---
title: "Cost vs value; factors affecting valuation"
subject: "Construction Management"
chapter: 13
key: "semester_8/construction_management:cost-vs-value-factors"
source: https://www.bctengineer.com/q/semester_8/construction_management/cost-vs-value-factors
site: BCT Engineering
---

# Cost vs value; factors affecting valuation

Construction Management · Chapter 13: Valuation

- Asked in: 2073 Magh, 6 marks
- Video: [Factors affecting valuation](https://www.youtube.com/watch?v=kAEDR6RFZso) — Civil Eazy
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_8/construction_management/cost-vs-value-factors
- Whole chapter: https://www.bctengineer.com/md/semester_8/construction_management/chapter-13

## Question

Differentiate between cost and value. Explain different factors affecting valuation of property.

## 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.

## Answer

#### 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
1. **Location and accessibility** (road, market, services).
2. **Demand and supply** in the market.
3. **Utility and purpose** (residential, commercial, industrial use).
4. **Plot size, shape, frontage and orientation.**
5. **Age, life, quality and condition** of the building (depreciation).
6. **Net income** or rent obtained from the property.
7. **Legal and planning factors:** title, tenancy, bye-laws, FAR, setbacks, taxes.
8. **Physical features:** soil, slope, flood or landslide risk, environment.
9. **Services and amenities:** water, power, sewerage, parking.
10. **Economic conditions:** interest rates, inflation and availability of loans.
11. **Social and political factors:** safety, neighbourhood and development plans.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. What is the basis of cost compared with value?
   A. Both are the same
   B. Cost depends on demand; value on material
   C. Cost changes with market daily
   D. Cost is past expenditure; value is future benefits, income and market demand
   Answer: D. Cost is historical and fixed; value reflects present worth and changes. (Key point: Cost vs value basis)

2. How are cost and value related?
   A. Value always equals cost
   B. Value may be more or less than cost
   C. Value is always lower
   D. Cost is always lower
   Answer: B. A house built for Rs 50 lakh may be worth Rs 80 lakh after area development. (Key point: Relation)

3. Which factor affects valuation through net income?
   A. Colour of paint
   B. Name of the builder
   C. Age of the owner
   D. Rent obtained from the property
   Answer: D. Net income or rent is a key factor in valuation. (Key point: Factor)

## Related in Construction Management

- [Factors affecting the value of property](https://www.bctengineer.com/question.md?key=semester_8%2Fconstruction_management%3Afactors-affecting-value) — Construction Management, chapter 13, asked 3×
- [Valuation of a cinema hall (land Rs 15 lakh)](https://www.bctengineer.com/question.md?key=semester_8%2Fconstruction_management%3Avalue-cinema-hall-2077) — Construction Management, chapter 13, asked 2×
- [Methods of valuation of property](https://www.bctengineer.com/question.md?key=semester_8%2Fconstruction_management%3Avaluation-methods) — Construction Management, chapter 13, asked 3×
- [Value of property and fair value numerical](https://www.bctengineer.com/question.md?key=semester_8%2Fconstruction_management%3Avalue-property-numerical-2073) — Construction Management, chapter 13

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