A

Seminar Report
On

"Valuation of Construction Projects"

-"Concept and Types of Valuation"
bas been duly completed in satisfactory manner as partial fulfillment for
the award of degree of

B.E. Civil Engineering

Submitted to,

Sant Gadge Baba Amravati University,

Amravati, Maharashtra
Submitted by,

Miss. Gayatri A. Khotre

(Final Year B.E. Semester VII - Roll.No. ) '2.-G

Guided by,

Dr. Abhinandan R. Gupta

DEPARTMENT OF CIVIL ENGINEERING

COLLEGE OF ENGINEERING AND TECHNOLOGY, AKOLA
ACADEMIC YEAR 2021-2022

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 -
Shri Shivaji Education Society, Amravati's
COLLEGE OF ENGINEERING AND TECHNOLOGY, AKOLA
Babhulgaon (Jh.), National Highway No. 6, Akola - 444104.

DEPARTMENT OF CIVIL ENGINEERING

CERTIFICATE
This is to certify that the dissertation report entitled,

"Valuation of Construction Projects"

-"Concept and Types of Valuation"
Has been duly completed and delivered under my supervision and guidance
during the academic year 2021-2122 in satisfactory manner as partial fulfillment
towards the bachelor degree

B.E. (Civil Engineering)

Submitted to Sant Gadge Baba Amravati University,
Amravati, Maharashtra.
By,
Miss. Gayatri A. Khotre
(Final Year B.E. Semester VD- Roll.No. '2.G )

Pro~ ke
~ pm
(H.O.D)
(Guide)
12 1
Place -AkolaDate: 2 8 I / 'l
(2021-2022)

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 ACKNOWLEDGMENT
Tb.is piece of work will never be accomplished without God Almighty with his blessings and
bis power that work within me and without the people behind my life for inspiring, guiding
and accompanying me through thick and thin. It is a pleasure to convey my gratitude to all in
my humble acknowledgement.
I am greatly indebted and express my deep concern and sincere gratitude to Dr. A. R. Gupta
who guided me during project work. Their command and valuable guidance was an inspiring
experience to work under such enlightened faculty.
I owe my sincere gratitude to Prof.R. M. Phuke, Head of Civil Engineering Department,
who gave me the opportunity to work beyond the permissible limits.
Also, I am very thankful to all teaching as well as non-teaching Staff members of Civil
Department.
And I am also thankful to the principal Dr. S. K. Desbmukh sir for giving us valuable
support.

Miss. Gayatri A. Khotre

Place - Akola )
(Final Year B.E. Semester VII - Roll.No.

Date: 2..'o / l'2.. / '2- I

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Table of Contents

Ch. Contents Page No.

No.
Title Page 1
Certificate 2
Acknowledgement 3
Table of Contents 4
List of Figure 5
List of Table 5
Abstract 6

1. Introduction 7
1.1. Aim 8
1.2. Objective 8
1.3. Need 8

2. Literature Review 9

3. Detailed Study
3.1. What is Valuation? 10
3.2. Value, Cost and Price 11
3.2.1. Value 11
3.2.2. Cost 14
3.2.3. Price 14
3.3. Concept of Valuation 15
3.4. Purpose of Valuation 16
3.5. Factors Affecting Valuation 17
3.6. Method of Valuation 18

4. Conclusion 21

5. References 22

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List of Figures

Fig. Name of figure Page No.

No.

3.5 Property Valuation 17

List of Table

Table Name of table Page No.

No.

3.6 Value ofrd 20

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 Abstract
Value Engineering (VE) can be a very valuable tool in the field of civil engineering and the
construction industry. Valuation of Construction Project has tremendous benefits in both
cost-saving and project improvement areas. Between the pay-offs and wide variety of
applications, it is unsurprising that more firms are adopting the principles of VE in the design
and construction phases of their projects. Many studies have been conducted on the invention
of new tools for VE while others focused on the application aspect of VE in different
engineering domains. The study should prove useful for future researchers who wish to
update their knowledge with the latest status of the state of art of VE application in civil
engineering.

