With so many different factors impacting property prices, the need for qualified valuers is stronger than ever before
Recently, we were involved in an investment for a Foreign fund into a property worth Rs 40 crore. Halfway through the negotiation, a question was thrown at us. Where is the appraisal report? We were dumbfounded for a few seconds and had to be honest and say, there was none. Valuation and appraisal reports may be alien to us but it is a "must have" in international practice. People don't move till they have reports from qualified and certified companies. One can't just take the sellers' price or the last sale price as a benchmark to derive the right price. Whether you are buying or selling you need professional guidance.
With so many changes in housing policies there is bound to be speculation on which way the price is going. Price determination or valuation is not an easy job; it requires locationbased and property market knowledge. As a property consultant, I am often asked questions like, "What is the price at Cuffe Parade"? or even as general as: ‘what are the prices of properties like?' It is almost like asking what is the cost of an air ticket to New York or to no destination specified. Just like the ticket cost would depend on the carrier/destination and the class you fly; property price is valued based on a lot of parameters, techniques, and methodologies.
Who would you trust to guide you on the right property valuation? There are the socalled "government valuers" who don't have property valuation expertise and often call consultants like us for advice. What is the sense of having a government approved valuer who has no market pulse or sense on pricing? Private companies like ours and many others provide "valuation services" but none of us are qualified or certified to do so.
Self-regulated and private real estate institutes like 'Akruti Centre of Real Estate Studies' (ACRES) and India Institute of Real Estate (IIRE) are constantly working and innovating to improve the standards of practice. A two-day valuation course will be taught on December 14 and 15, which will be the first of its kind by ACRES. This would be beneficial to bankers, lenders, financial institutions, brokers, property consultants, real estate developers, investors, buyers, sellers, financial analysts, project appraisers, and full-time valuers.
Recently I met a developer who has been on a land-buying spree in tier two and three cities. According to him, the sellers' or land owners' expectations have been increasing on a daily basis due to excessive demand. In such a scenario, how does one determine the correct valuation? He had to let go of some great properties because it was just not feasible to develop and sell. But, he was quick to add, the properties were bought by other developers who were new entrants into the market.
A direct impact of all this again, is the ultimate price which is paid by the consumer. A simple formula for final sale price would be: cost of land + cost of construction + cost of funds + a fair margin of profit = sale price. To work out the land cost you would use the reverse formula and keep subtracting from the finished product price. Only if it was so simple!
With banks, insurance companies, investors, funds, FDI in real estate all involved heavily into real estate the need for a professional valuer or knowledge on valuation is more important now than ever. A common man could be a buyer or seller too and want professional advice to optimize his money or property.