It is the technique of estimating and determining the fair price or value of a property such as a building, a factory or other engineering structures of various types, land etc.
Six important Purposes of Valuation:
The main purposes of valuation are as follows:
Buying or Selling Property
When it is required to buy or sell a property, its valuation is required.
To assess the tax of a property, its valuation is required. Taxes may be municipal tax, wealth tax, Property tax etc, and all the taxes are fixed on the valuation of the property
In order to determine the rent of a property, valuation is required. Rent is usually fixed on the certain percentage of the amount of valuation which is 6% to 10% of valuation.
Security of loans or Mortgage
When loans are taken against the security of the property, its valuation is required.
Whenever a property is acquired by law; compensation is paid to the owner. To determine the amount of compensation, valuation of the property is required.
Valuation of a property is also required for Insurance, Betterment charges, speculations etc.
Valuation of Building:
Valuation of a building depends on the type of the building, its structure and durability, on the situation, size, shape, frontage, width of roadways, the quality of materials used in the construction and present day prices of materials. Valuation also depends on the height of the building, height of the plinth, thickness of the wall, nature of the floor, roof, doors, windows etc.
The valuation of a building is determined on working out its cost of construction at present day rate and allowing a suitable depreciation.
Six Methods of Valuation
1. Rental Method of Valuation
2. Direct Comparisons of the capital value
3. Valuation based on the profit
4. Valuation based on the cost
5. Development method of Valuation
6. Depreciation method of Valuation