Top 3 ways to calculate Actual Market Value of a Property in India

When selling a property, the question "What is the actual market value?" arises. And, with so many different methods in the industry, the assessment process can become quite confusing. We've compiled a list of the three most commonly used methods to help you make your decision.

First, what exactly is "market value"?

The market value of a property can be expressed as a monetary value that both the willing buyer and seller agree on after going through the proper channels of marketing and negotiation.

Disclaimer:

This provides general information that can be used to calculate an estimated value under ideal conditions. However, using any of the methods listed below does not guarantee 100% accuracy, and we recommend consulting a professional for more information.

Sales Comparison Method:

As we all know, the price of any commodity is determined by both demand and supply. Property is no exception, and the Sales Comparison Method is founded on a similar concept. This method is primarily based on how comparable properties performed financially in the most recent time period under ideal conditions.

Step 1:

Make a list of property details such as location, size, total area, facilities, configuration (number of rooms, bathrooms, balconies, etc.), and property age.

Step 2:

Make another list of three properties and the prices they sold for, ensuring that the properties are 70% similar to your property and including a dedicated column for differences noticed. These properties should not have been sold earlier than six months.

Step 3:

Calculate the average sale price of the three properties you've listed, followed by the price per square foot. Once you've determined the approximate price per square foot, multiply it by the total size of your property. This should help you determine a standard price for your property.

Note:

Allow enough leeway to adjust the pricing based on the condition of your property and other factors.

The Cost Method is useful when a property has been remodeled and determining a fair value is difficult due to lack of comparable properties in the area. The cost method is designed with the understanding that the average buyer will not want to pay a higher price for a property with alterations that are not very relevant to him/her or cannot be compared to any other generic property with a mainstream purpose.

Step 1:
Determine how much it would cost an individual to rebuild/alter the property to the point where it could be easily compared to other properties in the area that serve a similar function.

Step 2:
Next, deduct the property's depreciation value while considering its condition after time and utility have taken their toll.

The value of the property after depreciation can be calculated as the approximate market value.

Component Method:

This method allows one to calculate both property values, i.e. the value of the land and the value of reconstructing the property, independently.

Value of Land:

If your city collects land tax, the pricing set by the local authorities can be used to estimate the value of your property. Proper consideration should be given to the area's potential for future growth, as well as the initial price at which the sites/plots were sold to the public by the local development authorities. The value of the land can be calculated using the sale of built-up properties in the same area, after carefully considering factors such as zone use, frontage on the main road, shape, plot coverage, and floor to area ratio.

Building value can be calculated by subtracting depreciation from the current building value and calculating the reproduction cost.

So, the total cost of the property can be expressed as:
Total cost = Value of building + Value of plot.
Total cost = total area multiplied by 10% of reproduction cost + plot value

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