Valuation of Apartment : Methods & Examples

What Methods are Used for Valuation of Apartment/Flat Properties?

Valuers use the below mentioned 3 methods to determine apartment prices. Choice of method by valuer depends on specific conditions of the apartment.

Sales Comparison Method

In this method, a valuer compares your flat with a similar property that has been recently sold in the same neighbourhood. Valuers match the features of the sold property to your Apartment for comparison, features like size, floor level, flat facing & amenities. Based on the comparison, the final price or the value of your apartment is determined.

Lets say that you want to get your 2 BHK apartment valued. A valuer will refer the recent 2BHK apartment transactions or deals in your neighbourhood. Lets say the recent transaction for 2BHK apartment was recorded for around ₹80 lakhs. Your apartment’s value might be in close range to that. But if your flat has a better view or newer fittings, the valuer will increase the valuation accordingly during the final adjustments.

Income Capitalization Method

This approach calculates value based on rental income potential. Valuers divide the annual rental income by the capitalization rate. The capitalization rate reflects the expected return on investment in that area.

If your apartment earns ₹30,000 monthly rent, the annual income is ₹3.6 lakhs. With a 4% capitalization rate, the value becomes ₹90 lakhs.

Cost Method

This technique adds the land value to the construction cost, then subtracts depreciation. Valuers rarely use this for apartments since separating land value from building value proves difficult. It works better for independent houses or new constructions.

How to Calculate Apartment Valuation?

Calculating apartment value requires systematic steps and accurate data. Here’s how professionals do it

1. Collecting Property Information

Collect all documents related to your apartment like sale deed, floor plan, society NOC and maintenance receipts. Note down the carpet area, built-up area, and super built-up area

2. Researching Market Rates of Apartments

Check recent sale prices in your building and nearby societies. Online property portals show asking prices, but actual transaction values often differ. Circle rates set by the government provide a baseline, though market rates usually exceed these.

3. Identifying Value Factors

Various factors affect your apartment’s worth, factors like

• Floor level (higher floors cost more)
• Facing direction (north and east facing units command premiums)
• Parking availability
• Age of the building
• Quality of construction
• Proximity to amenities like metro stations, schools, and hospitals

4. Applying Adjustments

Add or subtract value based on your apartment’s unique features. A renovated kitchen adds 2-3% to the base value. A corner flat with extra windows might fetch 5% more. Poor maintenance reduces value by 10-15%.

5. Calculating Final Value

Take the average price per square foot from comparable sales data. Multiply by your apartment’s carpet area. Apply the adjustments from Step 4. This gives you the estimated market value.

How is Apartment Valuation Different than Villa Valuation?

Apartments and villas require different valuation approaches. The main differences affect how valuers calculate prices.

Land Component

Villa owners possess land rights. The land value forms a major part of total villa valuation. Apartment owners share land ownership through undivided shares. Individual land value stays minimal in apartment valuation.

Appreciation Patterns

Villas appreciate faster because land prices rise steadily. Apartments depend more on building condition and locality development. After 20 years, apartment buildings depreciate while villa land values keep growing.

Valuation Method Preference

The sales comparison method works best for apartments since many similar units exist. Villas vary greatly in size and design, making comparisons harder. The cost method suits villas better as land and construction costs separate easily.

Common Areas Impact

Apartment valuation includes shared spaces like lobbies, gardens, and gyms. These amenities add 15-20% to the base price. Villa valuation focuses on private features like garden size and internal modifications.

Square Yards’ valuation services combine technology with expert knowledge. Our valuers inspect hundreds of properties monthly and understand micro-market trends. We provide detailed reports that banks and financial institutions accept. Contact us for accurate apartment valuation that helps you make informed property decisions.

Examples of Apartment’s Valuation

We will explain the calculations for each valuation method we mentioned for Flat’s Valuation. We will see different scenarios with certain assumptions supported by calculation steps for each.

Example 1

Assumptions

Valuation Breakdown

Example 2

Assumptions

Valuation Breakdown