WORKSHOP ON VALUATION REAL ESTATE AND PLANT & MACHINERY

1. WORKSHOP ON VALUATIONREAL ESTATE AND PLANT & MACHINERY ORGANISED BY CENTRE FOR VALUATION STUDIES ISTAR, VALLABH VIDYANAGAR SATURDAY, 14th DECEMBER 2013

3. Fundamentals of Valuation • By • Rupesh T. Shah • B.E.(civil) M.V.(RE) LL.B.(Sp.) • F.I.V., M.I.E., M.I.S., CE(I) • Asst. Prof., ISTAR • Vallabh Vidyanagar

4. Valuation • it is not as simple as we think • it is not simple multiplication of area and rate • it requires knowledge of: • basic principles of valuation • micro and macro economics • planning laws and development control regulations

5. land economics • construction technology and cost estimation • surveying and land measurement • various laws relating to immovable properties governing their - transfers, tenancies, acquisitions, taxations etc. • environmental laws and regulations • judgments of courts in some landmark cases

6. Valuation is a complex process of estimating monetary value of the property rights as on valuation date, for given purpose taking in to account cumulative effect of various factors affecting the value

7. Immovable property comprises of bundle of rights such as: • free hold exclusive ownership right • lease hold property - lessor’s and lessee’s interest • mortgaged property - mortgagor’s and mortgagee’s interest • easement rights • rented property – landlord’s and tenant’s interest

8. Fundamental 1 Valuation is of legal rights, interests and benefits and not merely of physical entities, and value is present worth of future benefits • checks in case of a freehold tenure encumbrances like – tenant, easement right, charge etc. checks in case of leasehold tenure total and balance period of lease and lease covenants • checks in case of rented property whether the tenant is protected under rent control Act or not

9. Fundamental 2 Value varies with purpose • Fiscal purposes • (mostly statutory valuation) • Wealth Tax • Income Tax • Capital Gain Tax • Stamp duty

12. Fundamental 3 Four Value ingredients • Utility • Scarcity • Demand • Transferability

13. Fundamental 4 Four factors affecting value • Economic factors

14. Legal factors • title and tenure of the property • land use zoning and other relevant development control regulations • encumbrances over the property if any - like seating tenant, liability/charge, easement right • pending litigation if any

15. Social factors • availability of civic facilities such as water supply, sewerage disposal, street lighting, solid waste disposal etc. • availability of infrastructure facilities such as road, power supply, communication etc. • availability of social infrastructure such as schools and colleges, play grounds and gardens, religious and recreation places • distance from market and shopping, bus and railway stations, local bus stops etc. • neighbourhood and development in the surrounding area

16. Physical/technical factors For land: • size, shape, topography and soil condition of land and climatic condition in the locality For building and other improvements: • type and quality of construction, specifications, age of the building, condition and level of maintenance, repairs required if any • floor level • amenities provided

17. Approaches of valuation • Considering type of property and purpose of valuation, above mentioned factors shall be considered for valuing the property by any of the relevant approaches mentioned below: • Market approach • Income approach • Cost approach

18. Summary • Value is present worth of future benefits • Valuation of immovable properties is valuation of legal rights, interests and benefits