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 Chapter 1

Introduction
Valuation is the technique of estimating or determining the fair price or value of property
such as a building, other engineering structures of various types, land, etc. By valuation
present value of a property is determined. The present value of a property may be decided by
its selling price, or income or rent it may fetch. The value of property is depend on its
structure, life, maintenance, location, bank interest, legal control, etc. The value is also
depends on supply on demand and the purpose for which valuation is required.

Engineer has to work out the value of an existing property for various purpose. Valuation is
needed for wealth tax, municipal taxation, etc Valuation is an art of judgment based on
experience and relevant statistical data to forecast the value of a property at present. The
estimated value of property depends upon its power to serve man's need, location, amenities,
purpose and supply and demand of a property type. It continuously varies with age, physical
state and characteristics.

Since times immemorial mankind has been indulging in valuation of things. In any trade or
even in an ordinary purchase in the market, a person does a mental calculation of what the
worth of thing is to him. Before the concept of money, the value came to be related to the
worth in monetary terms. ·

The simplest definition assigned to the term value is the amount that a potential buyer will
pay for the possession of a thing desired. Correspondingly, it may also be termed as the
amount that a potential seller desires for parting with a thing.

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1.1. Aim:
To study Concept and Types of Valuation.

1.2. Objective :
The objective of valuation of construction project is as follows,

1. To understand broad principles of valuation ofimmovableproperties.

2. To know the purposes for which valuation of immovable properties isrequired to be
carried out.
3. To comprehend the various terms used to assign specific meanings to value.
4 . To distinguish between value and cost.
5. To understand the set up and functions of the official and the private valuation
machineries.
6. To understand the broad classification of the methods used in valuation of immovable
properties.

1.3 Need:
Property valuation assists the industry that you are a part of to fight or prevent fraud. Without
valuable information about the property market trends, it will be impossible for you as the
lender to understand the money required for the buying and selling of property. This will also
help in measuring the price of the property. Property valuation can help understand and
comprehend every transaction like the selling cost, property and house value, house
switching, and purchasing. This will help you regulate the market, and you, as a lender, will
be able to estimate the costs for mortgage value.

A professional and experienced property valuer will offer you atrustedopinion and strong
advice on the real estate data. They will contribute to your success that will ultimately benefit
the real estate industry. It is impossible to match the results offered by a trained professional
to the results that are calculated online. This can be done by comparing properties that are
sold in similar locations or those with the same value. A real estate professional' s opinion to
you will be unbiased, objective, informative, and helpful to you if you are a lender, a
mortgage broker, an insurer, or an appraiser.

Property valuation will also help mitigate the risks that you can face while doing
business in the real estate and property market. A property valuer can collect the data and get
it.

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 Chapter 2

Literature Review
To gain the information related to the study done by previous researcher for determining the
existing concept of valuation and their types various literature review have been reviewed.
The literature review on concept and types of valuation is studied as shown below,

Senay Atabay et. al. (1), In this research paper author discussed about valuation of project.
In this research paper, how the principles of VE (value engineering) are applied in
construction projects is explained.Author discussed about importance of concept of Value
Engineering.

Mohamed Abdel-Raheem et. al. (2), In this research paper author discussed about Value
Engineering and its application. Author discussed various important phases which come
under valuation of project. VE has tremendous benefits in both cost-saving and project
improvement areas.This paper presents an overview of VE and its applications in the field of
civil engineering.

Prasad et. al. (3), In this research paper author did a case study of multiple valuation
approches of projects for different construction designs & techniques. This paper focus on the
manner author choose the complex building through which has maximum uncertainties as
well as variations of construction techniques, impact the cost dimensions during different
valuation approaches.
Prof. Nitin L. Rane et. al. (4), In this research paper author discussed the requirements of a
project for the purpose of achieving the essential functions at the lowest total costs over the
life of the project. Value Engineering focuses on accomplishing the required functions at the
lowest overall cost. It helps in eliminating or minimizing wastage of material, time, and
unnecessary cost, which improves value to the customer. This study mainly focuses on new
techniques, methods and materials that can be adopted in construction industry, in which, its
cost, quality, process time and feasibility are considered.

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 Chapter 3

Detail Study
3.1. What is valuation ?

l .It is the technique of estimating or determining the fair price or valueof a property such as a
building, a factory, other engineering structures of various types, land, etc.

