LAND & BUILDING VALUATION

A three storeyed building is on a plot of land of area 800 m2. Plinth Area of each storey is 400
m2. The building is RCC framed and its future life is 70 years. Building fetches a gross rent of
Rs 50,000 per month. Work out the Capitalized Value @ 6% net yield. For sinking fund, 3%
compound interest is applied. Land Cost may be taken as Rs 4,000 / m2. Value the Property.

Solution

LAND COST = 800 sq. m * Rs 4,000 / m2 = 32,00,000 = Rs 32 lakhs

BUILDING COST = 3 storeys * 400 sq.m per storey * Rs 10,000 per m2 = Rs 1,20,00,000 = Rs 1.20 Crores

GROSS INCOME per year = Rs 50 k pm * 12 months = Rs 6.00 lakhs

OUTGOINGS
# Expenditure Item ASSUMED RATE Calculation OUTGOING
AMOUNT
i REPAIR @ 1 / 12th of Gross = 1/ 12 * 6,00,000 50,000
Income
ii MUNICIPAL TAX @ 20 % of Gross Rent = 0.20 * 6,00,000 1,20,000
iii PROPERTY TAX @ 5 % of Gross Rent = 0.05 * 6,00,000 30,000
iv INSURANCE PREMIUM @ ½ % of Gross Rent = ( ½ / 100 ) * 6,00,000 3,000
v MAINTENANCE Charges @ 6 % of Gross Rent = 0.06 * 6,00,000 36,000
vi Others @ 2% of Gross Rent = 0.02 * 6,00,000 12,000
SINKING FUND 𝑺𝒊 𝟏,𝟐𝟎,𝟎𝟎,𝟎𝟎𝟎∗ 𝟎.𝟎𝟑 52,040
vii I= ( (𝟏+𝒊)𝒏 −𝟏) )
= ( (𝟏+𝟎.𝟎𝟑)𝟕𝟎−𝟏) )

SF is for Recovering the 𝟑,𝟔𝟎,𝟎𝟎𝟎

BUILDING COST SF is = 𝟔.𝟗𝟏𝟕𝟖𝟐𝟐 = 𝑹𝒔 𝟓𝟐, 𝟎𝟒𝟎 per Annum
specified @ 3%
Annual Sinking Fund
𝑺𝒊 𝟏,𝟐𝟎,𝟎𝟎,𝟎𝟎𝟎∗ 𝟎.𝟎𝟑 𝟑,𝟔𝟎,𝟎𝟎𝟎
I = ( (𝟏+𝒊)𝒏 ) = ( (𝟏+𝟎.𝟎𝟑)𝟕𝟎 ) = = 𝑹𝒔 𝟓𝟐, 𝟎𝟒𝟎 per Aunnum
−𝟏) −𝟏) 𝟔.𝟗𝟏𝟕𝟖𝟐𝟐

TOTAL OUTGOINGS p a = 3,03,040

GROSS INCOME pa = 6,00,000
NET ANNUAL INCOME = 2,96,960
viii CAPITALIZED VALUE @6% = Net Income * YP = 2,96,960 * ( 1 ) = 49,49, 333
0.06
ix LAND Cost 800 sq. m * Rs 4,000 / m2 = 32,00,000 32,00,000
TOTAL VALUE of the Building = CV + Land Cost 81,49,333
= Rs 81.49 lakhs