Property Valuation

Property Valuation

Prakash Dhawan. A cynic is one who knows price of everything, but value of none!!!

This age old adage fits perfectly with the contemporary real estate valuation system in our country. Property valuation has been a matter of ambiguity and intricacies so far in India.

In India, the role of valuer is not linked in property deals involving small scale transactions. Whenever we purchase a property; say for commercial or residential purpose, we don’t even consider valuation as a procedural step in the transaction. They buyers don’t know if the price they are paying for the land is worth it. The buyers always will tend to think that the seller is overestimating the land value and the deal would be a loss. The seller on the other hand will think if he is getting the correct value for the land. He has this asset and whether he is underestimating the price and quoting non-profitable rate. This makes the seller overestimate the price and offer the property at much higher rates than it actually is.

In the current scenario both the buyer and the seller are certain that they are being taken advantage of, no matter what the conclusion of a deal -- the asking price of a property is rarely a straight forward reflection of comparable values. While comparables may be a starting point, the price at which a seller offers a property is often also based on wishful thinking, propaganda and ploy. To de-magnitude this, the buyer will fragment the quoted rates and tries to score over the seller’s vulnerabilities. The comparison of quoted rates with similar property, the seller’s authorative pose and the fluctuations as the bargain takes over will be the bottom line for the transaction.

The vital point here is that there is no government regulated or any autonomous authority governing the norms and parameters for property valuation. The property valuers are independent of any codes and ethics and function without any predefined set of parameters. This has been the prime factor for the biased valuation and overestimation or underestimation of property value; based on the partial inputs from the buyers or sellers.

The Royal Institute of Chartered Surveyors (RICS) is one of the most respected and high profile global ‘standards and membership’ organizations for professionals involved in land, property, construction and environmental issues. As a part of delegation committee, RICS wants to impart and instill its standards and practices in Indian market as well.