---
title: "When cost, plinth area, development methods apply"
subject: "Construction Management"
chapter: 13
key: "semester_8/construction_management:valuation-methods-situations"
source: https://www.bctengineer.com/q/semester_8/construction_management/valuation-methods-situations
site: BCT Engineering
---

# When cost, plinth area, development methods apply

Construction Management · Chapter 13: Valuation

- Asked in: 2070 Bhadra, 3 marks
- Video: [Plinth Area Rate As Per CPWD | Rough Cost Estimate of Buildings with the help of Plinth Area Rate](https://www.youtube.com/watch?v=E5H702jb3ZQ) — SOLITUDE EDUCATION 
- 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-situations
- Whole chapter: https://www.bctengineer.com/md/semester_8/construction_management/chapter-13

## Question

Explain the situation where the following methods of valuation will be used: (i) Cost based method (ii) Plinth area method (iii) Development method.

## 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.

## Answer

#### (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.

## Check yourself

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

1. When is the cost-based method used?
   A. Where there is no rental income and no sale comparison, e.g. schools, hospitals
   B. For large land to be subdivided
   C. For quick approximate valuation
   D. For hotels only
   Answer: A. Cost-based method values non-income public buildings. (Key point: Cost-based method)

2. When is the plinth area method used?
   A. Subdivision of large land
   B. Businesses with profit
   C. Quick approximate valuation when detailed estimate or drawings are not available
   D. Lease only
   Answer: C. Plinth area x rate gives a quick approximation. (Key point: Plinth area method)

3. What is the development method also called and used for?
   A. Residual method; large vacant land that can be developed
   B. Rental method; houses
   C. Cost method; hospitals
   D. Profit method; hotels
   Answer: A. Residual method suits sub-division or housing colony land. (Key point: Development method)

## Related in Construction Management

- [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
- [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×
- [Valuation of a cinema hall (land Rs 5 crore)](https://www.bctengineer.com/question.md?key=semester_8%2Fconstruction_management%3Avalue-cinema-hall-2070-magh) — Construction Management, chapter 13
- [TCTO numerical with time-cost chart (five activities)](https://www.bctengineer.com/question.md?key=semester_8%2Fconstruction_management%3Atcto-2079-jestha) — Construction Management, chapter 2
- [Contracts by payment: lump sum and cost plus](https://www.bctengineer.com/question.md?key=semester_8%2Fconstruction_management%3Alump-sum-cost-plus) — Construction Management, chapter 5

## Related in other subjects

- [Two-room building: brick plinth, door shutters, plaster](https://www.bctengineer.com/question.md?key=semester_7%2Festimating_and_costing%3Abuilding-m-two-room-three-items) — Estimating and Costing, chapter 6
- [Building: excavation, soling, PCC, brick to plinth](https://www.bctengineer.com/question.md?key=semester_7%2Festimating_and_costing%3Abuilding-o-framed-4-items) — Estimating and Costing, chapter 6
- [Total cost of apartment building](https://www.bctengineer.com/question.md?key=semester_7%2Festimating_and_costing%3Atotal-cost-apartment-500) — Estimating and Costing, chapter 3
- [Apply Green's theorem](https://www.bctengineer.com/question.md?key=semester_3%2Fmathematics_iii%3Aapply-greens-theorem) — Mathematics III, chapter 2