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Property valuation, which is also referred to as real estate valuation, is a crucial process that involves determining the market value of a property. It plays a vital role in the real estate industry and is utilised by different stakeholders, including investors, buyers, sellers, and banks, and it can also be employed for insurance purposes.

To evaluate a property's value, various factors such as its size, age, condition, location, and potential profitability, among other things, are taken into account. This article focuses on the critical aspects of property valuation in India and provides essential information that buyers, sellers, and investors need to know.

Process of valuation

1. To initiate the property valuation process, owners must submit essential documents, such as property tax receipts, title deeds, etc., to a certified property valuer or real estate appraiser.

2. The valuer then physically inspects the property, considering factors such as size, layout, construction, condition, and legality.

3. Apart from this, the valuer also considers the location of the property, proximity to markets, offices, hospitals, demand for real estate in the area, and infrastructure.

4. After evaluating all these factors, the valuer prepares a property report or appraisal report highlighting the property's strengths and weaknesses.

Types of appraisal methods

There are various techniques available for the evaluation of a residential property, and some of them are –

1.Comparative method - In this approach, a property appraiser determines the market value of a property by comparing it with similar properties with similar characteristics, such as houses of the same size or houses located in the same area.

 2. Residual method - The residual method is employed when the property is evaluated for future developmental purposes like renting/leasing or redevelopment. In this method, the real estate appraiser considers various factors, like development cost, building cost, fees, profit, etc., to determine the property's value.

 3.Cost method - The cost method, which is also referred to as the contractor's method, determines the actual value of a property by considering factors such as the construction cost, land value, and other related aspects, as well as the property's depreciation cost.

Benefits of property valuation

There are many benefits of conducting a valuation of your property, such as -

1.Real estate valuation provides a precise estimation of a property's value, which is crucial for buyers, sellers, and lenders to make informed decisions about the property. For buyers and sellers, an accurate property valuation helps them negotiate prices and choose the best deals for the property.

 2. Lenders rely on house valuation to determine the property's value, decide whether to approve or reject a loan application, and determine the loan amount, interest rates, and other details. Insurance companies use real estate valuation to evaluate the property before offering insurance coverage and decide on the insurance premium and sum assured based on the property's value and income-generating abilities.

 3.Real estate valuation is also essential for real estate investors to decide whether to invest in a property, how much to invest, and the property's potential for returns. Finally, real estate valuation can play a vital role in legal disputes, where property appraisals can be used as evidence in court.

 4.Property valuation can be useful for property owners in making estate planning decisions and determining how to divide the property among their beneficiaries.

 Real estate valuation is an essential process that can benefit all parties involved, such as buyers, sellers, investors, lenders, and insurers. It enables the calculation of a property's market value, which can be useful in price negotiations, obtaining loans, making investments, and obtaining insurance coverage. Additionally, property valuation is crucial in estate planning and resolving legal disputes. Therefore, it is essential to consider the results of a property valuation before making any significant real estate-related decisions.