Unlocking the Secrets of Property Valuation: How to Find the True Land Value

Property evaluation may be carried out for different reasons and purposes. However, to get the true estimate of a property's worth, it is important to conduct property evaluation in the right manner. Sadly, most property owners in India are unaware of the best ways to conduct accurate property evaluations.

Over the past few decades, the value of land has been increasing significantly. This has turned even the smallest bit of land into a major commodity. Hence, learning about how to find land value of property is the key to securing the financial future of the owners. This can be ensured by gaining an in-depth understanding of the common methods used for land evaluation in India.

The first thing owners need to understand is that land evaluation is a data-driven process. This essentially means that estimating the true value of land requires the collection of specific data about the property as well as other generic data. The five common methods used for finding the true value of land in India are explained briefly as follows.  

Comparative Property Valuation Method

Also known as the sales comparison method, it is based on comparing similar properties within the same location. The land to be sold is compared to a similar piece of land that was recently sold in the area. The professionals carrying out the evaluation also check other parameters to determine the actual value of the land. These include the age of the land, its condition, the type and level of infrastructure development in the area, and the presence of various social and civic amenities. It is the most common, basic and direct method for calculating the value of land.

Developmental Method

This method is also known as the residual land value method and is a popular choice for how to find land value of property across the globe. The following formula is used for calculating the value of land using this method:

Land = Gross Development Value (GDV) – (Construction + Profit + Other fees)

Here, land means the amount paid for acquiring the piece of land and GDV refers to the projected final capital value of the land when it will be sold at a given time. Also, construction is the total amount spent on any construction work carried out on the land, profit is the ROI calculated by the investors at an early stage, and other fees include any other costs incurred by the investors.

Land and Building Method

This method is used for calculating the value of a piece that has some construction done on it. In such cases, the value of both the land and the building are calculated separately. The two amounts are added to presume the total value of the property. The value of the land is calculated using the comparative method and factoring in the current price trends for similar pieces of land in the area. The value of the building is calculated by determining the reconstruction cost and then making the necessary adjustments for depreciation.

Belting Method

This method is most suitable for assessing the value of land in urban areas or for calculating the value of large areas of land. In this method, the piece of land to be evaluated is divided into three belts. The belt closest to the main road is given the highest weightage. The value of the second belt is set at 2/3rd of the value of the first belt. Similarly, the value of the third belt is set at 1/2 of the value of the primary belt. This method helps in ensuring impartial valuation of the land of different sizes.

Guidance Value Method

For people seeking a simple method of how to find land value of property, the guidance value method is the best choice. This method uses the minimum guidance value set by the government for each plot. This value is the minimum price at which a property should be registered in the local municipal office. The value, which is also known as suggestion value is set by the government to levy stamp duty and registration fee in case of property transfer.

Final Thoughts

Property owners can choose a method that best suits their needs for evaluating their land with the highest level of efficiency and accuracy.