Valuation of Land & Building is a method of determining the present marketable value of such land & building. A large number of aspects are considered while deriving the value of such land & building such as size, location, width of roads, frontage etc. In case of valuation of building the shape, size, location, durability, material, its structures, height of plinth, thickness of walls, and height of building are also considered

Methods of valuation

1. Rental Method

   This method is used when the rental income of such property is known. Under this method the net rental income is derived after deduction all the outgoing expenses. Year’s purchase is calculated by considering the current interest rate prevailing in the market and by multiplying the net income with the year’s purchase, capitalised value or the valuation of land & building is obtained.

2. Development Method

   This method is used for land & building which are under developed or undeveloped. In this method valuation of land & building depends on the further renovations or alteration or cost of development required in such property and the future earnings after a certain period.

3. Land And Building

   This method is used for calculating value of Land & Building after assessing the separate value assigned to land & building and then combining it to derive the final value. By using this method we can assess the separate values of land & building.
   Value of building can be calculated by using following two methods:

   • Valuation Based on Cost In this method the value of building is assessed as the cost incurred in constructing such building or the cost incurred in obtaining the possession of such building and deducting any depreciation allowed.
   • Depreciation method of valuation in this method, valuation is divided into four parts:
     1. Doors & windows
     2. Floor
     3. Roofs
     4. Walls

     Also, while valuation other aspects like whether necessary amenities are well maintained or not if not, then appropriate deduction shall be made. Whereas if the necessary amenities is well maintained appropriate additions can be attributable to the cost.

   • Profit Based Method This method is widely used in the valuation of properties which are used generally for the commercial purpose. Their valuation can be much higher than the actual cost incurred in construction or possession as it totally depend upon the earnings from such commercial properties. In this method net income is derived after deducting all the outgoing expenses from gross income and multiplying such net income by year’s purchase.