If somebody has followed a trend in real estate, The prices of land in India, mainly in towns, have grown in a very rapid manner from the past two decades. The demand for land and prices of land have continuously showed appreciation , whereas the trend in real estate market has shown slump or slowdown, which actually has gone down drastically in the Covid19 pandemic.
On the other hand it is very surprising that land values in Rural areas are still the same with not much appreciation, whereas if we look into urban areas there is a huge appreciation in the market for the land parcels.
According to studies, the best way to develop an accurate land-value assessment, is through the procedure of land-value mapping. Taking land – value mapping into consideration, many land valuation systems have been made, to finally come at the exact value of land. Based on the valuation process and their efficacy, some of the methods are worth to get the best price of land and then to fix its price. Some methods are quite commonly used in India. Following are some of them.
1. Comparative Method
From last few years , People have got more inclined towards apartment based projects because of security and facilities and projects having apartments have become more popular and are in more demand. Because of the demand of apartments this method is generally in practice, get actual worth of these apartments. And if taken Sales approach where project comparisons are taken into account, this method of evaluation helps you to achieve the right price of your property, by way of getting prices of similar properties in the same vicinity.
Comparative property valuation method works as we are all living in an active market where property prices are compared with every other property in same vicinity or other locations. However, when you are actually looking to sell your property which you have bought for Rs. 2 Crore you might get lower rates than expected and no buyer is willing to pay you more than Rs. 1.8 Crore for the property. This can happen because of following reasons:
– Location of Apartment: Location plays major role in apartment based society’s for what is the worth of apartment you are buying. Apartments which are nearer to main entry gate of the society will be having lower price as compared to other ones. Secondly, a park-facing apartments are always more lucrative for a buyer and will be having higher prices than others surrounded by apartments.
– Shape of Apartment: This has vast impact on price of apartment as in India people believe more on Vaastu compliant homes and nobody prefers a home with irregular shape as apartments with irregular shapes stops the owner’s personal, as well as professional growth.
– Size of your Apartment: If size of your apartment slightly smaller than apartment besides yours, your property value will always be lesser then theirs.
– Level or Floor of your apartment: This has extra benefit on the valuation of your property which depends on the city where you are buying property, the level or floor of your apartment will decide the value of your property. For Example: In Mumbai, Higher the apartment is higher the price of apartment whereas its opposite in Delhi NCR where higher you buy apartment in a building lesser the price is.
– Frontage of Property: A corner property will always demand higher prices when compared to other ones.
– Legal issues: Any legal issues from family, government or any other means will always depreciate value of the property and you will not get prices as desired from the market.
2. Development Method
This method gives you calculation of price of plot or any development coming on the land parcel where upcoming infrastructure of high class and there is economic development coming or planned in near future by government bodies.
3. Land And Building Method
Under land and Building method of land valuation, the cost of land is assessed separately and the Cost of the building on that particular land is added to the land value, to achieve the final pricing. By using this method, one could always get land valuation as well as property valuation.
If you have to calculate the value of the building, we need to calculate reconstruction cost and then accordingly adjustments are done for depreciation.
4. Belting Method
To evaluate the pricing of a bigger land parcel in urban areas, the belting method is always more effective and is generally used to valuate land cost. To calculate the total value, land is divided in 3 different belts. Firstly with higher weightage is which is nearer to the main road and can stretch up to 10 ft and the second belt can be stretched up to 50 ft. and third belt will be thereafter. 75% of the cost of the first belt is calculated as cost of the second belt and half of first belt cost can be calculated for the third belt.
5. Guidance Value Method
For everybody the most easiest way is to check local authorities sites where they have done all this work of land evaluation and have updated and given land parcel prices which is also known as circle rate or ready reckoner rate or many names to it . This is done individually by state governments in order to levy stamp duty and registration charges on transfer of properties.
Some Key points to consider
- Location always have the biggest role, in determining the value of land. What is the scale of development happening in that area can always increase or depreciate value of your property. That is why big chunk of large land parcel is a developing area will give you lesser appreciation and on the other hand small piece of land in a well-developed area gives you more appreciation on your property.
- Secondly, when you take in consideration the value of land, the quality of construction of the building is also taken into account. At the same location, a building will cost much more if it’s a quality construction as compared to a building constructed using average construction quality, even if both the buildings are made at same time.
- Age of the property is also another factor that impacts the value of a property. An old construction will always be cheaper than a new construction in the same location.
- Whereas price of building is concerned, the brand of the developer will be having effect on pricing in that location. A project constructed by a well-known developer will give you better appreciation and will cost more if you buy rather than any unknown developer.
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Author: NIKITA DAGAR
