QUANTITY & ESTIMATION
AR. ANNUJJ SETH, ASSOCIATE PROFESSOR, USAP
Intent
• To understand costing of construction.
• To understand method and use of valuation in
calculating value of building in accordance to the age
of building.
What is Costing?
It is the means for calculating how much money will be
needed or will be charged for various types of works.
How Costing is done?
Quantity X Rate = Cost
WHAT IS VALUATION?
Valuation is technique of estimation or determining the
fair price or value of the property such as building, a
factory, other engineering structure of various types, land
etc.
By valuation present value of property is defined.
The value of Building depends upon so many factors
such as,
• Building location (Locality)
• Size & shape
• Frontage on road side
• Quality of material used
• Present prices of materials
• Height of Building
• Height of plinth
Factors affecting Valuation.
Location in busy market will have higher value than
similar building in residential area.
Location in urban area will have higher value than similar
building in rural area.
Good service areas like sewer lines, water supply,
electricity, telephone etc will have increased value.
Building on free hold plot will be costlier than that of lease
hold land.
Demand and supply equation also affect the cost of
building.
The main purpose of valuation are as follows:
Buying or Selling Property
When it is required to buy or sell a property, its valuation is
required.
Taxation
To assess the 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.
Rent Function
In order to determine the rent of a property, valuation is required.
Rent is usually fixed on the certain percentage of the amount of
valuation which is 6% to 10% of valuation.
Security of loans or Mortgage
When loans are taken against the security of the property, its
valuation is required.
Compulsory acquisition
Whenever a property is acquired by law; compensation is paid to
the owner.
To determine the amount of compensation, valuation of the
property is required.
Depreciation
It is the loss in value of the property due to its use, life, wear &
tear and obsolescence.
The general annual decrease in the value of the property is known
as annual depreciation.
Obsolescence
The value of property or structure become less by its becoming
out of date in style, in structure in design etc.
Methods of Valuation
1. Rental Method of Valuation
2. Direct Comparisons of the capital value
Rental or Capitalisation Method:
Rental method of valuation consists in capitalising the Net Annual
Rental Income (NARI) at an appropriate rate of interest or rate of
capitalisation.
Net annual rent income equals to Gross Annual Rental Income (GARI)
minus outgoings like Property Tax, repairs, maintenance, Service
Charges, Insurance Premium, Rent Collection and Management Charges
etc.
Amount invested 2,00,000.00
Rate of Return 10 % p.a.
2,00,000 x (10/100) = Rs.
Yearly income
20,000/-
Monthly income = Rs. 1666.67
Yearly income X (100/Rate of
Capitalisation return)
20,000 X (100/10)
Capital amount Rs. 2,00,000.00
Direct comparison with the capital Value
This method may be adopted when the rental value is not
available from the property concerned, but there are
evidences of sale price of properties as a whole.
In such cases, the capitalized value of the property is
fixed by direct comparison with capitalized value of
similar property in the locality
Assignment:-
• What do you understand by the term valuation? What is
the importance of valuation for an architect?
• A person needs to sale his ancestral home which has been
locked since 3 years. By which method the valuation of the
property will be done by the evaluator?
