Real Estate - Valuation India

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Valuations of Real Estate are required for a variety of purposes and brief outline shows respective considerations :-

Insurance: Dwellings are subject to hazards such as fire, storm and flood, hence the need to protect them with insurance. They may be partially damaged or totally destroyed but at least there remains the value of the site. Consequently, the valuer is called upon to advise as to re-building and replacement costs, to which he will add a percentage to cover professional fees for the services of architects and surveyors necessary for the re-building and site clearance. With insurance the valuer must keep up to date with building costs.

Rating: Local bodies levy appropriate taxes to the property/dwellings as a return for various infrastructure obligations extended to the locality. This includes education, roads, sewers open spaces, waste manage- ment, street lighting, preventive health services and a variety of other outgoings necessary to maintain the system. The property tax is based on rateable value. These rateable values are made by the assessor of municipal authority. These values are somewhat hypothetical and are open to criticism and appeal. Apart, therefore, from the civil servant, valuers in private practice are asked to advise as to accuracy of these assessments, especially taking into account changing environment and circumstances. They may be called upon to appear on behalf of their clients at the local appellate Court to argue the case and endeavour to obtain appropriate reductions in rates and taxes.

Probate: When people die, leaving property, the estate may be liable to Capital Transfer Tax as per the law of land, in which event the solicitor of the deceased will seek a valuation of the dwelling and other assets, for sub- mission when obtaining probate. Values may be with vacant possession, tenanted or in part possession and the valuer may be considering full or part shares. The valuer in private practice must be prepared to argue his case and go to appeal if necessary.

Sale and Purchase: The Valuer must be able to value property on behalf of vendors, and he can also be retained to act for purchasers. In the former case, he will explore the potential, seeking the highest possible valuation for his client, whilst in the latter there is a natural tendency to be more conservative. However, judicious balance is also necessary in each case. The basis of valuation under his heading is similar to that outlined under "Mortgage" and at the same time, if the vendor client purchased the property in the recent years, to that purchase price can be added the calculated appreciation as a further addition on current open market value. In addition, the valuer will advise the vendor as to the right price for negotiations.

Compulsory Acquisition for Public Purpose: From time to time, government or local authorities decide to carry out planned city development including such works as new highways, roads, airports or improvements to existing facilities which require the acquisition from private owners of whole or part of the land and buildings which they own and/or occupy. The interests of these land owners must be protected and proper compensation assured. The valuer must know the Land Acquisition Acts and how to interpret them in each case.

Direct Tax Acts: Under the Direct Tax Acts valuation is required under Chapter XXC (Pre-emptive right of purchase) of Income Tax Act which is now applicable to major clients all throughout India. Even valuations are required for Capital Gains Tax, Wealth Tax, Gift Tax, etc.

REAL ESTATE VALUATION
`Valuations of Real Estate are required for a variety of purposes and brief outline shows respective considerations :-`
Mortgage: In the majority of house purchases, buyers need to borrow money to meet present day prices. Sources of finance are banks and local authorities. The valuer will make a critical appraisal of the property, taking into account the nature of the location and promixity to amenities. He will estimate the age and take into account the charater, design, plan, decorative and structural condition and many other factors which affect the value of the property. He will carry out an academic valuaion where appropriate by calculating the floor area in order to arrive at an estimated building cost, allowin for essential repairs and adding the value of the site. He will examine his recent sales records to find comparables and finally make his written report to the mortgagee (the Lender) giving his recommendations.
Insurance: Dwellings are subject to hazards such as fire, storm and flood, hence the need to protect them with insurance. They may be partially damaged or totally destroyed but at least there remains the value of the site. Consequently, the valuer is called upon to advise as to re-building and replacement costs, to which he will add a percentage to cover professional fees for the services of architects and surveyors necessary for the re-building and site clearance. With insurance the valuer must keep up to date with building costs.
Rating: Local bodies levy appropriate taxes to the property/dwellings as a return for various infrastructure obligations extended to the locality. This includes education, roads, sewers open spaces, waste manage- ment, street lighting, preventive health services and a variety of other outgoings necessary to maintain the system. The property tax is based on rateable value. These rateable values are made by the assessor of municipal authority. These values are somewhat hypothetical and are open to criticism and appeal. Apart, therefore, from the civil servant, valuers in private practice are asked to advise as to accuracy of these assessments, especially taking into account changing environment and circumstances. They may be called upon to appear on behalf of their clients at the local appellate Court to argue the case and endeavour to obtain appropriate reductions in rates and taxes.
`Probate: When people die, leaving property, the estate may be liable to Capital Transfer Tax as per the law of land, in which event the solicitor of the deceased will seek a valuation of the dwelling and other assets, for sub- mission when obtaining probate. Values may be with vacant possession, tenanted or in part possession and the valuer may be considering full or part shares. The valuer in private practice must be prepared to argue his case and go to appeal if necessary.`
Sale and Purchase: The Valuer must be able to value property on behalf of vendors, and he can also be retained to act for purchasers. In the former case, he will explore the potential, seeking the highest possible valuation for his client, whilst in the latter there is a natural tendency to be more conservative. However, judicious balance is also necessary in each case. The basis of valuation under his heading is similar to that outlined under "Mortgage" and at the same time, if the vendor client purchased the property in the recent years, to that purchase price can be added the calculated appreciation as a further addition on current open market value. In addition, the valuer will advise the vendor as to the right price for negotiations.
Compulsory Acquisition for Public Purpose: From time to time, government or local authorities decide to carry out planned city development including such works as new highways, roads, airports or improvements to existing facilities which require the acquisition from private owners of whole or part of the land and buildings which they own and/or occupy. The interests of these land owners must be protected and proper compensation assured. The valuer must know the Land Acquisition Acts and how to interpret them in each case.
`Direct Tax Acts: Under the Direct Tax Acts valuation is required under Chapter XXC (Pre-emptive right of purchase) of Income Tax Act which is now applicable to major clients all throughout India. Even valuations are required for Capital Gains Tax, Wealth Tax, Gift Tax, etc.`
Financial Valuations: Financial valuations are carried out for a variety of reasons including, amongst others, balance sheet purposes, bank loans and other funding activities, company takeovers and mergers, compulsory purchase and taxation. In essence, the valuer is required to assess the true worth of a company of its real estate in its present location and role, as part of the existing business. Following a valuation, the specialist valuer may well be instructed to negotiate on behalf of his client. Therefore, in addition to his technical knowledge and valuation skills, an understanding of company law and other relevant legislation is vital.

REAL ESTATE VALUATION