HOW TO VALUE A DIMOLISHED STRUCTURE CAPITAL GAIN

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Message from B. Kanaga sabapathy 30.07.2023

HOW TO VALUE A DIMOLISHED STRUCTURE FOR CAPITAL GAIN PURPOSES?

Question :

I got an valuation assignment for capital gain purpose. FMV has to be certified as on 2001.

In this case, the structure is currently demolished at site and I am unable to measure the plinth area physically now. Plan has been obtained for demolition cum construction. From this drawing, I have collected the details of plinth area.

The ground floor structure roof is of madras terrace roof and first floor structure roof is of RCC.

How to adopt plinth area rates to arrive at the value for building component in this case?

My opinion :

1. Treat the entire building as load bearing structure. The plinth area rate for load bearing in Chennai for 2001 – 02 is Rs. 5,420/sq.m. for ground floor and Rs.4,785/sq.m. for first floor.

2. Treating these rates as replacement rates, calculate the depreciated value. Considering the age of the building.

3. Write in your report :

i) At the time of my physical inspection, there was no building. It was demolished.

ii) However, there is a demolition and construction drawing duly approved by the corporation.

iii) The plinth area of the old building mentioned in the drawing are assumed as the correct plinth areas which are adopted here in this valuation report.

4. However, if you are not convinced about the bonafide of the plinth areas, you can estimate the FMV of plot alone neglecting the building component.

5. Depending upon the site condition, you may take a judicious decision.

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With best wishes,

B. KANAGA SABAPATHY
[email protected]
www.bkanagasabapathy.com

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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