Points to be remembered by composite rate method

KNOWLEDGE BANK

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Message from B K Aruna 31.08.2023

Ten points to be remembered while doing valuation by composite rate method :

1. For valuing a flat, shop and commercial complex, composite rate method can be adopted. Composite rate denotes a single unit rate.

2. The composite rate involves i) land component, ii) building component and
iii) promoter’s profit.

3. FSI plays a significant role while determining the composite rate.

4. Prevailing land rate divided by the FSI will be the land component.

5. The prevailing market rate of land is to be adopted (not the guideline rate) to determine the composite rate.

6. The building rate depends upon the specifications and location of the building.

7. When the apartment building is old, depreciation is to be considered only for the building component and not on the entire composite rate.

8. The composite rate of a flat depends on the

i) location of the apartment building,
ii) location of the floor in the apartment building and
iii) location of the said flat on the floor.

9. For the purpose of foolproof identification of a flat under valuation, a valuer must mention six boundaries of the respective flat in his valuation report. This is a new concept.

10. The tentative market value of a flat can be estimated and counter-checked by rent capitalisation method by adopting a suitable yield rate. If the flat is very old and crossed its economic life, only UDS has significant value.