- 2073 Magh · 6 marks
Cost vs value; factors affecting valuation
Short answer
Cost is historical expenditure; value is present worth influenced by market. Valuation factors: location, demand-supply, utility, plot characteristics, building age/condition, income, legal restrictions, physical features, services, economy, and social factors.
Differentiate between cost and value. Explain different factors affecting valuation of property.
Cost vs value
| Point | Cost | Value |
|---|---|---|
| Meaning | The amount actually spent to produce or buy a property | The present worth or utility of the property in the market, or to the owner |
| Basis | Past expenditure: land, material, labour, overhead | Future benefits, income, market demand |
| Time | Historical and fixed | Changes with time and market |
| Depends on | Rates of material and labour | Demand, location, income, utility |
| Nature | A fact, found from records and bills | An estimate, which may be more or less than the cost |
| Example | A house built for Rs 50 lakh | The same house is worth Rs 80 lakh after the area has developed |
Factors affecting the valuation of property
- Location and accessibility (road, market, services).
- Demand and supply in the market.
- Utility and purpose (residential, commercial, industrial use).
- Plot size, shape, frontage and orientation.
- Age, life, quality and condition of the building (depreciation).
- Net income or rent obtained from the property.
- Legal and planning factors: title, tenancy, bye-laws, FAR, setbacks, taxes.
- Physical features: soil, slope, flood or landslide risk, environment.
- Services and amenities: water, power, sewerage, parking.
- Economic conditions: interest rates, inflation and availability of loans.
- Social and political factors: safety, neighbourhood and development plans.
✓ Answer checked by Claude Opus 5.5 (high effort)
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