Techniques For Calculating Land Value

Techniques For Calculating Land Value

There are several ways to give a piece of land a monetary worth. Learn more about some of the more popular ones below.

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In order to determine the genuine worth of land around the world, a number of land valuation systems have been created. A few approaches of determining the value of land and setting its price have gained significant traction on a global scale based on their efficacy. These are also used pretty frequently in India. Some significant ones are covered in this article.

Using a comparative property valuation method, value the land This method is frequently used to determine the value of apartments in a period when apartment-based projects have become an essential component of urban living. This methodology, also known as the sales comparison approach, aids in determining the worth of your property by looking at the prices of nearby properties that are similar to yours.

Let's imagine that two apartments in your housing community recently sold for Rs. 1 crore each. The same sum would be the price you would list your home for if you were to sell it soon.

Because you reside in an active market with access to comparable data, this approach of property appraisal is effective. When you finally list your apartment for sale, though, you might discover that potential buyers are only ready to offer you Rs 90 lakhs for it. There may be a number of causes for this.

Location: Even inside a housing society, location is crucial in determining how much a house is worth. Due to the potential for ongoing disturbance to the occupants, apartments closer to the major entry point, for instance, will sell for less money. Similar to how a property surrounded by other apartments is less beneficial for a buyer and, consequently, less valued than a unit facing a park.

Shape: Although irregularly shaped homes are not preferred, they are also less likely to fetch the full asking price now that Vastu is making a strong resurgence in India. According to Vastu principles, apartments with oddly shaped rooms restrict their owners' ability to advance both personally and professionally.

Size: If your home is even marginally smaller than that of your neighbor, it will never be worth as much money.

Level: The level of your apartment will determine the value of your property depending on the city where you live. Due to recurrent flooding during the monsoon season, apartments in housing societies on upper floors in Mumbai are more expensive than those on lower floors. The National Capital Region (NCR), on the other hand, places a premium on dwellings on the first floor.

Frontage: Compared to other properties, a corner flat or plot would command a higher price due to the simpler entry and exit locations.

Legal issues: Let's say your sibling owns your property in a joint ownership arrangement and is unwilling to sell his half. Such a situation could cause value depreciation in addition to delaying the sale.

Land valuation technique under development The value of plots and the flats that are constructed on such plots are mostly determined using this method. This widely acknowledged method, also known as the residual land value method, aids in determining a land parcel's potential.

The plot's value may have formerly been insignificant, but impending infrastructural development might multiply that value many times over.

For instance, a bigha (27,000 sq ft) of land in Jewar was once sold for around Rs 4-5 lakhs.

Land prices have reached Rs 20–25 lakhs per bigha after Jewar was chosen as the site for the second airport to serve the NCR. As a result, both unit values and rental rates have surged in housing societies neighbouring Greater Noida.

Land valuation using the land and building method This approach to land valuation assesses the value of the land individually before adding the value of the building to the result to determine the total cost. This approach could be used to arrive at both a land valuation and a property valuation.

Reconstruction costs are calculated first, and then depreciation adjustments are applied to arrive at the building's value. Due to the building's age, construction method, present state, quality depreciation, etc., depreciation of Rs 5 lakhs from its value could be applied if the structure could be rebuilt for Rs 25 lakhs, for example. By using this method, the building in this instance only costs Rs 20 lakhs. To calculate the capitalized value of any comparable property, multiply the net annual revenue by its rental potential (let us assume this is Rs 55 lakhs). The land value is represented by the difference between the two numbers, or Rs 35 lakhs.

Belting method of valuing land The belting approach is the most useful and popular way to value a large piece of land in a city. The entire piece of land is divided into three belts for this purpose, with the portion nearest to the major road receiving the most weight. Usually, the front belt can extend up to 10 feet, while the second belt can go as far as 50 feet. The third belt would be the component that comes next. The second belt may be given 75% of the first belt's worth, while the third belt could be given 50% of the first belt's value. Areas up to 150 feet would be valued at Rs 7.50 lakhs if belt 1 is worth Rs 10 lakhs. Depending on how large it is, areas beyond this would be valued Rs 5 lakhs.

Property appraisal using the guidance value method A precise guidance value, also known as a circle rate, ready reckoner rate, etc., has been assigned to land by authorities, making the job easier for some of us. States take this action in order to collect stamp duty and registration fees on property transfers. For instance, Gurugram's district government has announced an increase in circle rate that is likely to increase the cost of purchasing residences with a piece of land. The government-specified rates, however, can be greater or lower than the property's current market worth. Find out the going market rate if you intend to sell your land or apartment.

Land's market value There is a difference between the market price of land and its market value. The amount the landowner is willing to ask for when selling it on the open market is the market price of the property. The amount that this land is worth, particularly in the eyes of potential buyers, in relation to its price reflects the market value of the property.

A property owner almost usually assigns a value to it based on a variety of considerations.

However, when a potential buyer begins to examine this same land, he might not think it is as valuable as the owner believes. This illustrates how different buyers and sellers place different values on land.

The difference between a piece of land's market value and its market price Without even personally seeing the site, it is possible to calculate the market price of a land piece using a few crucial details. The market price of a plot of land or piece of property is influenced by supply and demand, the property's condition, and previous deals on similar properties.

Simply perform some data analysis to determine the price at which comparable land parcels in the same location are currently being sold. Therefore, an agent would anticipate getting the same amount for his client if a similar land plot sale brought the owners, let's say, Rs 2,000 per sq ft.

However, since the market price of land is attached without taking the value component into account, the agent would need to physically visit the site in order to completely comprehend the value of this land piece.

For instance, the plot is worth more than comparable land parcels in the neighbourhood if it is close to the main road. If the plot, for example, is close to a cemetery, its value would be significantly lower than that of other nearby plots of equal size.

An owner should set a market price for his land parcel or other property only after considering all of these variables. The buyer should be willing to pay this amount, and the seller should be open to accepting it.

The final rate of the deal would be the market price of the land, which would have an effect on the market value of nearby properties. Thus, both of these things continue to have a significant impact on one another.

Important things to keep in mind when valuing land Location of the property: The most important factor in assessing a piece of land's value is its location. A locality's value or lack thereof is determined by the degree of development there. Because of this, a large tract of property in a developing neighbourhood would sell for much less money than a small plot in a prosperous neighbourhood. An excellent illustration of this is the rise in land prices in Noida near the Jewar Airport.

Construction quality: The quality of the building built on the site comes in second when considering its value. Even if there is no age difference between two buildings in the same neighbourhood, a structure constructed with premium materials will cost significantly more than a building constructed with average quality materials. Keep in mind that you must use technical professionals because you might not have the knowledge to evaluate the construction quality on your own.

Age of the property: An additional aspect that affects a property's value is age. An older building would be considerably less expensive than a new one in the same spot.

Builder brand: In the case of a building, the developer's brand will also affect pricing. For example, a project from a well-known developer will cost more than one from a developer who is somewhat less well-known.

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