- 2070 Bhadra · 3 marks
When cost, plinth area, development methods apply
Short answer
Cost-based method: for properties with no rental income or sale comparison, like schools, hospitals, factories. Plinth area method: for quick approximate valuation, e.g., bank loans, when drawings unavailable. Development method: for large vacant land with development potential, to be subdivided or built upon.
Explain the situation where the following methods of valuation will be used: (i) Cost based method (ii) Plinth area method (iii) Development method.
(i) Cost-based method
The value is found as the present cost of construction (less depreciation) plus the value of land. It is used where the property gives no rental income and no sale comparison is available, such as schools, hospitals, government offices, temples, factories and public buildings. It is also used for insurance and the valuation of a new building.
(ii) Plinth area method
The plinth area is multiplied by the local plinth area rate (cost per m² of similar buildings) and depreciated for age, and the land is added. It is used for a quick, approximate valuation when a detailed estimate is not required, e.g. for bank loans, preliminary valuation, compensation or when the drawings are not available, and for buildings of a standard type such as residential houses in a colony.
(iii) Development method
Also known as the residual method. Value of land = expected selling value of the developed plots (or building) − (development cost + builder's profit + interest). It is used for large vacant or underused land that can be developed, such as a plot to be sub-divided into small plots, a housing colony or a commercial complex, and for the valuation of the land that has development potential.
✓ Answer checked by Claude Opus 5.5 (high effort)
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