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Which of the following statements is/are false about the building's valuation? S1: A valuation is performed after when a property is purchased or sold. S2: The future value of the property is estimated through valuation. S3: Rent fixing or mortgage purposes necessitate the valuation.

Which of the following statements is/are false about the building's valuation? S1: A valuation is performed after when a property is purchased or sold. S2: The future value of the property is estimated through valuation. S3: Rent fixing or mortgage purposes necessitate the valuation. Correct Answer S2 only

Concept-

The technique of finding the fair price of an existing building or property is known as valuation.

Valuation of property is done to work out the amount of fair rent of a building, buying or selling of the property etc., especially when it is requisitioned by the government or semi-government organization. 

The future value of the property can not be estimated through valuation.

The main purposes 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 a 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, a valuation of the property is required.
  • Valuation of Building: Valuation of a building depends on the type of the building, its structure, and durability, on the situation, size, shape, frontage, the width of roadways, the quality of materials used in the construction, and present-day prices of materials.

Various methods of valuation are-

  • Rental method of valuation
  • Direct comparisons of the capital value
  • valuation based on the profit
  • Valuation based on the cost
  • Development method of valuation
  • Depreciation method of valuation

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