Valuation of Building
Valuation of a building depends on the type of the building, its structure and durability, on the situation, size, shape, frontage, width of roadways, the quality of materials used in the construction and present day prices of materials. Valuation also depends on the height of the building, height of the plinth, thickness of the wall, nature of the floor, roof, doors, windows etc.
The valuation of a building is determined on working out its cost of construction at present day rate and allowing a suitable depreciation.
Six Methods of Valuation
- Rental Method of Valuation
- Direct Comparisons of the capital value
- Valuation based on the profit
- Valuation based on the cost
- Development method of Valuation
- Depreciation method of Valuation
Rental Method of Valuation
In this method, the net income by way of rent is found out by deducting all outgoing from the gross rent. A suitable rate of interest as prevailing in the market is assumed and Year’s purchase is calculated. This net income multiplied by Year’s Purchase gives the capitalized value or valuation of the property. This method is applicable only when the rent is known or probable rent is determined by enquiries.