2.0r it is art of assessing the present fair value of a property at a statedtime.

3.Although it attempts at suggesting the fair prices, valuation is not an arbitrary process.

4.All facts and judicious process are considered to arrive at fair value.

5. Valuation of anything is an estimate of that thing in terms of money

6. The value of property depends on its structure, life , maintenance , location , bank interest,
legal control.

7.By valuation present value of property is determined.

8.Rise and falls may occur in short period of time, hence valuation report always mentions a
date.

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,
• 3.2 Value ,Cost and Price
• 3.2.1. Value:
•a I.Value of property means its worth or utility
2 It d nd . .
· epe s largely on supply of property and extent of demand .
3.Value may not have any relation with cost of construction
4.The value of the property ·thin h . ·
ii demand of supply. WI a s ort time may be more or less depending upon

:I S.The location of the property greatly affects its value.

6 -Value depends upon the purpose for which it is value.
:t 7 .Property value depends on:
• its utility
• scarcity
• events

•.a Types of Value

I .Book Value
2.Scrap Value
3.Distress Value
4.Market Value
5.Monopoly Value
6.Salvage Value
7.Sentimental Value
8.Speculative Value
.> 9.Potential Value
IO.Replacement Value
..> II.Income
12.Depletion
3 13.Value
3
I.Book Value :
3
• It is the amount shown in the account book after allowing necessary
...> depreciations.
• Thus , the book value of property depends on a depreciation allowed per year
and it is not affected by market condition.
.J
2.Scrap Value or junk value:

• It is the value of dismantled materials.

t, • A property is discarded at the end of the life span then it can be broken into
suitable units as steel, bricks, timber etc., will fetch a certain amount which is
the scrap value of building.
• For building it may be 10% of its total cost of construction.

~,
l
• The cost of dismantling and removal of rubbish material is deducted from the
total receipt from the sale of the useable materials to get thescrap value.

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3.Distress Value :
• The property is said to be distress when it can fetch lower value than the market
value,
• Distress value may encountered due to :
a] Fear of war, earthquake,etc.
b]Financial difficulties of seller.

4.Market Value:

• It is the amount which can be obtained at any particular time from the open market if
the property is put for sale
• It differ from time to time according to demand and supply.
• It also changes from time to time for various miscellaneous reasons such as changes
in industry , changes on fashions. Means of transport , cost of materials and
labour,etc.

5.Monopoly Value:
• In some cases, the property possesses certain advantages with respect to adjoining
properties due to its size , shape, frontage, location etc. the owner of such property
may demand a fancy price for that property.
• Such a fancy price is known as the monopoly value.

6.Salvage Value:
When property after being discarded at the end of utility period, is sold as it is
without being broken into pieces, the amount obtained over and above the cost of its
removal is known as salvage value.
• For instance, the sleepers used on a railway track may be reused as posts offencing
or as buffer stops etc.

7.Sentimental Value:
When the property is sold or purchased at a higher value than the market value due to
feelings of owner of purchaser , this is known as sentimental value.
It has no relation with the market value or nearby properties.

8.Speculative Value:
Speculators purchase properties at low price, that properties where a proposal to
construct road, water line , dams , etc. the speculators sell property again at profit
after short period without spending any amount on its development.
The purchase of such properties by speculator at low price is known as speculation
value.
In general the speculative value i.s less than the market value because the purchaser try
to buy it lower price and to sell at high price in future.

9.Potential Value:
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 • The terms potential value is used to indicate the potential possibilities of property
when developed in its most advantageous manner.
• An undeveloped property possess a potential value and it can be obtained by fully
developing the property.

10.Replacement Value:

• When property is to be replace either fully or in part at the prevailing market rates for
labour and materials is known as replacement value .

11.Income:

• The monetary payment received for goods or services, od from other sources or rent
investments.

12.Depletion:

• The method which is used to calculated the tax-deduction of the sources.

13.Value:
• It is the present market value which may be not be necessary same as that of cost of
an item. It may be higher or lower than cost.

