---
title: "Methods of valuation of property"
subject: "Construction Management"
chapter: 13
key: "semester_8/construction_management:valuation-methods"
source: https://www.bctengineer.com/q/semester_8/construction_management/valuation-methods
site: BCT Engineering
---

# Methods of valuation of property

Construction Management · Chapter 13: Valuation

- Asked in: 2074 Bhadra, 6 marks; 2073 Bhadra, 4 marks; 2072 Asoj (asked 3 times)
- Video: [VALUATION of open land #BELTING METHOD - PART 3](https://www.youtube.com/watch?v=5MszW1XI03U) — 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/valuation-methods
- Whole chapter: https://www.bctengineer.com/md/semester_8/construction_management/chapter-13

## Question

What is valuation? Write different methods of valuation of properties.

## Short answer

Valuation estimates fair price. Methods: rental (capitalising net income), direct comparison, cost (land + construction – depreciation), plinth area, development (residual), profit-based, land-and-building, depreciation, and lease-hold.

## Answer

#### Valuation
**Valuation** is the technique of estimating the fair price or worth of a property (land, building, plant) at a given date, in terms of money, for a stated purpose.

#### Methods of valuation of properties
1. **Rental (income) method:** the net annual income of the property is capitalised using the year's purchase (YP): Value = Net income × YP. Used for rented or income-producing property.
2. **Direct comparison (market) method:** the value is found from recent sale prices of similar properties nearby, with adjustments. Mostly used for land and residential houses.
3. **Cost (replacement) method:** value = cost of land + present cost of construction − depreciation. Used for buildings that give no income, such as schools, hospitals and government buildings.
4. **Plinth area (or cubic content) method:** plinth area × local plinth area rate, less depreciation, plus land value. Used for a quick or approximate valuation.
5. **Development (residual) method:** for large land to be developed: Value = expected sale value of the developed plots − (development cost + profit). Used for land to be sub-divided.
6. **Profit-based method:** for business properties such as hotels, cinema halls and petrol pumps, the net profit is capitalised.
7. **Land and building method:** land and building are valued separately and added. For land, the **belting method** divides a deep plot into belts parallel to the road, each valued at a different rate.
8. **Depreciation methods:** straight line, constant percentage (declining balance), sinking fund and quantity survey methods, used for finding the building value.
9. **Rent-based / lease-hold valuation:** value of lease-hold or freehold interests, from the lease rent and period.

## Check yourself

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

1. What is valuation?
   A. Estimating the fair price or worth of a property at a given date for a stated purpose
   B. Counting the bricks
   C. Measuring land area
   D. Paying tax
   Answer: A. Valuation is the estimation of fair worth in money at a given date. (Key point: Definition)

2. How is value found by the rental method?
   A. Gross income / 12
   B. Plinth area x rate
   C. Net income x year's purchase
   D. Cost minus income
   Answer: C. Net annual income is capitalised using the year's purchase. (Key point: Rental method)

3. For which property is the cost method used?
   A. Non-income buildings such as schools, hospitals and government buildings
   B. Rented shops
   C. Cinema halls
   D. Vacant land to be subdivided
   Answer: A. Cost method suits buildings with no income or market comparison. (Key point: Cost method)

4. What is the development (residual) method formula?
   A. Value = rent x 12
   B. Value = area x rate
   C. Value = expected sale value of developed plots - (development cost + profit)
   D. Value = cost - depreciation
   Answer: C. Residual method subtracts development cost and profit from the expected developed value. (Key point: Development method)

## Related in Construction Management

- [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×
- [Cost vs value; factors affecting valuation](https://www.bctengineer.com/question.md?key=semester_8%2Fconstruction_management%3Acost-vs-value-factors) — Construction Management, chapter 13

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