KNOWLEDGE BANK FROM B KANAGA SABAPATHY
LET KNOWLEDGE SPREAD
Message from B. K. sir 11/04.2023
Question :
It is a residential flat tenanted. The tenant is paying a monthly rent of Rs. 25,000/- and also a maintenance charge of Rs. 5,000/-. When I wanted to estimate the value, I capitalised Rs. 30,000/- at the appropriate rate of return. But, I didn’t get a right value. What may be the reason?
Opinion :
There may be two reasons :
i) You are valuing in the hands of the owner. He gets a net monthly income of Rs. 25,000/-. Rs. 5,000/- is an expense in the hands of the tenant which should not be considered while capitalising.
On the other hand, if the owner has fixed a rent of Rs. 30,000/- which includes the maintenance charge of Rs. 5,000/-, deduct the maintenance charge (of Rs. 5,000/-) from the total rent (Rs. 30,000/-). Then capitalise the net rent of Rs. 25,000/- at an appropriate rate of return.
ii) The rate of return you have adopted may not be appropriate.
iii) Analise the reasons and do the right valuation.
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