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 3.2.2.Cost :
The term cost is used to indicate the actual amount inproducing a commodity
which processes some value.
In case of civil engineering cost of property means land cost plus construction
cost.
• Cost of new construction = addition of cost of materials, labour, equipment
and overheads as current market rates.
• Cost of old building = Cost of new construction- loss in building due to wear
and tear.

a 3.2.3.Price:

t • The term price is used to indicate the cost of commodity plus profit of
manufacturer.
t • Price = Cost of production + Interest on investment + Profit to contractor.

• • Selling price is fixed for commodity .

• For less demand the selling price may have to be fixed at lower or vice versa.

,
I • The price of commodity is determined by supply and demand conditions
prevailing in the market for that particular commodity and as such, a
commodity may be sold above or below its cost of production.

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 3.3.Concept of Valuation:
Valuation of building or property is the method of calculating the present marketable cost of
a building. Valuation of a building depends on the sort of building, its structure, durability,
location, size, shape, the width of roads, frontage, types and quality of building materials
used and the cost of these materials. Valuation of a building also depends on the height of the
plinth, height of the building, thickness of its walls, nature of structure (such as load bearing
or framed structure), type of flooring, roofing, doors and windows etc. Location ofa building
also plays an important role in deciding the value of a building. For example, a building
located in a market area would have a stronger and higher valuation than the same building
located in a residential area.

Also, the buildings located in areas with proper municipal water supply, sewer and
electricity have increased values. A building located on a freehold land generates a higher
valuation amount compared to a building located on the leasehold land.The valuation ofa
building also depends on the demands for purchase which varies from time to time. More
demands make the building more valuable.

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·3.4.Purpose of Valuation:
l .Buying and selling of the properties.

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

2. Rent fixation.(generally taken as 6% - 10% of valuation of the property)

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

3.Compulsory Acquisition of property by government.

- Whenever a property is acquired by a law compensation is paid to the owner. To detennine

the amount of compensation valuation of property is required.
4.Taxation

- To assess the tax of a property its valuation is required. Taxes may be municipal tax, wealth
tax, property tax, etc.,and all taxes are fixed on the valuation of the property. For various
taxes to be given and fixed, by Municipal committee.

S.Security ofloans or mortagage.

-When loans are taken against the security of the property, its valuation is required. Valuation
is for security of loans or mortgaged with bank or any other society to raiseloan.

6.Valuation of property is also required for Insurance Premium, Betterment Charges,

Speculations, etc.

7.To determine amount of court fee stamp.

&.Auction bids,Estate duty, Wealth tax,Speculation,Reinstatement,Probate,etc.

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t 3.5.Faetors Affecting Valuation (value of property):
I • TyPe of building or Design of property.
• Location

,
a • Cost of construction
• Building structure and durability.
• Size of building.
)
• The quality of materials used in construction.

"
• Rise in population.
• Forces of demand and supply.
• Improvement by public schemes.
• Abnormal condition

--;a
TVPE OF PROPERTV

I LANo u~E

LOCATION

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3.6.Methods of Valuation:
0
Me:o;s offValua~ion of Buildings and Properties and Following are the different
me O so valuations of the property:
1. Rental Method of Valuation
2- Direct comparison with capital value
3. Valuation based on profit
4. Valuation based on cost
5. Development method of valuation
6. Depreciation method of valuation

1. Rental Method of valuation:

In this method, net income from the building is calculated by deducting all the outgoings
~om gross re~~- Y~ar's purchase (Y.P.) value is calculated by assuming a suitable rate of
interest prevrulmg m the market. For example, consider a rate of interest as 5%, the Year's
Pur~h3:5e = 100/5 = 20 years. The net income multiplied by the year's purchase gives the
cap1tahzed value or the valuation of the property. This method is used only when the rent is
known or probable rent is determined by enquiries.

2. Direct Comparison with Capital Value:

When the rental value is not known, this method of direct comparison with the capital value
of a similar property of the locality is used. In this case, the valuation of the property is fixed
by direct comparison with the valuation or capitalized value of similar property in the
locality.

3. Valuation based on Profit:

This method of valuation is suitable for commercial properties such as hotels, restaurants,
shops, offices, malls, cinemas, theaters etc. for which the valuation depends on the profit. In
such cases, the net annual income is used from the valuation after deducting all the outgoings
and expenses

from the gross income. The valuation of building or property is found by multiplying the net
income by year's purchase. The valuation, in this case, can be too high in comparison with
the actual cost of construction.

