### HOW TO FIND VALUE OF BUILDING AND LAND WITH EXAMPLE PROBLEM

In This Lesson Lets Learn   How To Find Value Of Land. Most Of The Times This Points Required For Civil Engineer. As A Civil Engineer It Is Most Before Going To Problem First We Want To Know Some Terms In Valuation Calculation Process. That Points Are Below

MARKET VALUE

Marker Value Mean A Property Can Be Sold In The Open Market At A Particular Time . In The Open Market Mean That Any Person Desires To Make Purchase.

BOOK VALUE

Book Value Is The Value Of The Property Shown In The Account Book For Particular Year The Book Value Reduce Gradually By Particular Amount Or Purchase Every Year From The Initial Value Till It Reaches Crab Value.

ASSESSED VALUE

Assessed Value Of The Property Is The  Recorded   value Of Municipality It Is Used To Determine The Taxes To Be Collected From The Owner Of The Property.

SCRAP VALUE

This Is The Value Of Machinery Obtained When It Is Useless. Actually The Scrap Value Of The Material Is 10  Of Its Buy Cost.

SINKING FUND

Sinking Fund Is The Amount It Has To Be Collect Specified Time Out Of Gross Income So That The End Of Useful Life Of Any Property The Fund Should Accumulate To The Initial Cost Of The Building.
The Sinking Fund Is Considered As 90 Of The Initial Cost Of Building. Remaining 10 Of Cost Is Claimed From Scarab Value Of Property

FORMULA FOR SINKING FUND

I  =  Si/(1+i)n-1
I  = annual installment required
S = tot amount of sinking fund
i  = the rate of interest in decimal
n = number of year
Ie = coefficient of sinking fund.

CAPITALIZED VALUE

The capitalized value of the property is the amount the invest on which at the highest prevailing rate would be equal to the net income out of the property.

YEAR’S PURCHASE

Years purchase is defined as the capital sum required to be invest in order to receive a net annual income as an annuity of rupee one at fixed rate of interest.
Yp = 100 / i
I = Rate Of Interest
Capital Sum = Annual Income  X  Year’s Purchase.

WORKOUT THE VALUATION OF A WEDDING HOUSE WITH THE FOLLOWING DATA

(i)                Cost of land = RS .2500000 (USD .38461 )
(ii)               Gross income = RS.5000000 (USD.76923 )
(iii)             Managing charges, electricity charges, municipal taxes, etc is 30 % of gross income.
(iv)             Repair and maintenance of machinery all equipment at 5%  of their capital cost which is RS.1200000 ( USD.18461 )
(v)              Sinking fund for machinery ( lifts, generator ) life is estimated as 25 years at 4 % after allowing 10 % scrap value
(vi)             Insurance premium is RS.20000 Per Annum (USD.307 )
Assume annual repair of house is 2% of gross income and yp for 50 years at 8 % and redemption fo capitl at 4%

OUTGOINGS

(i)                Managing electricity ,municipal taxes per annum
=  (30/100) X 5000000
= 150000 Pa (USD.23076 )
(ii)              Repair and maintenance cost of machinery (lifts )
= (5/100) X 1200000
= RS.60000 pa (USD.923 )
(iii)             Sinking fund deposits annually to replace the machine in 25 years we have to get an amount = capital cost –10/100 X capital cost
=1200000 – (10/100) x 1200000
= RS. 1080000 (USD.16615 )
Annual deposit as sinking fund for machinery
= 1080000 x sinking fund co.efficient
= 1080000 x((0.04)/(1.04)25-1)
= RS.25933 (USD.398 )
(iv)             Insurance premium annually paid = RS.10000 (USD.153 )
(v)              Building repair annual cost             = (2/100) X Gross income
= (2/100) x 5000000
= RS.100000 (USD. 1538 )
Total out boings = 1500000 + 60000 + 25933 + 10000 + 100000
= RS.1695933 (USD.26091 )
Net annual income = gross income – outgoings
= 5000000 – 1625933
= RS.3304067 ( USD.5083 )

FIND TOTAL VALUE OF PROPERTY

Capitalized value = net annual income x years purchase (y.p)
y.p  = 1/(Ip+Ic)
Ip =  0.08
Ic = 0.04/(0.04)­50-1
= 0.0065
y.p = 1/(0.08+0.0065)
= 11.55
Capitalized value = RS.3304067 X 11.55
= RS.38175151 (USD.587310 )
Total value of wedding house = capitalized value  + land cost
= 38175151 + 2500000
= RS .4.06 crores (USD.625771 )

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