Various land valuation systems have been developed to determine the true value of land worldwide. Based on their effectiveness, a handful of land-price methods are more popular globally. This article discusses several ways you can calculate the land value. There are various tools you can use to calculate your rental property values such as property value calculator or prorated rent calculator.
Methods to calculate land value
Comparative property valuation method of land valuation
This method is often used to determine the value of flats in an era when apartment-based projects are common. This method helps you determine your property’s value by comparing it to similar properties in the value.
Say your housing society sold two flats for Rs 1 crore each. If you sold your home soon, you’d ask the same amount. Because you live in an active market with comparable data, this property valuation method works. When you sell your flat, buyers may not pay more than Rs 90 lakhs. This has many causes.
Even in a housing society, location determines a property’s value. Flats near the main entrance will fetch a lower price because of the noise. A park-facing apartment is more valuable than one surrounded by other flats.
As Vastu makes a comeback in India, irregularly shaped homes are less likely to sell for asking price. Under Vastu, irregular-sized flats hinder personal and professional growth.
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If your property is even slightly smaller than your neighbor’s, its value will be lower.
Depending on where you live, the level of your apartment affects the value of your property. In Mumbai, an upper-story flat costs more than a ground-floor apartment because of monsoon flooding. In Delhi-NCR, ground-floor homes are expensive.
A corner flat or plot would command a premium due to easier entry and egress points.
Suppose your sibling is unwilling to sell his property share. Such a problem can delay the sale and reduce its value.
Development method of land valuation
This method is used to value plots and apartments on them. This globally accepted method helps assess a land parcel’s potential.
Land and building method of land valuation
Under this method of land valuation, the value of the land is separately assessed and the value of the building is added to arrive at the final value. Using this method, land and property can be valued.
To get the building’s value, first calculate its reconstruction cost and then depreciation. If the building could be reconstructed for Rs 25 lakhs, Rs 5 lakhs might be deducted from its value as depreciation due to its age, method of construction, current condition, quality depreciation, etc. This reduces the building’s cost to Rs 20 lakhs. Multiplying a property’s net annual income by its rental capacity will give its capitalised value (let us assume this is Rs 55 lakhs). The Rs 35 lakh difference is land value.
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Belting method of land valuation
The belting method is used to value large urban land parcels. The land parcel is divided into three belts, with the belt closest to the main road given the most weight. The front belt could stretch 10 feet and the second belt 50 feet. Third belt. The first belt’s value could be split between the second and third belts. If belt 1 is 10 lakhs, 150 feet would be 7.50 lakhs. Larger areas cost Rs 5 lakhs.
Guidance value method of property valuation
Some of us have an easier time since authorities have done the hard value and assigned a circle rate, ready reckoner rate, etc. to land. States do this to charge transfer stamp duty and registration fees. Gurugram’s district administration recently raised the circle rate, making plot-based properties more expensive. The government-specified rates may be higher or lower than the market value of the property. If you’re selling a plot/flat, research the market price.
Land value
Land’s market price and value are different. The land’s market price is the amount the owner is willing to sell it for. The land’s market value is how much it’s worth to buyers compared to its price.
An owner’s property value is based on several factors. A buyer may not find the land as valuable as the owner does. This shows that buyers and sellers value land differently.
Market value vs. market price
The market price of a land parcel can be determined based on key facts without visiting the property. Supply and demand, the property’s condition, and similar sales determine the market price of land or property.
You just need to crunch some data to find out how much similar land parcels are selling for. An agent would expect to get the same price for his client if a similar land plot sold for Rs 2,000 per sq ft.
To fully understand the value of this land parcel, the agent must visit the site because the market price is listed without the value.
If the site is next to the main road, for example, it has more value than similar land parcels. If the plot is near a cemetery, its value will be lower than other nearby plots.
After evaluating all these factors, a property should set a market price. The buyer and seller should agree on this price.
The final price of the land transaction will affect the market value of nearby properties. Both things impact each other greatly.
Land valuation must-knows
Location determines the value of land. A neighborhood’s worth depends on its level of development. Large land parcels in developing areas fetch less money than tiny parcels in well-developed areas.
Second, the quality of the building on the land determines its value. In the same location, a building built with premium materials will cost more than one built with average materials, even if they are the same age. You may lack the expertise to judge construction quality on your own, so hire experts.
Age affects a property’s property. Old construction in the same location costs less.
Developer brand affects building pricing. A well-known developer’s project costs more than a less-known developer’s.
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