SYLLABUS OF VALUATION EXAMINATION
FOR ASSET CLASS – LAND AND BUILDING
WITH EFFECT FROM 1ST MAY 2024
Syllabus
| Sl.
No. |
Coverage | Weight (%) |
| 1. | Principles of Economics – Microeconomics
Consumption: Indifference curve, consumer surplus, elasticity, Price mechanism: determinants of price mechanism; individual and market demand schedules; conditions, exceptions, and limitations of law of demand; individual and market supply schedules; conditions and limitations of law of supply; highest, lowest and equilibrium price; importance of time element, Pricing of products under different market conditions: perfect and imperfect competition, monopoly etc., actors of production and their pricing: land, labour, capital, entrepreneur, and other factors, Theory of rent, Capital and interest: types of capital, gross interest, net interest, Organisation and profit: functions of entrepreneur; meaning of profit and theories of profit |
3
|
| Macroeconomics
Functions and role of money, Inflation: types of inflation; causes and effects of inflation; Inflationary gap, Control of inflation: monetary, fiscal, and direct measures, Deflation: causes and effects of deflation; deflationary gap; measures to control deflation; deficit financing, Savings and investment: savings and types of savings; determinants of savings; investment and types of investment; determinants of investment; relationship between savings and investment, Components of economy: primary sector, secondary sector, tertiary sector; informal sector in urban economy; parasitic components in urban economy, Concepts of gross domestic product and gross national product; capital formation etc. Definition of parallel economy; causes of parallel economy and effects on use of land and its valuation, Impact on real estate market and construction industry |
3
|
| 2. | Book-keeping and Accountancy
Meaning and objects of book-keeping; double entry book-keeping, Books of prime entry and subsidiary books: cash book, bank book, journal, ledger, purchase and sale books, debit and credit notes register; writing of books; posting and closing of accounts, Trading account; profit and loss account; income and expenditure account, Preliminary analysis of financial statements, Cost and costing; elements of cost – fixed expenses, variable expenses, break-even point |
3
|
| 3. | Laws – General
Indian legal system: salient features of the Indian Constitution, fundamental rights, directive principles of state policy Government: executive, legislature, and judiciary Laws of contract: formation of a contract, parties, void, voidable and unenforceable contract, contingent contract, misrepresentation, fraud, and effect thereof, termination of contract, remedies for breach, performance of contract, indemnity and guarantee, law of agency Tort: general principles of tort, tort affecting valuation Law of arbitration and conciliation: salient features Auction: authority of auctioneer, duties of vendor, purchaser and public, mis-description and misrepresentation, advertisements, particulars and catalogues, statements on the rostrum, conduct of sale, reservation of price, right to bid, bidding agreements, memorandum of the sale, deposit, rights of auctioneer against vendor and purchaser • Laws of evidence: burden of proof, presumptions, conclusive proof https://youtu.be/iK2_6U5-frw Salient features of the Insolvency and Bankruptcy Code, 2016 concerning valuation https://youtu.be/OrTVZmtB5iY The Companies Act, 2013: Section 192(2), 230 (1), 230 (2), 230 (3), 231, 232, 247 and 281(1) https://youtu.be/X3ORFImbZcQ Salient features of the Companies (Registered Valuers and Valuation) Rules, 2017 https://youtu.be/DfKKXqYfptE Salient features of the Securitisation and Reconstruction of the Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) concerning valuation Section 5(n) of the Banking Regulation Act, 1949 on “secured loan or advance” |
9
|
| 4. | Introduction to Statistics
Data classifications and processing, graphical representation of data, frequency distributions, Measures of central tendency, dispersion, and skewness. Elementary theory of probability and probability distributions, sampling, and sampling distributions, Simple test of significance, regression and correlation, multiple correlation coefficient, Time series, Index numbers |
2
|
| 5. | Environmental Issues in Valuation
Environment and valuation – differences between the market price and the negative value consequent on environmental impact, Environmental issues of air pollution, water pollution, environmental factors and their effects, measures to restore the damage, cost to cure, Outlines of environmental legislations: the Indian Forest Act, 1927, the Water (Prevention and Control of Pollution) Act, 1974, the Air (Prevention and Control of Pollution) Act, 1981, the Environment (Protection) Act, 1986, Laws related to industrial health and safety |
3
|
| 6. | Professional/Business Ethics and Standards
Model code of conduct under the Companies (Registered Valuers and Valuation) Rules, 2017: professional competence and due care, independence and disclosure of interest, confidentiality, information management, gifts, and hospitality, Integrity and fairness, remuneration and costs, occupation, employability and restrictions, business ethics, Ethical considerations under terms of engagements: engagement letter, management representation, guidance on use of work of experts, independence and conflict of interest, quality review process of valuers, rights, and responsibilities of valuers |
3
|
| 7. | Laws related to Real Estate
Land acquisition – the right to fair compensation and transparency in the land acquisition, the Rehabilitation and Resettlement Act, 2013 General building rules and regulations Rent control laws: sections pertaining to occupancy rights of tenants, freezing of rent, protection against eviction of tenant and its effect on value of property Right of way and Section 52 – licenses under the Indian Easements Act, 1882 Salient features of the Real Estate (Regulation and Development) Act, 2016 and regulating authorities established under the Act The Transfer of Property Act, 1882: transfer of immovable property, sale, mortgage, gift, exchange, assignment, charge, lien, tenancies/sub-tenancies; lease of immovable property; lease granted by private and statutory bodies – impact of each on valuation; Sections: 3, 5, 6, 7, 25, 53 and 53A of the Transfer of Property Act, 1882 • Laws relating to inheritance/succession: Mohammedan: Muslim Personal Law; the Hindu Succession Act, 1956, the Hindu Succession (Amendment) Act, 2005; the Indian Succession Act, 1925: law of succession for person other than Hindu and Mohammedan; will & testament, succession certificate |
