- Asked 2/19
- 2078 Chaitra · 2 marks
- 2070 Magh · 2+3 marks
Define valuation and purposes of valuation
Short answer
Valuation is estimating fair price. Purposes: buying/selling, mortgage, taxation, rent fixation, insurance, compensation for acquisition, partition/inheritance, company accounts, betterment/development, court cases, and investment decisions.
Define valuation. Why is valuation done (what are the purposes of valuation)?
Valuation is the estimation of the fair price or worth of a property at a given date, based on the facts about the property, the market and its income.
Purposes of valuation
- Buying and selling: to fix a fair price for the buyer and the seller.
- Mortgage and bank loans: banks need the value of the security; loan is given as a percentage (e.g. 50–70%) of the value.
- Taxation: for property tax, land revenue (malpot), wealth and capital gains tax, and registration fees.
- Rent fixation: to fix a fair rent for the property.
- Insurance: to know the value to be insured and to settle claims after a loss.
- Compensation for land acquisition: to fix the compensation when the government acquires land for a road, project or public work under the Land Acquisition Act.
- Partition and inheritance: to divide a property fairly among co-owners or heirs.
- Company accounts: to show the assets in the balance sheet, merger, sale or liquidation.
- Betterment, development and urban planning: to estimate the increase in value caused by public works.
- Court and legal cases: disputes about sale, rent or compensation.
- Investment decisions and valuation of assets for auction.
✓ Answer checked by Claude Opus 5.5 (high effort)