Optima Engineers and Developers is one of the leading firms in the field of Real Estate Valuation. Our 30+ years of experience in Property Valuation means that we have worked with many banks – both nationalised and private, Housing Finance Institutions as well as NBFCs. We offer valuation services for real estate/immovable properties, business and equities, financial reporting and taxes, brand and intangible assets, industrial plant and machineries, and specialised assets and infrastructure in its service portfolio.
Our Property Valuation business is led by two main valuers:
Our client base includes Banks (Private, Co-Operative and Nationalised), Non-Banking Finance Institutions, Corporates, Government Bodies, Institutes, CA Firms as well as major Builders.
Here are a few of them for your perusal:
Apart from above, we have worked with all major Chartered Accountants & Builders from Surat.
For many, Property Valuation is an intricate subject best left alone till the time it is absolutely needed or as a process best handled via banks when the need arises. And that is the very reason, why it is of utmost importance to know what property valuation means and how it is determined or its purposes.
Here is an insight in to what is property valuation:
If you go by the dictionary meaning, property valuation is the process of developing an opinion of value for property, usually called market value. Having said that, it is not the same as property prices. Property valuation lets us know the actual worth of a property whereas the price of the same depends on factors such as bargaining skills, the prices of nearby property, how soon the sale needs be done (which impacts bargaining, which in turn impacts prices), etc.
Property valuation is done by a valuer who evaluates the value of the property, which could be a land or a building. The location of a property plays a very important role in determining the value of a property and each property is unique. The evaluation is also done on the basis of upgrades or improvements done to the property, which plays an important role in changing the value of that particular property because the property as such cannot change its location. Property valuation is done by ‘Property Valuers’ and the valuation reports form the basis of loans, family wealth partitions, buying and selling of a property, property insurance, taxation, etc., to just name a few. As already mentioned, property valuation is very different from a real estate agent’s appraisal. Usually, a real estate agent uses his or her local market knowledge/expertise to arrive at a selling figure under which a property should be placed or sold in the market. On the contrary, the valuation report is a legal document and the valuation is done by a certified valuer for individual property owners or for banks, solicitors, financial planners for a variety of purposes.
Property valuation usually involves the inspection and measuring of the land of the property to be valued by a certified property valuer who will then evaluate it against the title or plan. The current conditions and improvements made to the property are also taken into consideration apart from any previous sales, which helps with sales analysis and then a report is prepared based on these findings. Ideally, property valuation is the valuation of a property on a particular date and the property valuation report is valid for a period of 3 months.
There are different valuation concepts/methods that are used to determine the value of a property. Here are the 3 traditional ones:
It is the most popular of all the 3 property valuation methods. It is also known as the market data or comparable sales approach and is usually used to value private properties. It takes into considerate substitute properties based on the assumption that an individual will not pay more for a property than it would cost to purchase a comparable substitute property. In short, a buyer will compare asking prices and purchase the property only if it meets his/her wants and desires for the lowest cost. In this approach the valuer will take into consideration the marketplace that includes buyers, sellers as well as investors.
To value properties under this method, marketplace data is collected of the recent sales of similar properties (those that have the sold tag – so that we know what was actually paid). Adjustments are made as comparable property is “not identical” to the property whose valuation is underway and is subjective to the experience of the property valuer. Usually, the below steps are followed:
Market Research – Obtaining information related to sales similar to the property undervaluation
Data Investigation – Determining whether the data collected if correct and accurate
Data Comparison – Determining relevant units of companies and developing a comparative analysis
Adjustments – comparing the property under valuation and comparable sales and making adjustments as necessary
Reconciliation – Reconciling the multiple value indications that result from the adjustments into a single value indication.
Once called the summation approach, this method is based on the theory that the value of a property can be estimated by summing the land value and the depreciated value of any improvements on the property. It is usually used for properties that are constructed but not sold like schools, religious institutions, government buildings and hospitals. Here the land value of the property under valuation is estimated and summed or added up with the estimated building costs of the property on the land. Then depreciation costs are subtracted – there are three types of depreciation that are considered – physical deterioration, functional obsolescence and economic obsolescence.
The income capitalization approach is mainly used to value commercial and investment properties. This approach is usually applied for apartments, commercial real estate and family homes/private properties. There are two pathways that can be followed – Direct Capitalisation and Gross Income Multipliers. The former focuses on a property’s income.The annual gross income is estimated and from that the effective gross income is estimated by considering the impact of vacancies and then the net operating income is calculated after deducting expenses. From this the property’s value is estimated using the cap rate and net operating income. The latter method is used for properties that are not initially bought as income properties, but end up as one. An example would be a rental property. The annual gross income of the property is calculated and then the sales price is divided by the rental income. The gross income multiplier is derived, which is then used to find the property’s value.
Property valuation is done for the below purposes:
A property appraisal is an estimate of price of the said property and is usually given by a real estate agent. The real estate agent uses his/her knowledge of the local area and the property sales in that area to come up to that estimated price that ‘might’ be obtained by a particular property. This estimation or appraisal could be biased as there is a possibility of the exaggeration on the part of the agent to potential vendors. Property appraisal is an opinion and is not legally binding. It is different from property valuation as valuation is a formal process and has legal standing.
A Valuation Report is an expression of a written opinion, based on certain assumptions and limiting conditions. Users of the Report should not read the Certificate of Value in isolation, but it should be read in conjunction with the Underlying Assumptions and Limiting Conditions that govern the value of the property.
The style and the format of the report need not be standardized, but the values and texts depends on the Scope of the Work and Reporting Requirement of the End users. The type of report Narrative/ Restricted use etc., will essentially decide the extent of detail contained in a valuation report of the property.
All three terms are extremely relevant especially, when the purpose of valuation is Asset Backed Lending. The three opinions of value work as a good measure in mitigating risk when making Lending decisions. When certifying the Market Value a valuer is expected to make a prudent assessment of the future marketability of the asset considering the sustainability of the present market conditions over the long term and the current and alternative appropriate uses of the property. There is no direct or linear relationship in the percentage discount offered to the Market Value when certifying the RV / DSV. The values purely depend on the Liquidity and Marketability of the asset under reference.
Yes, there is a great variance in these values. The valuation cycle for Ready Reckoner / Guideline Rates is 12 months / 1 year, whereas a valuation report is certified as of a particular date. The Ready Reckoner does not account for variations and fluctuations in the market during the year. Moreover, the published rates are based ONLY on the scrutiny of the documents lodged for registration and does not involve the physical inspection of the property.
Credit : CPWD, Government of India
CPWD works manual 2014
RICS Valuation – Global Standards 2017
Indian Valuation Standards 2018
Handbook on Policy, Standards and Procedures for Real Estate Valuation by Banks and HFIs in India
409/410, Titaanium The Business Hub, Bhimrad Rd, Checkpost, Surat, Gujarat 395017
Office No. 12, 13 ,Second Floor,Vrund Complex,
BPC Road, Vadodara – 390020, Gujarat, India.
353, 3rd Floor, Govinda Complex, Nr GIDC Char Rasta, Vapi 396191, Gujarat, India.
Office G 14, Aditya Complex, Near Kasak Circle, Bharuch, 392 001
205, 2nd Floor, Maa Krupa Complex, Gandhi Road, Bardoli 394 601