Here’s How to Get Your Real Estate Valued
Assessing the value of Real Estate is a requisite whether the asset is residential, commercial, or industrial. Arriving at the correct value of an existing asset allows for sound decisions concerning investments. Hence, people generally look to work out the Fair Market Value (FMV) of an asset before they add a ‘premium’ towards the final price.
Government Regulation and Approaches to Valuation
In 2017, the Indian Government shifted the Cost Inflation Index’s (CII) base year from 1981 to 2001. As a result, the FMV of your assets is now set at 2001 levels. To check, you can consider the selling price of similar properties in your neighbourhood. However, the Real Estate market is heterogeneous with many variations within a single city, town, or even locality. Therefore, such an approach is found wanting.
Another method is to look up Indian Real Estate indices such as the Residential Property Price Index (RPPI), Housing Price Index (HPI), and the National Housing Bank’s (NHB) Residex. However, this approach may also prove to be inadequate in certain cases due to the lack of data prior to 2001.
Even if you could get access to such data, you could argue that prices computed using an FMV derived from the CII with 2001 as the base year, would not be ‘fair’ as the price for the asset today would be much higher. Furthermore, other factors also impact the ‘premium’ added to the FMV:
The location of the property: Location is a major factor as properties in prime areas would fetch a higher price than those in the outskirts.
The site: Property dimensions such as whether the asset is an independent villaz.com/blogs/apartment-vs-independent-house-how-to-make-the-right-choice, apartment, or an undeveloped piece of plot also play a role.
Demand and supply: Oversupply leads to a lack of asset appreciation, while high demand results in surging prices.
The plethora of considerations involved are sure to give you a headache.
Registered Valuers and Real Estate Advisors
The simple solution is to turn to a registered valuer for a valuation report on the target asset. A valuer is registered under section 34AB of the Wealth Tax Act, 1957 and is certified by the Indian Government in the field of asset valuation. In addition, they are also answerable to income tax authorities. In order to give you a valuation on your asset, valuers charge a fee for their services - a percentage dictated by the value of your asset, a condition specified in legislation.
As per the law, the report prepared by valuers should contain key aspects such as factors influencing valuation, methodology of valuation, procedures utilised in valuation, sources of information, and objective of valuation. As of March 2021, there were 3,967 registered valuers in India, with 40 of them being registered entities and the rest working as individual valuers.
Before getting in touch with a registered valuer, keep in mind that there is one more entity that can add value to your search to maximise the value of an asset. A Real Estate advisory firm can provide much help, so you get a solid Return on Investment (ROI). A Real Estate advisory company will charge a fee that will appear minuscule when you cash in on your investment. Certain Real Estate advisory firms, such as Indiassetz, not only work with a registered valuer but also offer a bouquet of other services so you are sure to get a good deal.
In addition, Indiassetz also takes up the following tasks on your behalf:
Assess long-and-short-term objectives and offer alternatives for the ideal utilisation of a property
Work with financial advisors to help you achieve your financial goals
Offer advice on the best practices associated with property management
Play a neutral role in presenting the best outcomes for the asset
Provide strategies to enhance customer satisfaction and operations on properties that produce income
Offer guidance on renovating, building or developing commercial and residential properties
Offers assessment on renovation, feasibility and associated costs for properties that produce income
Offers evaluation of zoning, land or other aspects that could improve or impede the development of a property
Provide input on strategies associated with capital allocation
Offer end-to-end advice from the acquisition to the sale of an asset
In comparison, a realtor only cares about the transaction.
Always remember that the aim of investments in Real Estate is to ensure you get a good return on your investment. To get the right valuation for your asset, approach a registered valuer or a Real Estate advisory firm that uses government-registered valuers.
Remember, plans fail without counsel, but strategies succeed when you have an abundance of advisors.