Ten points to be borne in mind while valuing a flat

KNOWLEDGE BANK

LET KNOWLEDGE SPREAD

Message from B K Aruna 10.09.2023

Ten points to be borne in mind while valuing a flat :

1. The market value of a flat depends on i) location of apartment building in total ii) location of the specific floor in the apartment building iii) location of the flat in the said floor.

2. In flat valuation, the market value arrived at by rent capitalisation method will be nearer to the accuracy if the age of the building is within say, 14 years.

3. As on 2023, the yield rate for a residential flat is approximately 2.6 to 3%. The yield rate for a residential flat used for office purpose is approximately 3 to 4%. The yield rate for a ground floor flat meant for commercial activity is approximately 5 to 6%. A local valuer with good experience can estimate the yield rate judiciously. It is to be remembered that there is no hard and fast rule in fixing the yield rate. It varies from location.

4. If the building is of age more than 20 to 25 years, practically the buyers are comparatively less in mofussil towns.

5. If the building has crossed more than 50% of its economic life, the value by rent capitalisation method will be more than the actual and in such case it cannot reflect the true market value.

6. The insurance for the flat can be done on the building component alone and not on the land component and promoter’s profit.

7. The market value of the entire apartment complex need not be the sum of the market value of all the individual flats.

8. Valuation for the estimation of cost of construction for income tax purpose is based on the registered value of UDS of land and the building construction agreement.

9. When the apartment building is very old, the quantum of UDS of land plays a significant role for any prospective buyer of the flat.

10. When the apartment building has attained its economic life and if all the flat owners want to hand over for promotion to a new promoter, the proportionate