A successful property transaction begins by knowing its worth. This knowledge is crucial when it comes to making better decisions in real estate investments and deriving profits from them.
The value of a property depends on a host of different factors, including the size and structure of the property, its location, quality of build, prevalent market value, etc. Estimating the fair value of a property involves taking into account all these factors and making a well-calculated and educated guess.
However, not every valuation is done the same. There are different methods of property valuation. In this blog, we’ll discuss some of the most common ones. But first, let us look at what determines the value of a property.
What Determines the Value of a Property?
There are multiple factors that determine the value, such as:
- Location: Properties that are in urban areas or closer, properties that have a view and better connectivity all have a higher value than those that do not.
- Infrastructure: The infrastructure, its features, and plinth are all determining factors of the value of a property.
- Frontage: What the property is facing is something people can be choosy over, thus heightening the price of the property
- Level: If the property you are planning to buy or sell is higher up the building or lower, there is a difference in value.
- Shape: The shape of the plot is crucial when it comes to valuation. This is also important in terms of the building as Vastu is a major factor when it comes to property building and transactions.
- Legal Embroilement: There is a significant drop if the property in question has legal issues surrounding it.
- Safety: The safety of infrastructure, the land it is on, and the surrounding areas all play an important role in determining the value of the property.
Top Property Valuation Methods in India
Let us now look at the different approaches taken to evaluate a property. It should also be kept in mind that the method taken also differs depending on the purpose at hand.
Comparative Method/ Sales Comparison Approach
This method arrives at a valuation by comparing the prices of several other properties that are similar to the given property. The prices compared are the latest sales figures in the current market.
Development Method/ Residual Land Value Method
This method of evaluation is sought when the property in question is being bought for a development purpose. The valuation method looks at whether there is a scope of profit if the land is used for development.
Guidance Value Method/Ready Reckoner Rate
This method is also known as the Circle Rate. This method is used by the authorities that oversee the transfer of properties. It is used to estimate the stamp duty and the registration charges to be levied at the time of the transaction.
Land & Building Method
As the name suggests, this method is used to understand the valuation of the land and the building distinctly. First, the value of the land is assessed. Then the value of the building is assessed. It is then added to come to a final value.
The Belting Method
The belting method involves the division of the land in question into three belts or three parts. The value of the land closest to the front roads is first determined. This value is given the most weightage.
Recommended, Property Investment without Valuation is Shooting Blindly in the Real Estate Market
Summing It Up
Whether you are planning to buy, sell or rent out a property, it is important to perform the correct valuation. Choosing a suitable valuation method can be key to arriving at an appropriate value.
Experienced asset valuers know which valuation method to be applied in which case to drive maximum profits for their clients. This is why when you enlist the property valuation services of a reputed valuation firm, it helps to generate your ideal ROI from property investments.
Are you about to invest in a property or need property valuation for insurance purposes? Reach out to RNC to book an appointment today!