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Property Valuation Method 1 - Fair Market Value (Hindi, India) - YouTube
Channel: Asset Yogi
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Namaskar, my name is Mukul and welcome to Asset Yogi.
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where we don't lock but unlock the knowledge of real estate and finance
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In this video, we are going to talk about property valuation
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that how can you find the right value for the property and real estate?
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Now, why do you the correct value?
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There could be different reasons for that
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Let's suppose you want to buy a property
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so, you would like to get the property at the right price
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and you wouldn't want to overpay for it.
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Similarly, there is a seller who wants to sell his property,
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he will also want that he get a maximum value for it
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he does not want to sell his property at undervalue.
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So, unless he has any idea about what is the right value for his property?
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he will not get the idea of how much he should sell or buy it for?
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Similarly, if you want to take insurance for a property or a loan
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in that case too, it's very important to know the right value of the property.
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So now, how to calculate the right value of the property?
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There are 3 main ways for this
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First is your fair market value,
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second is the land and building method
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and the third one is the rent method.
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We will learn in detail about all 3 of them
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that how these are calculated?
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Fair market value depends on demand and supply
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land and building method is generally used for new construction
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and under-construction properties.
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And rent method is generally for those properties
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which can be given at a rent
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or are "ready to move" property.
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So, we will know about these three in detail.
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I will make separate videos for all three.
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Consider this as a series
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so, let's call it the property valuation series
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and this is the first video, in which we will talk about the fair market in detail.
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So, how the fair market value is calculated?
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let's discuss this in detail
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let's go straight to my computer screen
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You do watch this video from beginning to the end
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so that you understand the whole calculation.
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So, in this video, we are going to talk about a property valuation method
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which we call fair market value.
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Apart from this, there are two other methods.
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one is the land and building method and the other is the rent method.
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I'll make videos about them too, so you do watch those videos as well.
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So in this video, we will talk about
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how you can estimate the true market value of a property?
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If we talk about an example, then let's suppose
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you are looking for a 3BHK flat
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let's say you are looking for a flat on Sohna road, Gurgaon
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so whichever 3BHK flat you liked,
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how can you estimate the right value for that?
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So, one way is, if there's any other flat available on sale in that complex
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so you can estimate that flat
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So, what would be our first step in this?
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that you find the value of the comparable properties
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Now, this comparable property could be a 3BHK in the same apartment
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or if there's any similar property nearby in any other apartment complex
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so you can idea from its value.
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So, how can we get the idea of its value now?
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There are two ways for this.
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First is that you can check it online from the websites.
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These are 5-6 websites that are very common in India.
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So, whichever is the popular website of your area, you can search it there
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about your apartment complex or about the surrounding area
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whatever the rate of 3BHK is going on
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After that, there's one thing to keep in mind
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you have to get an idea about the raw property
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whether your property is furnished or unfurnished
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whatever property you are looking for
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So some work has been done on it.
Let's suppose wardrobes are made
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modular kitchen has been installed
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or lights, fans everything is installed
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So, whether installed or not
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what you have to do, is to see the rate of an unfinished or raw property
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whatever properties are nearby
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and then we will see
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If the work has been done over the property
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then how can you find out the value?
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we'll also see that
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Now, what you have to do
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is to make an estimate of the raw property from the comparable property.
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and then have to calculate a per square feet rate
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So, how to calculate the per square feet rate?
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Let's suppose, this 3BHK property is a property of 1000 sq. feet.
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Let's suppose its built-up area is 1000 sq. feet
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and its rate is
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comparable property, which I am talking about
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Let's say there's another flat in this apartment which is sold at 1 crore
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or if you can't find it to be 1 crore, then
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you can make an estimate by calling a broker or an agent of that locality.
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You can ask her what is the rate for a 3 BHK in Sohna road
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so by that also, you can get to know,
how much is the last transaction
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on that apartment complex or the area nearby. You'll get an idea.
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So let's suppose,
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you get to know the price of the comparable property, the raw property
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let's suppose, this is the raw flat
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and if its rate is 1 crore
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then what will you do is
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1 crore has 7 zeroes
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you'll divide 1 crore to 1,000 sq. feet
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so you'll get an idea about the per sq. feet rate
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So in this case, Rs.10,000 is the rate per sq. feet
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So, this area has a rate of Rs.10,000 per sq. feet.
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Now, you've an idea that this much will be the rate
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so now you can estimate the rate of a raw property.
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Let's suppose there's a 1500 sq. feet property
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so you will multiply it by 10,000.
So it'll be a property of 1.5 crores.
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Similarly, you can get an idea about any area.
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Now, the second step is
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whatever quote you are getting from online or by brokers
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you can deduct 5-10% from them
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because generally the prices available online are a bit too higher
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because they leave a scope for negotitaion
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and whatever broker and agent will tell you, they'll also tell extra price of 5-10%
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so in that case, you can consider a scope for 5-10% negotiation.
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So, let's suppose if you are getting a property at 1 crore
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so you can expect that you'll get a final deal at 90-95 Lakhs
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so as I have said, quotes are generally charged with a 5-10% negotiation scope.
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After this, the next step comes in which you can add a premium
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for a better location and better amenities.
