How to Calculate Property Value?

Lipika Pandey L

While planning to purchase a property, it’s necessary to understand the market value of the property so as there is no case of exploitation by the seller and the same is true while selling out the property as well, at that time one should understand the market value so that good return can be received from the property.

According to the financial expert Ajay Shah, if someone was supposed to fit 1.2 billion people in just a 1000 sq. ft house meant for a family, where two members of the family are workers in an office or a factory space of 400 sq.ft., then approx. 1% of India’s land area would be required, assuming an FSI of 1. Thus, it’s not the shortage but instead the human inclination to remain in proximity to one another that leads to value appreciation of land in specific areas of the country. This conclusive factor is behind each well-known method adopted to reach a land valuation in India.

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To make the survival easy in the real estate market there is some trick on how to calculate the market value of the property:

Three types of property valuation methods

  1. Fair Market Value or Sales Comparable Method

It is used to reckon the market value of ready apartments. Following is the method to calculate the correct value of the market of the property: 

  • Check the property costs of adjoining properties.
  • Check the per sq. ft. rate of a raw property.
  1. Land and Building Valuation

It is used to reckon the market value of a property that is under construction. Following is the method to calculate the correct market value of the property:

  • Calculate the per sq. ft of land and the cost of construction of the building.
  • Following is the formula to calculate Land and building valuation: 
    • Capitalized value = Net income x Year’s Purchase value
  • P. value = 10/100 = 100/10 = 10
  • Capitalized value = 10,000 x 10 = Rs. 1,00,000/-.
  • The value of a building depends upon the cost used during the construction phases.
  1. Rental Method Valuation

It is used to reckon the market value of rental residential and commercial properties. It is necessary to determine the property value before it is put on rent.

  • Rental value = Annual Rent /Property value.
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Factors for Calculation 

While calculating the Valuation of the Property, the following things shall be taken into consideration

  1. Government Ready-Reckoner Rate – For working out the valuation of the property, the initial step will be to get Government prepared reckoner rate.
  2. Built-Up Area – The rates given in the Government prepared reckoner are for the built-up regions. Subsequently, considering the built-up area while estimating the valuation of the property is required. It is fundamental to obtain the built-up region by using this formula: ‘Built-up Area = Carpet Area x 1.2’
  3. The Floor Area on which the Property is located – It is critical to learn the specific floor on which the property is located since while estimating the Valuation, it is expected to consider the ‘Raise’ part in the ready reckoner rate according to the floor of the structure on which the said property is located.
  4. Depreciation – In the case of determining the valuation of the properties which are more seasoned than 02 years, the particular percentage of the ready reckoner value is expected to be deducted. While deciding the age of the property, the Occupancy Certificate or Completion Certificate is given by the concerned Government Office will be investigated.
  5. Parking Area – Parking is one of the significant parts while ascertaining the valuation of the property. The Parking region distributed with the flat is expected to be included in the property valuation. For the covered parking case, 25% of the prepared reckoner value will be multiplied by the area and for open parking, 40% of the prepared reckoner value (for land) will be multiplied by the area.
  6. Terrace Area – The Terrace area apportioned alongside the flat is likewise expected to be included in the computation of the property valuation. If the terrace is nearby to the flat, 40% of the prepared reckoner value will be multiplied by the area and if the Terrace is above the individual flat, then 25% of the prepared reckoner value will be multiplied by the area.
  7. Garden Area – If the rights in the land contiguous to the flat on the ground/stilt floor are given alongside the flat, for gardening, parking, and so on, then 40% of the prepared reckoner value will be increased by the area and be included for the valuation of the property.
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The difference between the market value of land and the market price of land

The market price of a land parcel can be calculated given a few key facts, without even actually visiting the property. The elements that decide the market cost of land or property are the supply and demand, the state of the property, and past exchanges for similar properties.

The market price and the market value of land are not indeed the very same thing. The market price of land is the amount that the proprietor will sell his property for, in the open market. The market value of the land is reflected in how much this land is worth, particularly according to forthcoming purchasers when contrasted with its cost.

Conclusion

So next time you think of buying or selling any property, do consider these tips to better understand the market value and its importance so that you get a good return on your property.

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