Property Valuation

Property valuation is an important component of a property transaction. The valuation process evaluates the market value of the property. A comprehensive valuation report contains value of all the major assets of a property and also the basis and manner in which the valuation has been performed. Valuation or assessment of a property can be a self-assessment or through an external source. One can seek the service of various professional agencies or hire a Government registered valuer for a fee as prescribed by the valuers association. Some real estate agents too conduct valuation based on prevalent market rates.

It is, though, always advisable to conduct an official property valuation, since the valuation report comes handy in different financial transactions. For example, if one uses the valued property as a security against a loan, the bank's loan approval process would be expedited if the property is certified by an official valuer. Such certification also becomes essential in situations, where the correct value of the property has a legal bearing-such as, a will statement, insurance papers, business balance sheets etc.

Determining Factors

Demand & Supply
The factors that have an impact on the market value of a property are demand and supply forces operating in the market, type of property, quality of construction, the local infrastructure available and maintenance of the property as well as that of the premises.

Layout
Layout of premises and ancillary costs too are given importance in a property valuation. The layout of the premises in terms of optimum space utilization in an efficient manner helps the premises notch up valuable points. Ancillary costs of holding the premises like society outgoing for maintenance of the building, municipal taxes, etc would also determine the marketability of the premises.

Location
Another prime determining factor, when it comes to property valuation, is the location or setting of the property. The valuation of an apartment or independent house, which is set near to the bustling market or office area can be quite high than that placed in a remote area.

Safety & Security
Safety and security of the apartment is another factor which is closely looked upon in the present times. With incidents of robberies, burglary or theft increasing day in and day out, people are shifting base straight away. Today, a property located in or near the riot prone area has lower rates, even if it is in the best of location and filled with all the modern conveniences and amenities.

Other Factors
Additional factors, such as plush green surroundings, good quality roads nearby, civic amenities like safe drinking water and systematic drainage system add to the valuation of the property. Good connectivity of the property with the bus depot, railway station and airport is equally important and adds to the face value of the apartment or house.

Property Valuation Methods

Investment Method
Based on discounted cash flow method, it takes into account the future cash flows that the real property can bring to the investor. The method is a practical and discreet one, extending a fair view of the value of the property.

Comparative Method
In this method, the latest sales figure of property in the market is devised. Based on the comparative values, it derives capital values for properties and rental yield.

Contractoral Method
A cost-based approach, it is generally used in rating all the compulsory purchases.

Residual Method
This method is generally applicable in development projects, where the real estate developer sells most of the property.