Common FAQ's For Property Valuers In India

What is "Valuation"?
The term value refers to an estimated worth of an asset, item or utility expressed in prevailing monetary terms by an expert, experienced and judicious valuer, who is not directly or indirectly an interested party in that specific asset which is being valued for a particular purpose.
Valuers perform the following tasks:

·    examine properties and select methods of evaluation

·    calculate values by considering market demand, condition of items, future trends and other factors (e.g. location, size, zoning legislation and the availability of services, such as transport and parking, in the case of real estate)

·    submit written assessments of value

·    provide consultancy advice on valuation matters

·    evaluate properties for bank loan purpose

·    give evidence in legal proceedings and mediate on valuation matters

·    provide rental valuations for arbitration purposes.

·    calculate cost of construction for income tax purpose

·    evaluate the property for capital gain & wealth tax purpose

Why and for Whom is valuation done?

Valuation of varied types of assets either tangible or intangible is required to be undertaken for different purposes. The valuation exercise is ordered by individual owner, banks, financial institutions, by companies or firms, by Government departments, organizations, institutes etc. Valuation is an excellent tool to determine the value of a specific asset owned by someone. Valuation is purpose oriented and time specific.

Purposes of Valuation

·    Bank loan purpose to assess the fair market value for mortgage and collateral security.

·    Income tax purpose for assessment of cost of construction

·    Wealth tax purpose

·    To ascertain the capital gain tax

·    Pre-sale or pre-purchase assessment

·    To determine reserve price at auction

·    Replacement value for insurance purposes

·    Rental assessments, reviews and determinations for all commercial/industrial property

·    Family settlement and litigation matters

·    Replacement cost valuations for accounting depreciation purposes etc.

Do the Banks also need valuation Services?
All Banks have the need for valuation service. They have to assess the worth of assets pledged to them as securities against the credits/loans etc. granted by them to various parties. These assets could be machinery, equipment, buildings etc. or their moving stock in trade etc. Normally, this valuation exercise is undertaken at the time of disbursing a loan or assets are re-valued and taken as collateral security while extending further financial assistance for working capital etc. Banks also solicit valuers' services when they wish to sell or dispose off assets acquired by them (mostly from defaulters) for assessing the realizable price for which the item can be sold in open markets.

What is Fair Market Value?
The fair market value can be defined as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing, wherein the parties have each acted knowledgeably, prudently and without compulsion.
Market value is a market supported estimate. In fair market value the market forces play a predominant role. In a market there are alternative options available to both buyers or sellers. In such a situation, if there are no overriding reasons to force any decision for a buyer to buy (from particular seller) or for a seller to sale (to a specific buyer at a given price) where buying / selling both acts are not influenced by any uncommon market conditions such as hyper inflation or undue, uncommon depression, then the value at which an exchange takes place is termed to be the 'Fair Market Value'.

What is guideline rate of properties?
The Govt. fixes guideline rates for various localities of a town for stamp duty purpose. For registration of properties the stamp duty is levied as per these guideline rates or the fair market value of that property whichever is more. The Guideline rated can not be taken as fair market rates.

What is Non-Performing Asset?
Non-performing asset is the term very frequently used by lending institutions such as banks, lease companies and other financial institutions for the defaulters' assets(NPA) which were originally pledged to lenders at the time of grant of loans. The borrowers who continue to pay their interests and installments have also pledged some property machines etc. to lenders, but their assets are performing assets, in as much as, that they continue to honor the commitments to lenders. On the other hand, the borrowers whose loans have gone sour and have become defaulters, their assets are not performing. Lenders may solicit valuer's services to ascertain what price or value these assets will fetch if sold in the open market. The valuer can assist, guide and help the lenders in selling / disposing these items called NPA's.

Why should I use a Valuer?
A senior, qualified valuers will ensure that you receive an accurate, well researched, professional valuation report, wherever you or your property may be located and our valuations are regularly accepted by the top financial institutions and banks. Our ongoing research, analysis and interaction with the main players in the markets throughout India ensures we remain in touch with current market trends.

Why should I have my property valued?
Whether you are buying, selling, leasing, dissolving a partnership, involved in a family settlement, executor of a deceased estate, having land resumed or acquired, undertaking a subdivision, appealing against a statutory assessment, undergoing a rent review, building units or a commercial or industrial complex or seeking finance for any reason, you need to know the true value of your property. A Valuer will provide you with an accurate, independent market value.

What will a valuation cost?
The Central Board of direct taxes, Ministry of Finance, Govt. Of India has prescribed a standard fee structure in the Wealth Tax Act 1957. According to this Act the fee structure is as under:

·    For the first Rs,1,50,000/- of the valuation amount prescribed fee is Rs.500/-

·    For the remaining valuation amount, fee is charged @1/8% , i.e. Rs.125/- per lakh of the amount.

·    Service tax as per Govt. norms is charged extra.

·    Traveling & incidental expences charges extra.

How long does it take to have my property valued?
Our prompt and efficient services ensure that no matter how remote your area is, we can usually complete your residential valuation within 2-3 working days and your commercial/industrial valuation within 4-5 working days. When accepting your valuation we will provide an estimated turn around time, so you will know when to expect your report.

How does a person become a Valuer?
A person can become a valuer in the field of activity in which he has acquired the necessary experience. For instance, for machinery, plant and equipment, the intending valuer must be a degree holding mechanical / electrical engineer and for land, building he should be a civil engineer or architect. M.Sc. agriculturist can be a valuer for plantation. For jewellery valuation, he has to be a jewellery shop keeper with a minimum turnover of Rs.15,00,000/- per annum, for a minimum period of ten years.

But only these basic qualifications and required experience are not enough. The intending valuer must also acquire sufficient knowledge of various legal provisions, taxation rules, levies by different official bodies etc. Moreover, he must keep abreast of changing legislation, emerging economic trends and constantly shifting market forces. An apprenticeship of minimum 3 to 5 years will provide a good training. In addition to this an actual independent practice of his own for a minimum ten years period as a practicing valuer is necessary to become what may be termed as full-fledged valuer.

Need to know more?
We are always happy to help you with additional information. If your enquiry is not answered in full, please CONTACT US and we will be happy to assist.