---
title: "Capitalized value of 80-year building"
subject: "Construction Management"
chapter: 13
key: "semester_8/construction_management:value-building-80-years-2078"
source: https://www.bctengineer.com/q/semester_8/construction_management/value-building-80-years-2078
site: BCT Engineering
---

# Capitalized value of 80-year building

Construction Management · Chapter 13: Valuation

- Asked in: 2078 Chaitra, 6 marks
- Video: [Building Valuation | Valuation of Building | Introduction to Valuation of Building || By CivilGuruji](https://www.youtube.com/watch?v=caV1OJf-W_8) — The Institute of Construction Managment 
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_8/construction_management/value-building-80-years-2078
- Whole chapter: https://www.bctengineer.com/md/semester_8/construction_management/chapter-13

## Question

A building having estimated future life of 80 years, fetches a gross annual rent of Rs. 2500 per month. Work out its capitalized value on the basis of 8% net yield. The rate of above building measures 1200 $m^2$ and cost of land is taken at Rs. 100 per $m^2$. The other outgoings are: Repair and maintenance (1/12)th of gross income; Municipal tax and property tax - 25% of gross income; Management and miscellaneous charges - 8% of gross income. The plinth area of a building is 600 $m^2$ and plinth area rate of the building is Rs. 200 per $m^2$.

## Short answer

Annual gross rent Rs30,000; outgoings repair, taxes/municipal and management total Rs12,400, so net income Rs17,600. Capitalize at 8% net yield using single-rate YP 12.5; capitalized value Rs2,20,000.

## Answer

**Given:** Gross rent = 2500 × 12 = Rs 30,000 per year. Net yield = 8%.

**Outgoings**
- Repair and maintenance = 1/12 × 30,000 = Rs 2,500
- Municipal and property tax = 25% × 30,000 = Rs 7,500
- Management and miscellaneous = 8% × 30,000 = Rs 2,400
- Total outgoings = Rs 12,400

**Net income** = 30,000 − 12,400 = Rs 17,600

**Year's purchase** for a net yield of 8% (single rate, as net yield is given):

$$
YP = \frac{100}{8} = 12.5
$$

**Capitalised value**

$$
= 17{,}600 \times 12.5 = Rs\ 2{,}20{,}000
$$

**Check with cost:** land = 1200 × 100 = Rs 1,20,000 and building = 600 × 200 = Rs 1,20,000, total new cost Rs 2,40,000; the capitalised value is below this, which is reasonable for an old building.

**Answer: Capitalised value of the property is Rs 2,20,000.**

## Check yourself

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

1. Rent is Rs 2,500 per month. What is the gross annual rent used for outgoing percentages?
   A. Rs 2,500
   B. Rs 30,000
   C. Rs 12,400
   D. Rs 17,600
   Answer: B. 2,500 x 12 = Rs 30,000; all outgoing fractions are taken on this. (Key point: Gross annual rent)

2. What are the total outgoings (repair 1/12, tax 25%, management 8% of gross)?
   A. Rs 7,500
   B. Rs 17,600
   C. Rs 12,400
   D. Rs 2,400
   Answer: C. 2,500 + 7,500 + 2,400 = Rs 12,400, giving net income 30,000 - 12,400 = Rs 17,600. (Key point: Total outgoings)

3. Why is YP = 100/8 = 12.5 used instead of a dual-rate YP?
   A. Because net yield is given and no sinking fund rate is specified
   B. Because the building life is 80 years
   C. Because land is excluded
   D. Because outgoings are 25%
   Answer: A. With only a net yield given, the single-rate YP = 100/yield = 12.5 is applied. (Key point: Single-rate YP)

4. What is the capitalised value of the property?
   A. Rs 2,40,000
   B. Rs 3,75,000
   C. Rs 2,20,000
   D. Rs 1,20,000
   Answer: C. 17,600 x 12.5 = Rs 2,20,000, below new cost of Rs 2,40,000, reasonable for an old building. (Key point: Capitalised value)

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