Define Valuation | Purpose of Valuation

Valuation

Valuation is technique of estimating or determining the fair price or value of property such as building, factory, other engineering structure of various types, land, etc. By valuation the present value of a property is determined.

The present value of property may decided by its selling price, or income or rent it may fetch. The value of property depends on its structure, life, maintenance, location, bank interest, legal control, etc. Valuation is a logical estimate of value on economic decision of the engineer or architect.

Purpose of Valuation

1. Buying or selling property

When it is required to buy or sell a property, its valuation is required

2. Taxation

To asses tax of a property its valuation is required. Taxes may be municipal tax, wealth tax, property tax, etc. and all the taxes are fixed on the valuation of the property.

3. Rent Fixation

In order to determine the rent of a property, valuation is required. Rent is usually fixed on certain percentage of the amount of valuation

4. Security of loan or Mortgage

When loans are taken against security of the property, its valuation is required.

5. Compulsory Acquisition

Whenever property is acquired by law compensation is paid to the owner. To determine the amount of compensation valuation of property is required.

6. Balance sheet

Sometimes a company needs valuation of its property for showing the value of property in balance sheet.

7. Insurance

For taking out the insurance policy of property, insurance premium is decided from the valuation of the property.

8. Court Fee

When a case has to be filed with respect to a real estate, it becomes necessary to affix stamp of suitable amount. This amount is worked out after arriving at the value of property under dispute.