CAN MIXED USE BE VALUED USING COMPOSITE RATE?

KNOWLEDGE BANK FROM B KANAGA SABAPATHY

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Message from B. Kanaga sabapathy 01.08.2023

CAN MIXED USE BUILDING BE VALUED USING COMPOSITE RATE METHOD?

Question :

A building consists of ground plus two upper floors each of 475 sq.ft.

Ground floor is of hall type and it is to be rented.

The upper floors are residences. The plot area is also 475 sq.ft. and it is fully covered by the building.

The purpose of valuation to fix reasonable rent for ground floor for letting out.

Can we treat the building as apartment type and adopt composite rate method to determine the value?

The property is situated on a busy road and has good potential for commercial shops in the ground floor.

Opinion :

• Yes, you can estimate the present market value by adopting suitable depreciated composite rate also.

• The value arrived at may be counter-checked with the value arrived at by land & building method and also comparable sale instances.

• Since the FSI is 3 and plot coverage is 100%, due care must be taken while assuming appropriate rate.

• Depending upon the locational advantage and demand, suitable yield rate can be assumed to calculate the rent.

• If the purpose is to estimate the market value for collateral security purpose, the approval aspects have to be necessarily considered.

With best wishes,

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