What is Land Valuation? 

Land value refers to the monetary worth of a piece of land. To find the worth of a piece of Land, Several factors influence it, including location, size, usability, local infrastructure, and current real estate market conditions.

Land valuation/property valuations are frequently performed by professional real estate appraisers or government-certified valuers using various methodologies.

To get a land valuation certificate You will need the following documents: an Aadhaar Card, voter’s ID, proof of property ownership, encumbrance certificate, Land Tax Details, and so on.

Does land investment stand among the top strategies to expand your wealth? Financial Express reports a remarkable surge of 20% to 200% in land prices across tier 1 cities in the past two years. Understanding your land’s value becomes crucial—it unveils its potential selling price and complete development possibilities. 

Investing in land is often seen as a reliable path to financial success due to its limited availability and consistent value growth. Land in specific locations has a finite number of available plots, and missing out on these opportunities could mean missing out on future acquisitions. In India, land values, particularly in cities like Mumbai, have surged drastically over recent decades. This surge underscores the importance of timely land investments to capitalize on potential profits upon resale.

“Reliant Surveyors, a Government-approved valuer and reliable land valuation partner stands ready to assist in land valuation.” For the fair market value of your Plots/ land parcel call +91-7494999369

Unlike the unpredictable nature of the stock market, investing in land promises steady and appreciating returns. The ongoing trend of urbanisation fuels the demand for space, continually driving up land value. Understanding how to calculate land value in India becomes crucial as ongoing urban developments consistently raise land prices. Regularly monitoring current land prices is advised to gauge the escalating worth of this asset in the market.

There are various methods used to attach a monetary value to a plot/ piece of land in India, before checking the Land valuation method let us know what factors can affect the land valuation.   

Factors to Check When You Are Checking the Land Value in India?

Below are the factors you should check when planning to get your land evaluated in the country.

1. Location – It is the primary factor to consider when you check the land value in India. A small piece of land in a city like Delhi, Chennai, or Mumbai will be worth so much more than acres of land in rural locations. Always look for plot investment corridors or areas that show promising growth, and invest there. 
2. Presence of building – Any land with an existing building needs to be valued differently. The reconstruction cost of the building is calculated, which adds to the value of the land. 
3. Legal commitments – Land with a single owner is valued more because the legal processes of buying the land are simpler. A land with multiple owners may take some time to be bought.
4. Guidance value – The guidance value is the minimum value below which land cannot be bought in that area. The land value will directly depend on the guidance value.

Land valuation method:

1. Comparative Method for Market Valuation of Land

One of the easiest ways of land valuation, the comparative method simply means that you compare the market rates of similar plots in your locality.

Consider a case where your plot measures 1000 sq. ft. 

A similar plot of size 2000 sq. ft. was sold in your locality for 90 lacs. 

So, Its per sq. ft. rate would be 4500/-

Simply multiply the per sq. ft. rate by the size of your plot = 1200 x 3600 

                                                                                                   = 45.00 Lacs/-

Experts usually consider factors such as land size, shape, location, infrastructure, FSI, and more to calculate a more accurate land value. 

So, after calculating these factors, the value of your land could be anywhere between 40 to 50 lacs.

When to use this method – It is useful if you want to quickly calculate the average land value rate of your property. 

2. Development Method to Calculate Land Value

The Development method of land valuation calculates the market potential of a land parcel. 

A plot might not initially possess much value at first, but its worth would increase manifold if there is significant infrastructure coming up in the area. 

The perfect example of this would be the land parcels around the Ram Temple Ayodhya After the Supreme Court’s Ayodhya verdict in November 2019 and the Bhumi puja of Ram Temple.

The land price is around INR 900 sq ft. After “The Supreme Court’s Ayodhya verdict and Bhumi puja” Land price was appreciated to ₹2500 to 3000 sq ft. and after the ram mandir inauguration that is scheduled for January 22, 2024. Expected to increase in land price to 4000 to 6000 sq ft. according to local property dealer.

