PHE (Housing Economics (Valuation of Properties (Land Building Method: …
Principles of valuation
Cost: Expenditure to produce a commodity having a value
Price: Cost of a commodity plus additional reward
Valuation: Opinion or estimate
Arbitration, income tax, gift tax, selling, mortgaging, collateral security, auctioning, insurance, partitions, stamp duty etc
types of values
factors affecting value
Supply and demand
Rent control act
war, riots etc
Town planning act
Sinking fund: Gradually accumulated by way of periodic on annual deposit for replacement of building structure at end of its useful life.
Depreciation: Gradual exhaustion of the usefulness of a property. loss of value.
Annual decrease in value of a property is known as annual depreciation
Factors for depreciation:
Wear and tear
fall in market value
change in demands
change in art and fashion
calamity like flood, lighting etc
Obsolescence: value of property decreases by its becoming outof date in style, in structure in design etc.
Annuity: annual periodic payments for repayments of capital amount invested by a party
Annuity certain: amount paid for definite number of periods or years.
Annuity due: amount paid at the beginning of each period of year continued for definite number of periods
Deffered Annuity: If payment of annuity begins at a future date after a number of years
Perpetual Annuity: if payments continue for indefinite period of time.
Valuation of Properties
Land Building Method:
value of land and that of building are considered separately.
present value of property= value of the building + value of the land + value of the amenities and services.
Rental or capitalization method:
Capitalizing net annual rental income (NARI) at appropriate rate of interest or capitalization
NARI= Gross annual rent income (GARI)- outgoings like property tax repairs, maintenance etc
Used to evaluate property with potential for development which would increase its value.
Applicable to public places
Deals with working the profit from property and capitalizing the same at appropriate rate of return depending on:
1) Net profit to be adopted should be an avg of last 3 years of profit
2) Profit due to goodwill should be properly reflected in rate of return.
Direct Comparison Method:
Consists of comparing property under valuation with more or less similar property in the locality, make suitable adjustments in the rate if specification varies and there after arriving at a suitable composite rate per unit area.
Public Private Partnerships (PPP)
Required since public efforts will not suffice in fulfilling housing demand
NUHHP focuses spotlight on multiple stake-holders namely, the private sector, the cooperative sector, industrial sector for labour housing and the services sector for employee housing.
NUHHP promotes optimal use of land by
relaxing FAR to ensure 10-15% of land
or 20-25% of FAR is reserved for EWL/LIG units
or issuances of transferable development rights.
Illustration of PPP model;
Private developer on private land
Private developer on Govt. land/ acquired land
Slum Redevelopment with participation of private developer.
SRA The Genesis
Clearance of slums were rampant
not permanent solution
census of hutments were carried and I.card issued.
Slum upgradation carried out
slum lands given on 30 year lease to slum dwellers
schemes limited to state govt, municipal and housing lands
Comprehensive rehabilitation scheme was started.
Apparent physical sub-standardness, irrespective of land ownership or tenure status - legal settlements unfit for human habitation due to dilapidation, overcrowding etc
Freehold land: Those in inner cities, blighted areas.
Squatter settlements: encroachments on public roads
Illegal land sub ddivisions: Legal land ownership but subdivision taken illegally
Public/private leasehold: cooperative model in urban villages