4. Valuation based on Cost:

In this case the actual cost of construction of the building or the cost incurred in possessing
the buildin~ is considered as the basis to determine

the valuation of the property. In this case, necessary depreciation is allowed and points of
obsolescence are considered.

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5. Development method of valuation:

This method is suitable for properties which are under the developmental stage. For example,
if a large place of land is to be divided into plots after provision for roads and other
amenities, this method is used. The probable selling price of the plots, the area required for
amenities and other expenditures for development is considered for valuation. Development
method of valuation is also used for properties or buildings which are required to be
renovated by making alterations, additions, improvements etc. The value is calculated based
on the anticipated net income generated from the building after renovation work is complete.
The net income multiplied by year's purchase gives the valuation of the property. The actual
cost of the property with a total cost ofrenovation shall be compared with the anticipated
value of the property to decide if the renovation is justified.

6.Depreciation Method of Valuation:

Based on the depreciation method, the valuation of the buildings is divided into four parts:

I. Walls
2. Roofs
3. Floors
4. Doors and windows

Cost of each part at the present rate is calculated based on detailed measurement. The life of
each part is calculated by the formula:

D = P [(100 - rd)/lOO)]n

where,

• D = depreciated value
• r=rate
• d = depreciation
• n = age of building in years

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 F

I~

• $ :7 j !
 • rd values are aJMideirecl u per- f ~ bMt:

Life of Building Rd
I:

JOO years -
1.0
-

7Syean I.J

SO ycan 1..0

25 yea rs .u)

20 yean s.o
1"he vaJuatjon calculated i11 ex-elusive ofchc coi1 ofbnd. IIJJl<nili6. wt®I' :supply, \:'lt;\:ffl(,;ta.J.
and 88.flitary fitli~li etc. at1d used ooJ)' for bw.ldi~ \!lhidl &&n: weU ffl(a_tfltuitwJ. l f IL •~ rwc
well maintained. then l!iuitabk dcdugjmu an= aJOSMlcml i.o the- ~t&hial/Wn tWei:l.ll.u~<.I utx,v1..
The p_rcsen1 values t) f 1hc land. amonitic1i, '"'al.Cf suppl). cl«D'i.¢1lii W'llil sM•ta.,Y f1uin¥:ot ilh"'"l(J
be added to find the val~tion of the~>'·
 3. 7.Cooclusioo:
Work undertaken here for seminar is related to the concept of valuation as well as the types
of valuation. It can be seen tbat the valuation is important and unavoidable process for any
property. Valuation of construction projects is useful for buying or selling property, taxation,
rent fixation. Valuation is property is also required for Insurance, Speculations , Betterment
charges.Value Engineering can be used at any phase of the construction project to ensure the
best possible value with the lowest cost to resources, budgets, scheduling, and success.

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 References

Senay Atabay '.111d Niyazi Galipogullari,Application of Value Engineering in

1· Construction ProJects, Journal of Traffic and Transportation Engineering,Volume I,
No. 1 (Serial No. 1), pp. 39-4~, IS_SN 2328-2142, USA
Mohamed Abdel-Raheem, V1ct~na ~urbach, Ahmed Abdelhameed Grecia Sanchez,
2· L. da Navarro,Value Engmeermg and Its Applications in Civil
10
Engineering,Conference: Construct10n. Research Congress 2018Conference Paper:
March 2018 DOI: 10.1061/978078_4481295.0~7
Prasad, Balaji, Case Study - M~lt1ple Valuat10n, Approches of Projects for Different
3· Construction Designs & Techniques,Intemational Journal of Civil Engineering and
Technology, 9(9), 2018, pp. ~3-5_0,Volume=9&Issue==9
Prof. Nitin L. Rane , Apphcatlon Of Value Engineering Techniques In Building
4
· Construction Projects,Intemational Journal Of Engineering Sciences & Research
Technology (IJESRT),ISSN: 2277-9655, IC™ Value: 3.00 Impact Factor: 4.116

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