How to value flats
| There may be more intricacies to an apartment than commonly
understood. |
What is an apartment? "A room or set of rooms fitted
especially with housekeeping facilities and usually leased as a dwelling,"
defines www.m-w.com, the site of
Merriam-Webster Online Dictionary. The word dates back to 1641, and means,
"private rooms for the use of one person within a house," Online
Etymology Dictionary states. "From French appartement, from Italian
appartimento, literally `a separated place,' from appartere `to separate,' from
a `to' + parte `side, place' (see apart). Sense of `set of private rooms in a
building entirely of these' (the US equivalent of British flat) is first
attested 1874," reads more from www.etymonline.com.
And `apart', if you'd like to know, is an older word, "Circa 1380, from Old
French à part `to the side,' from Latin ad `to' + partem accusative of pars `a
side'."
Keeping the `root' research aside, let us look at a
legalistic definition of apartment, from a State law that governs apartment
ownership. It reads thus: "A part of property intended for any type of
independent use including one or more floors or enclosed spaces located in one
or more floors in building, intended to be used for residence, office, practice
of any profession or for carrying on any occupation, trade or business or for
other type of independent use and with a direct exit to a public exit to a
public street, road, or highway or to a common area leading to such street, road
or highway."
Before you exit, there's more: "An apartment shall be
deemed to be intended for `independent use' notwithstanding that provisions for
sanitary, washing, bathing or other conveniences have been made as common for
two or more apartments."
After reading that extended definition, it is quite probable
that you may look at your apartment in new light, even if it were a good old
one. And, with the appreciation in real estate property all round, what is very
likely is that your apartment, or more rightly the land that it relates to, has
been adding value to itself and to you, the owner, even when you sleep!
Simple
guide
On how to value flats, here is a simple guide from the
veteran architect C.H. Gopinatha Rao: `Apartments: At what cost, at what price.'
Fair market value is the estimated amount for which a property may be transacted
between a buyer and a seller, he begins. The adjective `fair' connotes that the
value is not to be unfair or biased, explains Rao.
A few basic essentials in valuation are that the property
should be exposed to the market bringing the attention of adequate number of
potential purchasers. "The parties should have been reasonably informed
about the nature and characteristics of the property. The title should not be
defective and property should be freehold and is to be handed over with vacant
possession," insists the author.
The formula for valuing used flats is as follows: "value
of undivided share of land on the date of valuation + depreciated value of the
building and amenities + inflated value, as on date, of overheads, incidental
expenses and promoter's profit." Theoretically, one can prepare an
evaluation grid to compare the subject property with a similar property.
What are the specifications and facts compared, in such an
exercise? Type of foundation, its depth, FSI (floor space index) utilised,
number of units in the complex, floor planning, covered area, access to
transportation, convenience of locality, neighbourhood and surroundings, age and
condition of the building, common areas, parking facilities, details of the
flat's interior, internal wall finish, doors and windows, floor height,
sanitary, plumbing, electricity, external wall thickness, landscape, lift,
fire-fighting, children play area, provision of generator, common hall and so
forth.
This valuation process is cumbersome, and there is no
certainty that you would arrive at precise values, cautions Rao. Also, prices
vary widely of the different items. For example, prices of marble from Rs.60 to
more than Rs.600 per square foot, and "in doors and windows, size of frames
and shutter, fittings provided may vary."
A note of alarm is that fair market value holds good only if
the construction is not unauthorised, and it does not suffer from deviations
from approved plans.
D. MURALI
Courtesy: Property Plus, The Hindu
http://www.hindu.com/pp/2007/01/13/stories/2007011300740400.htm