7
|
| 8. | Valuation of Real Estate
Cost, price, and value Types of value Basic elements of value – marketability, utility, scarcity, and transferability Factors affecting value – physical, economic, legal, and social Highest and best use, value in use, value in exchange Real property: rights and interests in real estate; types of ownerships and types of occupancy in real estate https://youtu.be/UO3CDVZ-2QA Annuities; capitalization and rate of capitalization; years purchase; sinking fund; redemption of capital; reversionary value Construction and use of valuation tables Urban infrastructure and its influence on value of real estate Real estate market and its characteristics; investment in real estate; Factors influencing demand and supply schedule in real estate • Concepts of green building |
9
|
| Income Approach to Value
Relation between income and value, Valuation of property affected by the Rent Control Acts; licensed property under the Easement Act, 1882; leasehold properties under the Transfer of Property Act, 1882 Derivation of yield rate from market derived data, Remunerative rate of interest and accumulative rate of interest, Types of rent: outgoings, income, yield, years purchase Determination of market rent and standard rent, Lease – lessor and lessee: types of lease; lease provisions and covenants, Valuation of lessor’s interest, lessee’s interest including sub-lease in leased property; premature termination of lease or surrender of lease Real estate as an investment; yield from real estate vis-à-vis other forms of investments; sound investment comparison, Investment decisions: discounted cash flow techniques, internal rate of return, net present value and capital assets pricing model Profit method for valuation of special properties: hotels, cinema, mall, petrol pump, hill resorts https://youtu.be/V50TQmVSvY8 |
7
|
|
| Market Approach to Value
Types of market, Market survey and data collection; sources of sale transactions https://youtu.be/xIxm85ETI1A Comparison of sale instances: factors of comparison and weightages for adjustment in value https://youtu.be/RGU6x49Lo1A Hedonic model and adjustment grid model under sales comparison method https://youtu.be/UbjG1lOLDb8 Land characteristics and its effect on land values, Hypothetical plotting scheme for value of large size land, Residue technique and other development methods Valuation for joint venture development of property |
7 |
| Cost Approach to Value
Methods of cost estimates for buildings, Life of building: economic, physical, legal Factors affecting life of the building Total life, age, estimating future life Various methods of computation of depreciation, functional, technological, and economic obsolescence https://youtu.be/ZMuwnItf620 Reproduction cost/replacement cost, depreciated replacement cost (DRC) working, adopting DRC as value subject to demand and supply aspect Land value by market approach and building value by cost estimation method for owner occupied bungalows, factories, public buildings |
7
|
|
| Various purposes of Valuation
Valuation of properties for purposes such as: bank finance, auction reserve, building insurance, sale, purchase, valuation disputes in court, probate, partition, rent fixation, stamp duty, capital gains tax, as per rule 11UA of the Income Tax Act, 1961, lease and mortgage of property, any other purposes not referred above https://youtu.be/txe-phuy_7w Valuation standards as per the provisions of the Companies Act, 2013 Indian accounting standards (Ind AS 16, Ind AS 36, Ind AS 40, Ind AS 113) as applicable to valuation https://youtu.be/X3ORFImbZcQ Valuer as an expert witness in court, Valuers’ functions & responsibilities, error of judgement and professional negligence |
3
|
|
| 9. | Principles of Insurance and Loss Assessment
Principles and legal concepts in relation to insurance of buildings; contract of insurance; insurable interests; liability to insure; duties of the insurer and the insured, Types of fire policies; reinstatement value, indemnity policies and policies for other perils; terms and conditions; perils, beneficial and restrictive clauses, Value at risk, sum insured and condition of average, over and under insurance; provisions regarding inflation, depreciation, obsolescence, and betterment; other provisions, Preparation of claim for damages due to insured perils, Obligations and rights of insurer and insured |
3
|
| 10. | Report writing
Reports: quality, structure, style, Report writing for various purposes of valuation: sale, purchase, purchase, mortgage, taxation, insurance, liquidation etc., Contents of the report: instruction of clients; date as on which valuation is made and date of report; site inspection; location; ownership history; data collection and analysis; type of construction; valuation method; value estimation; assumptions and limiting conditions including caveats and conclusion |
3
|
| 11. | Important Case Laws on principles of valuation of Real Estate:
• R.C. Cooper Vs. Union of India, (1970) AIR SC 564 • Sorab D. Talati Vs. Joseph Michem, Appeal No. 101 0f 1949 in R.A. Application No. 805 of 1948 • CWT Vs. P.N. Sikand (1977) 107 ITR 922 (SC) • Wenger & Co. Vs. DVO (1978) 115 ITR 648 Delhi HC • Jawajee Nagnathan Vs. Revenue Divisional Officer (1994) SCC (4) 595 (SC) • Chimanlal Hargovinddas Vs. SLAO, Pune AIR 1988 SC 1652 • CED Vs. Radhadevi Jalan (1968) 67 ITR 761 (Cal) • CIT Vs. Ashima Sinha (1979) 116 ITR 26 (Cal) • CIT Vs. Anupkumar Kapoor & others (1980) 125 ITR 684 (Cal) • CIT Vs. Smt. Vimlaben Bhagwandas Patel (1979)118 ITR 134 (Guj) |
2
|
| 12. | Case Studies:
Three case studies on valuation of land and building: One case study with six 2-mark questions, for 12 marks One case study with four 2-mark questions, for 8 marks One case study with three 2-mark questions, for 6 marks (This section will have case studies for application of valuation techniques. For each case there will be a comprehension narrating the transaction based on which questions will be asked from the case) |
26
|
| Total | 100 | |
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BONUS:
