ASSIGNMENT 10

VALUATION AND ARBITRATION

NANSHAL BAJAJ​
4TH YEAR B.ARCH SEC: B​
ROLL NO.: 170044​
PROFESSIONAL PRACTICE I​
S.B.P.C.O.A.D.
 VALUATION
Q1. Define valuation
• Valuation is defined as the determining process of
a fair value of a certain specific property for
specific /certain purpose on a certain specified
date.
• A property may mean a piece of land or a land only
or a piece of land with a building. It becomes
necessary to adopt and establish an appropriate
method of evaluation.
• Valuation is done in the local monetary unit. As in
India the valuation would be in Rupees.
• Valuation is done by specially qualified Valuers
who have received training and gathered
experience in this field.

Q2. Purposes of Valuation

1. Valuation for sale or purchase: A prospective buyer
wants to know the reasonable value he must offer to
the seller and vice-versa. In most such cases after a
series of meetings and deliberations a mutually
acceptable sum is arrived at for the deal.
2. Valuation for Legal Purposes. Properties are valued for
a number of legal purposes.
• Obtaining Probate of a will through a court of law.
• Division of Assets among the owners
• Determine the value of stamp duty.
• Determine the court fee
• Reserve Bid in terms of Auction of Properties
3. Valuation for Taxation
Properties are required to be valued for
• Tax Liability of the owner.
 • Assessment in the event of gifting of property or
sale of property.
In many cases when an Individual owns
properties beyond certain limits he or she may have
to pay Wealth Tax.
4. Valuation for Land Acquisition.
Any land that needs to be acquired by the
local governing body as per the Land Acquisition
Act 1894 needs to be valued so that
adequate compensation may be paid to the owner in
actual money or land elsewhere as valued on the date
of issue of ordinance.
5. Valuation for Accounting Purposes.
Properties are periodically valued to determine the
assets of an Individual or Companies.
6. Valuation for Insurance Purposes.
Buildings are insured against any calamity like fire or
earthquakes etc. In any such untoward incidents and
the owner claims the insurance, the buildings need to
be valued and adequate compensation be paid to the
owner.
7. Valuation for Loan against property.
8. Valuation for Fair Distribution of Wealth in case of
inherited property and its division amongst inheritors.

Q3. What do you understand by Market Value, what

are characteristic of Market Value?
Market value of a property is the value a purchaser is
willing to pay to the seller in a free and un-restricted
environment. This value is arrived after a series of
mutual discussions and bargaining. The numbers of
transactions that have taken place determine the
market value of an area. There must be demand and
 supply. The land must be trade-able and transferable.

Characteristic of Market Value are

1. Vendor: Seller Should be willing to sell
2. Purchaser: Purchaser must be willing to buy.
3. No compulsions on either of the parties in the
Transaction.
4. Urgent necessity of purchase or sale to be
discarded. (Distress Sale or Purchase)
5. Disinclination of Vendor Seller to be ignored.
3. 6. No sentimental Value.
7. Present and Future potentials are taken into
account.

Q4. Explain the Methods of Valuation.

1. Government Method.
State Government prepares a ready reckoner for
market values, which are updated periodically and
made available to the government departments,
municipal authorities, to levy taxes and stamp duty
accordingly. This forms the basis of land evaluation.
2. Comparative Sales Method.
All Transactions have to be registered with the
registrar of properties. This is done on a payment of
Stamp Duty for legalizing and recording the sale. The
payment of Stamp Duty is subject to the property rate
and Transactions. A Comparison with similar
sales/purchase shall help determine the value of a
property.
3. Hypothetical Lay-Out Method.
When the value of a large plot are to be determined,
small lay-outs are made of comparable sizes and
access and values are made similar to all of them.
4. Residual Method.
In case of valuation of properties with existing
buildings, the land value component can be isolated
from combined land + building value of the property.
The values can be derived from similar sales in the
neighborhood. This method involves estimation of
building values by established method of making
B.O.Q with quantities, rates and amounts.

Q5. Freehold and Leasehold Land Tenure

Freehold Property
If you have purchased a Freehold Property, then you
own the land it is built on and also the house. In the
case of Apartments the owner of the house becomes
a share holder in the property. You can live there as
long as you desire. You have the right to make
alterations in the house or redo some parts of the
house obviously subject to local byelaws and
permission from the local authorities specially if you
want to make structural changes (particularly with old
buildings). In India independent houses are sold as
free hold property and Apartments are mostly on
lease. However many Apartments are also now being
sold as freehold properties.
The freeholder of a property owns it outright,
including the land it’s built on. Generally, most houses
are freehold properties although some might be
leasehold – usually through shared ownership
schemes. If you buy freehold, you are responsible for
maintaining your property and land, so you’ll need to
budget for these costs.
The main benefit of freehold is that you don’t have to:
• worry about the lease running out, as you own the
 property outright
• deal with the freeholder (often known as
the landlord)
• Pay ground rent, services charges and any
other landlord charges. However you have the payout
to maintain your piece of land and also the
Property Tax.

Leasehold Property
Most flats and properties are owned leasehold.
With a leasehold property, you own the property and
its land for the length of your lease agreement with
the freeholder. When the lease ends, ownership
returns to the freeholder unless you are able to
extend the lease.
When you buy a leasehold property, you’ll take over
the lease from the previous owner, so before making
an offer you’ll need to consider:
• how many years are left on the lease
• how it may affect getting a mortgage and the
property resale value
• how you’ll budget for service charges and related
costs.

Q6. Sinking Fund

1. In a Society:
Definition: In a Society, A Sinking Fund consists of
contribution from all Members, at a rate fixed at the
General Body Meeting from time to time, subject to
the minimum of 0.25 percent per annum of the
construction cost of each flat.
Utilization: On the Resolution passed at the meeting
of the general body of the society, the Sinking Fund
 may be used by the society for reconstruction of its
building/buildings or for carrying out such structural
additions or alteration to the building/buildings, as in
the opinion of the Society’s Architect, would be
necessary to strengthen them or for carrying out such
heavy repairs as may be certified by the Architect and
on approval of General Body. This is per the Model By-
Laws of Maharashtra.

2. In Real Estate
A fund set aside from the income of a property along
with its accrued interest that will be enough to
replace components of an improvement as they wear
out

3. In Property
A sinking fund is an amount of money which is set
aside to cover any major work which is needed on a
property in the future. Such funds are quite common
with leasehold properties.

ARBITRATION
Q1. Define “Arbitration” its types and Salient Features
Arbitration means resolution of disputes between
Parties. It is a Quasi-Judicial Process to fairly and
impartially resolve disputes between parties in
accordance with Indian Arbitration and Conciliation
Acts 1966 before seeking Redressal in courts of Law.

Types of Arbitration: An Architect is the sole

Arbitrator in the first and the second cases.
1. Joint Arbitration: If in case of dispute both the parties
 and either party reject the sole arbitration of
the architect, he may call for joint arbitration.
2. Third Expert: If two Architects do not reach on a final
award in case of Joint Arbitration, they may appoint a
third expert or umpire to decide and declare an
award.
3. Court of Law: If the dispute does not get settled in
any of the above cases, then the dispute is taken to
the court of Law.

Salient Features
1. It is a quasi-judicial with the backing of the law in the
form of the Indian Arbitration and Conciliation Acts
1966. Hence Arbitration awards are accepted in all
courts of law as “Legal”. The process involves that
both parties enter into an Arbitration Agreement.
2. Arbitration involves solving disputes which may be too
small to be taken into court.
3. Arbitration makes sure that justice is given in the least
possible time and yet the project work continues
which may not happen in a court of Law.
4. It is good to make Arbitration a pre-condition in
Litigation.
5. Arbitration is relatively less time consuming and less
expensive compared to courts of law.
6. If an Architect has been asked to Arbitrate upon a dis-
agreement he shall charge separately apart from his
regular fees for the project (as mentioned in the
contract). The expense is generally borne by the party
calling for the Arbitration or the party in whose favor
the judgment is given.
7. Although the Architect is the sole Arbitrator either or
both parties may not accept his ruling.
 8. Arbitration is practiced by Lawyers,
Architects, Engineers and many qualified and
experienced persons to settle disputes out of courts
9. Minutes or record of the Arbitration Proceedings are
to be maintained as evidence in case the matter is
taken to a court of Law. Also the Award given by an
Arbitrator is a Legal Document that is acceptable in
any court of Law.
In case of Joint Arbitration the expenses of each
10. Arbitrator are to be paid by the respective parties.
11. For the Expert or Third Umpire Arbitration, the
expenses are to be borne by both parties.
12. The Award of the Arbitration is Final and Binding on
both the parties although one or both may seek
Redressal in court.