = Rs. 52,50,000/-). But the borrower is trying hard to convince me to certify 10,500 x 2,000 = Rs. 2,10,00,000/- since there is a proposal for road widening for 40’.

There is heavy pressure from other sides also to help him in order to avail more loan facilities. He is a well-known person in the locality who is known for his integrity.

Can I value of Rs. 2.10 crores?. I am going to receive a sizeable fee also.

Opinion :

1. Is there is any official announcement that the road is going to be widened? If the borrower is unable to show you any documentary evidence, make thorough enquiries with the revenue department which is in charge of giving compensation.

2. Rumours cannot be accepted while certifying market value for collateral securities for banks.

3. Certifying a huge value based on the casual, unreliable and unauthenticated statement of the borrower is always dangerous. What will happen if the borrower becomes a defaulter and his property is going to be auctioned? Will you come forward to buy that landlocked land for the huge value you have certified?.

4. The bank gives loans based on your valuation report. It is public money.

5. My suggestion :

Value is a function of place, purpose and date.

As on date, you can certify a value of Rs. 52,50,000/-. As and when (i) there is an authenticated announcement, (ii) the road is formed, (iii) the subject land has proper approach, then, you may consider certifying for a higher value provided marketability and enforceability are there.

6. Regarding the fees you have mentioned, a panel valuer must remember this always :

Fees in mind today or
Peace of mind tomorrow.

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With best wishes,

B. KANAGA SABAPATHY
bkvaluer@gmail.com
www.bkanagasabapathy.com

About the Author:-

Mr. B. Kanaga Sabapathy born in 1951, is a Civil Engineer who belongs to the 1972 batch of Regional Engineering College, Tiruchirappalli in Tamilnadu.
He is a Registered valuer of the Central Board of Direct Taxes, a Professional Engineer and also a Chartered engineer. Valuation is his main profession..
He was the National Vice-President of the Institution of Valuers (India) for 11 terms.
He is a regular contributor of articles in the Indian Valuer Journal from the year 1985. His articles especially his regular column “Questions & Opinions” are very popular among the practising valuers in India.
His book “Guidelines on Valuation for Banks” (2002) is used to be referred by many banks. The valuation formats designed by him were accepted and adopted as the formats by many banks in the country.
His son K. Arun and daughter B.K. Aruna are also approved valuers and they also contribute articles to the Indian valuer journal.
His guru: Mr. C.H. Gopinatha Rao, Chennai.
His mentor: Mr. R.K. Gandhi, Mumbai.
His role model: Mr. S. Rajaratnam, Chennai.
His best students: Thousands of valuers in the country