Here’s the formula on how to calculate the land value as per this method – 

Land Value = GDV – (Construction Cost + Profits + Other fees) 

GDV – Gross Development Value (GDV) is an estimate of the project value after its completion in the current market scenario.

Construction Cost – You must estimate the average cost of construction of the building on your land. 

Profit – The returns one would get after investing in a piece of land. 

Other fees – These include marketing, legal, and transaction costs. 

When to use this method – Use this approach when assessing the potential value of a land parcel situated in proximity to upcoming infrastructure projects like a Tourist place, shopping mall,  airport, see links etc.

3. Land & Building Method for Land Valuation

Using this technique, the property’s land and building values are evaluated separately to determine the overall property worth.

Here’s how to calculate the land value using the land and building method:

Calculate building value:

• Building Value = Reconstruction Cost – Depreciation Value
  
  Next, compute the land value:

• Land Value = Total Property Value – Building Value

For instance, consider a scenario where the estimated cost for rebuilding a structure amounts to 50 lakhs, and its anticipated depreciation value stands at 9 lakhs.

The building value would be: 50 lakhs – 9 lakhs = 41 lakhs

Suppose, after factoring in the rental income, the property’s assessed value stands at 90 lakhs.

Consequently,

the land value in this case would be 90 lakhs – 41 lakhs = 49 lakhs.

When to use this method – This method is ideal when you need to determine the individual values of both the land and the constructed building on it. 

4. Belting Method to Calculate Land Value 

The Belting Method doesn’t have a fixed formula; rather, it involves a process of subdividing the land into zones or belts based on certain criteria and then assigning values to each zone. However, I can explain how this method generally works with an example:

Let’s consider a piece of land that is being valued using the Belting Method. This land spans 10 acres and is situated in an area undergoing urban development. For simplicity, we’ll divide it into three belts:

Residential Belt (Zone A): This belt covers 4 acres and is closest to established residential areas. The estimated value per acre for this zone is ₹8317650.00 due to its proximity to existing neighbourhoods.

Commercial Belt (Zone B): Encompassing 3 acres, this belt is adjacent to a developing commercial district. The estimated value per acre here is ₹12476475.00, considering its potential for commercial use and growing business activity.

• Undeveloped Belt (Zone C): This zone includes the remaining 3 acres, further away from urbanized areas and lacks immediate development potential. The estimated value per acre in this zone is ₹4158825.00 due to its current lack of development and limited accessibility.

To calculate the total land value using the Belting Method:

Land Value = (Area of Zone A × Value per acre in Zone A) + (Area of Zone B × Value per acre in Zone B) + (Area of Zone C × Value per acre in Zone C)

Substituting the values:

Land Value = (4 acres ×  ₹8317650.00/acre) + (3 acres ×₹12476475.00/acre) + (3 acres × ₹4158825.00/acre)

Land Value = ( ₹33,270600.00) + ( ₹37,429425.00) + ( ₹12,476475.00)

Land Value = ₹ 83176500.00 

When to use this method – The belting method can be used to calculate the land value in India for large plots.

This is when the belting method is used as a fair way for land valuation where the plot belt nearest to the main road is valued higher and so on.

5. Guidance Method of Land Valuation

Under this method, the government’s own guidance rate can be used to calculate the value of your land.

This rate is also called the circle rate or ready reckoner rate.

It is the minimum value at which a property/land can be registered with the government.

All you have to do is find out this rate and you can easily get the market valuation of land.

When to use this method – You can use this to calculate land value if you already know the ready reckoner rates for land in your area. 

Difference Between Land Price and Land Value in India?

There are two factors to be discussed regarding land costs in India – market price and market value. Out of these, the land price is quite simple to calculate. The market price of land would mostly be similar to the other lands in the adjoining areas compared by land size. 

Calculating the land value in India is quite a challenging process, though. The value of property changes based on many factors. Consider these examples.

