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Value of a 20-year-old building

Short answer

Land value Rs2,50,00,000; building replacement cost Rs2,50,00,000. With 80-year life, 10% scrap, straight-line depreciation for 20 years is Rs56,25,000, so building value Rs1,93,75,000; total property value Rs4,43,75,000.

Calculate the value of a building built 20 years ago having plinth area 500 sqm, constructed in the land of 1000 sqm. Current market value of the land is Rs. 25000 per sqm and rate of building is Rs. 50,000 per sqm. Assume suitable data if necessary.

Assumptions: RCC building with a total life of 80 years; scrap value = 10% of the cost; straight-line depreciation (an alternative: sinking fund method). Rate of building (Rs 50,000/m²) is the present cost of construction.

Land = 1000 × 25,000 = Rs 2,50,00,000

Present cost of building = 500 × 50,000 = Rs 2,50,00,000

Depreciation (straight line)

Annual depreciation=C−Sn=0.9×2,50,00,00080=Rs 2,81,250Depreciation for 20 years=20×2,81,250=Rs 56,25,000  (22.5%)\begin{aligned} \text{Annual depreciation} &= \frac{C - S}{n} = \frac{0.9 \times 2{,}50{,}00{,}000}{80} = Rs\ 2{,}81{,}250 \\ \text{Depreciation for 20 years} &= 20 \times 2{,}81{,}250 = Rs\ 56{,}25{,}000 \; (22.5\%) \end{aligned}

Present value of building = 2,50,00,000 − 56,25,000 = Rs 1,93,75,000

Value of property = land + building = 2,50,00,000 + 1,93,75,000 = Rs 4,43,75,000

Answer: Value of the property is about Rs 4.44 crore (Rs 4,43,75,000).

✓ Answer checked by Claude Opus 5.5 (high effort)

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