Valuation of Immovable Property:
The process of estimating the market value or price of an immovable property is called as Valuation of Immovable Property. The valuation is calculated by taking into account all the factors in the market and the respective features of the property. The immovable property consists of landed property classified as under:
- Residential- Houses, tenements and flats
- Commercial- Offices, shops and establishments
- Industrial- Warehouses, godowns and factories
- Agricultural Land
Market Practices used for Valuation of Immovable Property:
In spite of having proper methods of valuation of immovable property there have always been certain market practices that took over time for valuating the immovable property. These practices are-
- Calculating the Super Built-Up Area to the Carpet Area and vice-versa situation: Nowadays the builders and developers have created a concept of super built-up area to sell their common spaces, home amenities. This was not covered under the carpet area before. The concept was accepted by the valuers because it was no unknown that the amenities and basic spaces and areas does not come free of cost with the actual house area. Since, the cost of amenities, common spaces are different and unique for every land and project, the developers loaded the carpet area based on them. Without any logic or base calculation, the load range is set as 20-50% area wise, project-wise or developer-wise and even as high as 80% in posh areas of metropolitan cities. While valuation of the immovable property, the valuer usually does not look over this load price range and the actual value of the property is calculated inappropriately and much higher. Therefore, it is necessary that the valuers actually look at the base price and value the immovable property accordingly.
- Purchasing flats from the developers by availing retail home loans: The valuer nowadays, only takes in consideration and quote the price as referred by the developers or the retailer. The developer or the retailer have all the right to decide the value of the property but it is not always the fair market value or price. Therefore, the valuer while valuation of immovable property must take in consideration the demand-supply ratio in the market, compare similar objects in the vicinity, past records and current price trends in the area and any title concerns attached with the project. And after all the fair assessment come up with an accurate and fair market value. Comparison method is really important in this market practice taken up by the valuer.
- Transferring balances and top-up loans in residential properties: A product in the retail lending is balance transfers from one lender to the other of the existing home loans. The borrowers usually get a benefit of lower rate of interest or top-up loans on the property and various other benefits in such a scenario. Since, every bank and lending institutions have different valuers and valuation services provided by them are as per their respective norms, so the exact market value of the immovable property remains unknown in most of the cases. This can pose challenge in valuation of immovable property.