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Now, in some apartments complex's there are some luxury apartments
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with lots of amenities like a swimming pool, kids play area
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there could be badminton courts, tennis courts
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so, there is a premium for such amenities.
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Then at the same this there are some flats in which lots of work has been done
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like the modular kitchen is installed, some furniture has been given
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So, let's see one by one, how you can give extra money for amenities and location
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so, there are premium factors
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first one is the location
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for location, you have to check how far is your location from the city centre or CBD
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CBD is Central Business District
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So, in this case, if we talk about Gurgaon, then in Gurgaon CBD area is the cyber city
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that is one of the main CBD area where maximum companies are located
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so, the surrounding area where the companies are located is quite expensive.
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If we are taking an example of Sohna road, then
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it is roughly 10 Km away from the cyber city
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around 9-10 kilometers away
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So it is a little far
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that's why it will be less expensive in Sohna road than in the cyber city.
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So, this way you can get an estimate of the location
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the areas around cyber city will be 10-15% expensive, sometimes 25% too.
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So, on Sohna road, you can get a discounting factor
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you can compare it with the area around the cyber city.
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The second is that you have to see infrastructure
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that is there schools nearby?
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or are there hospitals and transportation facilities available?
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Now, you'll see, where there are metros, the rates are a bit high
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sometimes 15 or 20-25% higher in comparison to the surrounding area
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so all this creates a slight difference.
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Then there is PLC which we call preferential location charges.
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Now, these location charges become important at many places
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especially if it's a commercial property.
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let me write here
if it's a commercial property
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then, in that case, it becomes very important.
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Let's say there's a road facing property
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then its rates must be very high.
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If it's 3 sides open or it is more frontage
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more frontage means how wide is its plot surface size
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let's very lengthy, or is 2 sides open
so shops can be made on those 2 sides
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so, these types of properties are very premium commanding
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in this case, it could be 50-60% extra in comparison to other commercial property
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If we talk under residential, then
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park facing is considered quite premium
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it could be 5-10% higher in comparison to others.
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Then higher and lower floor also make some difference
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If we talk about the top floor, then it is generally 10% lower than
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the rest of the flat
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If we talk about Mumbai, then
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in Mumbai, as the floor increases the property's price also increases
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because for the view people are ready to pay the extra premium
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but this is not the case in Delhi NCR
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here, people prefer lower floors, therefore the rate of the higher floor gets decreased.
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So in this way you can check how much premium you can pay for that property.
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Now, is the property Vastu-complined or not?
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people pay an extra premium for the directions
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east and north-facing properties command premium generally
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people tend to avoid south-facing properties.
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Other than these, if there are luxury specifications
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Let's suppose a modular kitchen is given
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wardrobes are nicely carved.High-quality washroom fittings are installed.
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Branded items are used.
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Let's say there are modular switches and electrical fittings are also branded.
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So, there is also a premium for that
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for that also you have to give 10-15% premium.
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Now let's say if the property is furnished?
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so there will be complete furniture.
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Now, whatever money has been spent on the furniture,
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you can calculate 40-70% depreciation on that.
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Suppose someone has kept worth10 lakhs furniture in that flat
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so you simply just do the half.
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So you calculate it as 5 lakhs
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and if it is 4-5 years old, then you can simply calculate its value as 30%
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can directly depreciate it to 70%.
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So, furniture depreciates very rapidly
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that's why you shouldn't consider it to be of high value.
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Other than that, there are amenities, as I've talked about
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like there's a swimming pool
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kids play area, badminton courts
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many good facilities are provided
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so, there's a premium for that too.
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Consider that premium to be around 10-15%.
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So, it will be more than the standard flat.
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So, if you see all these premiums, then
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sometimes property rises up to 50% also
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If it's not that you are getting all things in the flat,
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if all things are provided then it's very nice
you give a premium of 40-50%
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But let's say, from all the factors I've discussed
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if only 1 or 2 premium factors are applicable,
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then I would say, 10-20% premium is a reasonable premium.
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So, if we go back to our example
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the property which you can get in 90-95 lakhs
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what will you do now is,
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let's say you estimated its value to be around 90 lakhs,
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then on 95 lakhs
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let's say if we take 15% approximately, then add 15 more lakhs in this
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So, you can pay up to 1.1 crores maximum for this flat.
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Let's suppose there are some premium factors
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location is very nice
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infrastructure is nice of that area
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maybe you want to give PLC for that, maybe it's park facing
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let's say you estimated you can give 15% extra for that, then
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you'll make a rough estimate that I'll maximum give 1.1 crores for this flat
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and I can't give more than that.
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So, in this way, you can scientifically estimate that
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what will be the fair market value of any property?
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So, in the next video, I'll talk about the land and building method
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that how can we find out for all components?
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We can find a separate cost for land
we can find the cost for a building
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and we can add a profit of builder in that.
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It is especially applicable for those properties which are under construction
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or new properties
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it becomes very applicable to them.
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So, do watch that video
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if you want to invest in under-construction and new construction.
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I hope you liked this video.
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So, do like and share it.
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If you've any suggestions or you want to give any feedback
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or you want to share your experience then do comment below.
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I keep coming with such finance and investment-related videos every day.
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So, to get the latest video notification do subscribe to the channel
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and do press the bell icon on your phone
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So, see you in the next video.
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Till then keep learning, keep earning and be happy.
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