Property Valuation in India: Benefits, importance, valuation methods & legal standing

A property valuation report is given to the property owner to indicate the condition of the house and how much it is worth in the market. The report helps a buyer and a seller assess the value of a property. Based on the property valuation reports, you can estimate the price of your property.

A professional and experienced property valuer will offer you a trusted opinion and strong advice on real estate data. It is impossible to match the results offered by a trained professional to the results that are calculated online.

The valuation of a property is required for decision making across various industries, whether it is government organisations, private organisations, individuals, or taxation authorities. They all rely on property value while taking decisions. It could be for capital gains, tax calculation or investment decision-making, where somebody is putting money to acquire the project or to acquire the stake in the project.

For example, before sanctioning a home loan, the lender would understand the value at which a property can be acquired or traded in the market in case of a default. The lender relies on the valuation provided by a valuer to define the loan amount that it is willing to give to a home buyer.

Also, if you are trying to take insurance for a building, the insurance company would need to understand the value of the building and its replacement cost, which is done by a valuer.

Depending on the requirement/purpose of valuation, different government bodies have developed regulations related to who a valuer should be. The most common one in which a colloquial reference is government-approved valuers is registered under CBDT. CBDT gives out valuer rules on who could be a valuer. So, they have multiple regulations/conditions saying a valuer needs to be an individual with a certain amount of experience in terms of timeframe 5-10 years of experience. They need to be civil engineers, architects, or town planners to conduct real estate property valuation. There are bodies like NHB and IBA that have additional regulations for valuers. Since last two to three years, there is a new regulation under Section 247 of The Companies Act 2013, which requires a valuer to be a civil engineer, architect, or town planner to conduct real estate property valuation with certain experience and clear specific exams and undergo training and then register themselves as a valuer.

How long does it take to prepare a valuation report?

Depending on the property, it could take about 2-3 hours for a valuer to go and inspect and prepare a valuation report. Typically, it could take about 2-3 weeks for development projects. And for even larger projects or developments, it could take more time, but the typical timeframe is 2-3 weeks depending on the project.

How to get the right valuation done?

Method 1: Comparison approach
Method 2: Income capitalisation approach
Method 3: Discounted cash flow model
Method 4: Cost approach

What does a property valuation report contain?

It is prepared for a specific client. It can be a buyer or a lender, or it can be an investor or a government body.

Purpose:

Secured lending
Tax calculation
Financial reporting
Acquisition/purchasing
Disposition/selling

Parameters:

Physical inspection of the property
Opinion on market trends
Opinion on a fair price

Important points:

Report to be read in entirety
Don’t focus only on the numeric figures
Assumptions and disclaimers are important too

The decision should be based on the value, the timeframe required to market the property, and the kind of buyer segment or profile available for those properties.

How long is the valuation report valid for?

A valuation report is typically valid for up to 3 months from the inspection/report issue date.

What is the legal standing of a valuation report?

A valuation report by a government-registered valuer is admissible in a court of law. An auditor can also rely on it for financial reporting.

For more information

Importance and Benefits of Property Valuation for Buyers

https://www.magicbricks.com/blog/prop...

Importance and benefits of property valuation for sellers

https://www.magicbricks.com/blog/prop...