Arvind Kumar, a Jal Nigam official, wants to sell his independent house in Lucknow spread over 2,500 sq. ft. But with different buyers offering varying rates and brokers telling another story, he is not sure how much would the house actually fetch for him. K.C. Yadav, a resident of Janakpuri, New Delhi, who is looking for a buyer for his Jaipur property, is also unable to assess the market value of his property. He says: “After the dip in the Jaipur market in early 2009, nobody has offered the right value for the property.”
These are not isolated cases. Putting a price tag on a property is the biggest challenge for buyers as well as sellers. When selling, it is difficult to calculate the price appreciation over the years, especially if you have kept it for a long time. And then there’s always the risk of underestimating its real worth. Overvaluing of the same property may not fetch you buyers and you may have to strike a compromise that doesn’t really suit you. When buying, you may get a raw deal due to lack of information. To avoid all this and reach at an average price, you may need to do a little research. Here’s how to go about it.
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When it comes to day-to-day transaction value of properties, brokers are the best sources. To make sure you get a true picture, visit as many brokers as you can in your area. Brokers would give you an idea about recent transactions of similar properties in the area and this comparison will help you set a benchmark.
Property supplements in national dailies also give information on capital values.
Registrar’s office: A vital source of information is the office of the registrar under the local development authority. The registrar office maintains a record of all the properties and their last sale value at the time of registration.
You can walk into the office and ask for the value that was mentioned at the time of registration. The process may take some time, but it’s worth the effort. If you do not want to take the trouble, you can take the help of a lawyer or a real estate agents who regularly deals in such matters. How much time the process will take will also depend on how old the property is and how many transactions it has gone through.
Says Pradeep Mishra, a New Delhi-based independent real estate analyst: “The records of the sale maintained by the registrar’s office will give you a certain value of a certain year. You can also check on the previously recorded sales figures in the files. This would give you a rough idea of the price movement in the region.”
Circle rates: These help you ascertain the premium on the land on which the property is built. Fixed by all state governments, a circle rate is the minimum rate at which a property can be bought or sold. Within a state, there are different circle rates for different cities and within a city, circle rates vary according to the locality. For example, the lowest circle rate in Delhi is Rs 9,000 per sq. m and the highest is Rs 1.25 lakh per sq. m. Says Mishra: “This helps in estimating land value and its premium in the area. An area with a high circle rate will give you a higher price compared with the one with lower circle rates.”
Reaching an average
Professional property valuers determine the market value of properties in an area by taking recent sales figures of at least two or three properties that are comparable in building style, size, area and type and year of construction.
For example, comparing a new three-bedroom apartment in Noida’s Sector 62 with an old three-bedroom independent floor at upmarket Saket in New Delhi may not be fair.
Says Harmit Chawla, vice-president (sales and marketing), Paras Buildtech India Pvt. Ltd: “There could be numerous factors that may impact the value of the property. However, the location has a direct relation with the price. So this approach will be true only when the properties are located in the same colony or zone.”
This basic comparison will help you arrive at an average market value. But make sure you take into account factors such as the age of the property and its condition. The amenities and infrastructure around a property has a major impact on the value of a property.
Says Sanjiv Aggarwal, consulting valuer of CSV Technologies Pvt. Ltd, a New Delhi-based valuation firm: “In general, for old properties, we factor in appreciation at a rate of 5% per annum. So, we increase the last sale value at this rate and derive a current value.” Remember to subtract additional charges such as stamp duty or parking charges in an apartment complex to reach the market value.
What to do?
After you have finished with your research, you may end up with different values from different sources.
Says Rajul Srivastava, director, Top Mortgage Brokers Pvt. Ltd, a New Delhi-based firm specializing in property evaluation: “There is a fair deal (negotiated) price and a there is a market price. If you reach an average at the end of your calculation, you can decide between the two. Usually, it is the fair deal price at which the property is sold.”
You should always settle for a price higher than the average price you reach. Do not forget to add the brokerage to your cost.