KNOWLEDGE BANK FROM B KANAGA SABAPATHY
LET KNOWLEDGE SPREAD
Message from B. K. sir 26/04/2023
What are the 10 points to be remembered while doing valuation by land and building method?
1. In this method, plot is valued separately, building is valued separately and then these two values are added to get the total value.
2. Value of land can be estimated either by applying prevailing market rate or by guideline rate depending on the purpose.
3. If the purpose of valuation is to find out the market value for collateral security purposes, then, the prevailing market rate alone is to be adopted.
4. If the building is old, suitable depreciation is to be considered while arriving at the value of the building.
5. There are generally two methods to calculate depreciation :
i) Straight line method
ii) Constant percentage method
6. Depreciation percentage by straight line method :
((Age ÷ Life) x (100 – salvage)]
7. Depreciation percentage by constant percentage method can be calculated by applying the formula :
A = P [ 1 – (r ÷ 100)] n
Where A = Depreciated value
P = Replacement value
r = Rate of depreciation (100 ÷ life)
n = Age of the building
8. The addition of market value of land and depreciated value of building indicates the present worth of the property. If market value is required to be certified, then the factors affecting the marketability are to be thoroughly analysed.
9. Out of all the methods, this method is widely adopted by a valuer when he does valuation for bank purposes.
10. The value arrived at by this method cannot be compared with the value arrived at by rent capitalisation method if the FSI is very low.
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
