Valuation of Immovable Properties

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5.1 INRODUTION
It is human nature to create controversy even where it does not exist. Expert values have been fighting, in vain, to find out whether valuation is an art or a science. To set this rift at rest, Justice Viscount Simon of the House of Lords in Gold Coast Selection Trust case held that "valuation is an art and not an exact science. Mathematical certainty is not demanded, nor indeed is it possible". Thus valuation cannot be tied up by rigid laws of nature or science. It also cannot work under fixed and inflexible set up of principles because it has great dependence in human nature and individual' thinking. It can not be said that vacant flats are always required to be valued on comparable sales method. Sometimes circumstances may demand value estimation by Rental Method. Hence two flats in the same building may have different values for the same area. Similarly two adjacent plots in the same area may have different values because one plot falls in garden reservation and another plot is marked for commercial user. An old case of human intelligence affecting value of property is worth studying. An open plot of land was offered for sale in a posh locality of Mumbai. But there were no buyers for the plot because it was subjected to the covenant that no construction above 5' would be allowed to be put up in the plot. Owner failed to sell plot for 2 years in spite of his best efforts. One day a person came with an offer of Rs. 10 lacs with condition that the deal be completed in 2 days time. Owner was too happy and he immediately agreed to sell the property, but he also let the buyer know about the covenant. The purchaser replied that he was aware of that restriction. After the deal was completed, the curious vendor asked the purchaser about the proposed use to which the land would be put and he came to know that the purchaser intended to put up a petrol pump on the said plot. Thus human intelligence changed a `bad covenant' into a lucrative business use. The plot worth few thousands fetched a price in lacs. That is why it is said that stream of thoughts are the wings gifted by the nature to the whole mankind. With these wings of thoughts, we can solve many riddles. One may wonder why Harshad Mehta's flat in NCPA Apartment at Nariman Point in April 2000 fetched only 460 lacs whereas a similar flat of Chabrias at the same period of time in the same building fetched 603 lacs. Both flats were sold in the open market. The reason for low price in the case of Harshad Mehta's flat was the forced sale under court's auction order. Purchasers exploited the distress condition and offered less price. It was a case of a unwilling seller and sale in the shortest period of time. In the other case, plenty of time for the free sale was envisaged, hence higher price was available. It is thus clear that value of property goes on changing depending upon facts and circumstances in each case at relevant period of time. Value assumes new colour and new meaning with the prefix or adjective attached to it.

5.2 Meaning of value with different adjectives attached to it

FAIR MARKET VALUE:
It is an estimate of price likely to be fetched in the open market.

BOOK VALUE:
It is the written down value of the property as shown in books of accounts or Balance Sheet. Normally it is lower than the market value of the asset in open market.

VALUE-IN-USE:
The net present value is a cash flow that an asset generates for a specific owner under a specific use. Value-in-use is the value to one particular user, which may be above or below the market value of a property.

INVESTMENT VALUE:

This is the value to one particular investor, which may be above or below the market value of a property.

INSURABLE VALUE:

This is the value of real property covered by an insurance policy. Generally it does not include the site value.

DISTRESS VALUE:

An owner in an urgent need of liquidation his asset may sell property much below its...
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