• The value of land decreases if the surrounding roads are narrow.
• The value of land decreases if it is close to an active cemetery.
• Land value decreases if there is a water shortage in the area.
• Land value increases if multiple educational institutions are less than 500 m from the land.
• The value of land increases if there are proposed infrastructural developments in that area in the future.

Purposes of Land Value in India

Land valuation serves several crucial purposes:

• Property Transactions: When buying or selling land, knowing its market value is essential for fair negotiations. Valuation helps in determining a reasonable price, preventing overpayment or undervaluation.

• Taxation: Local authorities often use land valuation to assess property taxes. An accurate valuation ensures fair tax assessments for both property owners and the government.

• Investment Analysis: Investors use land valuation to evaluate potential returns on investment. It helps in determining whether a property is worth investing in and assessing its appreciation potential.

• Analyse the Land’s Pros and Cons: The report showcasing land value in India helps assess the land’s pros and cons. It comprises details such as the final market value of the land, location, its benefits, structural feasibility, data-stamped images, etc. Based on this report, a buyer can easily decide to skip or seal the deal. 

• Financial Decision-Making: Valuation is vital for securing mortgages, loans, or other financing. Lenders use property value to determine the loan amount they can offer, influencing borrowing terms.

• Insurance Purposes: Property insurance premiums are often based on the property’s value. Accurate valuation ensures appropriate insurance coverage and premiums.

• Development and Planning: Governments and developers use land valuation to make informed decisions about land use, zoning regulations, infrastructure development, and urban planning.

• Legal Disputes: Valuation reports serve as crucial evidence in legal disputes related to property, such as inheritance, divorce settlements, eminent domain cases, or property litigation.

Overall, land valuation provides a comprehensive understanding of the property’s worth, benefiting various stakeholders including buyers, sellers, investors, government agencies, and financial institutions in making informed decisions

How To Get A Land Valuation Certificate?

A land valuation certificate is a legal document, which shows that the value of your plot in the Land Values Register is correct.

It is a necessary document that you need for tax purposes or when you apply for a bank loan. 

Conclusion to Land Value in India

You can use one of the above five methods to calculate the land value in India depending on the type of land you own or plan to buy. It is always recommended that you take the help of an expert to calculate the land value. The expert will consider all related factors before giving you the right valuation.

The land value in India will indeed keep increasing, thanks to the ever-growing demand for space and the rise in population. Therefore, if you want to invest in an asset that promises sure returns, then you should invest in plots.

FAQs

How to calculate a land value per square meter?

You can find out the per sq.m. rate of land by knowing its carpet area. 

Consider a 1200 sq. ft. property with a value of Rs. 40 lakhs. Its per sq.m. rate would = 40 lakhs ÷ 1200 = 3333 Rs per sq.m.

Factors Influencing Land Value in India?

The value of land depends on a variety of factors such as FSI, land size, built-up area, encumbrances, and more. 

How to determine the value of a land parcel?

You can use the government’s guidance or reckoner rates to calculate land value or hire 

an external real estate professional as well.

What is the best method to calculate land value in India?

The most popular method is the “comparative one”. Under this method, you can check the rates of similar plots in your locality and find out the rate per square meter. Then, you can calculate the rate of your land parcel.

Steps for Calculating Property Value:

1. Evaluate the property’s built-up area, plot area, age of construction, amenities, floors, etc.
2. Specify the property type (residential/commercial unit, plot, house, apartment, builder floor, shop).
3. Select the property’s locality.
4. Calculate the minimum assessment figure based on circle rates.

The formula for Property Value Calculation:

Property value = Built-up area (in square meters) x circle rate for the locality (in Rs./square meters)

How is the property rate calculated in Delhi?

To calculate the property rate in Delhi, multiply the square meter plot area by the applicable circle rate for the land and then multiply the built-up area of the house in square meters by the minimum construction cost and the age multiplier factor. Sum up both the calculated land and home values to obtain the final property rate.