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Valuation of building or property is the method of calculating the present marketable cost of a building.

 

Valuation of a building depends on the sort of building, its structure, durability, location, size, shape, the width of roads, frontage, types, and quality of building materials used and the cost of these materials.

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The location of a building also plays an important role in deciding the value of a building. For example, a building located in a market area would have a stronger and higher valuation than the same building located in a residential area.

 

Also, the buildings located in areas with proper municipal water supply, sewer, and electricity have increased values. A building located on a freehold land generates a higher valuation amount compared to a building located on the leasehold land.

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The valuation of the building is calculated by finding the present-day cost of the building and allowing a suitable depreciation. The present-day cost of the building can be calculated by:

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• Cost from the Record

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The cost of construction can be determined from the estimations, the bill of quantities, and using the present-day rate of building materials and laborers. If the actual cost of construction of the building is known, this cost can be manipulated by using the percentage of increase or decrease to the present-day rate of materials and labors.

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• Cost by Detailed Measurement

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If the old record is not available, then the cost of construction can be calculated by a detailed measurement of the building and preparing the bill of quantities of various items of works. The present rate of materials and labors are used to calculate the cost of the building.

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• Cost by Plinth Area Method

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The plinth area method of calculating the cost of a building is simpler than the detailed measurement method which is laborious and lengthy. In this method, the plinth area of the building is measured and calculated and the plinth-area rate of a similar building in the locality is obtained by inquiry, and the cost is calculated.

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• Determination of Depreciation

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Depreciation is allowed to the current cost of the building to calculate the valuation of the building or the structure. Depreciation depends on the use of the building, age of the building and type of maintenance, etc. generally, for the first 5 to 10 years, there is very little depreciation of the building or the structure. The depreciation increases with the age of the building.