Land Acquisition & Valuation

WELCOME

LAND ACQUISITION

BEFORE AMENDMENT

• ART 31: COMPULSORY ACQUISITION OF PROPERTY.• 1] NO PERSON SHALL BE DEPRIVED OF HIS PROPERTY

SAVE BY AUTHORITY OF LAW.• 2] NO PROPERTY MOVABLE OR IMMOVABLE,INCLUDING ANY

INTEREST IN, OR IN ANY COMPANY OWNING, ANY COMMERCIAL OR INDUSTRIAL UNDERTAKING SHALL BE TAKEN POSSESSION OF OR ACQUIRED FOR PUBLIC PURPOSES UNDER ANY LAW AUTHORISING THE TAKING OF SUCH POSSESSION OR SUCH ACQUISITION, UNLESS THE LAW PROVIDES FOR COMPENSATION FOR THE PROPERTY TAKEN POSSESSION OF OR ACQUIRED AND EITHER FIXES THE AMOUNT OF THE COMPENSATION OR SPECIFIES THE PRINCIPLES ON WHICH & THE MANNER IN WHICH COMPENSATION IS TO BE DETERMINED AND GIVEN.

AFTER AMENDMENT• ART.31: COMPULSORY ACQUISITION OF PROPERTY.• 1] NO PERSON SHALL BE DEPRIVED OF HIS PROPERTY

SAVE BY AUTHORITY OF LAW.• 2] NO PROPERTY SHALL BE COMPULSORILY ACQUIRED

OR REQUISITIONED SAVE FOR A PUBLIC PURPOSE & SAVE BY AUTHORITY OF A LAW WHICH PROVIDES FOR ACQUISITION OR REQUISITION OF THE PROPERTY FOR AN AMOUNT WHICH MAY BE FIXED BY SUCH LAW OR WHICH MAY BE DETERMINED IN ACCORDANCE WITH SUCH PRINCIPLES & GIVEN IN SUCH MANNER AS MAY BE SPECIFIED IN SUCH LAW; AND NO SUCH LAW SHALL BE CALLED IN QUESTION IN ANY COURT ON THE GROUND THAT THE AMOUNT SO FIXED OR DETERMINED IS NOT ADEQUATE OR THAT THE WHOLE OR ANY PART OF SUCH AMOUNT IS TO BE GIVEN OTHERWISE THAN IN CASH.

MATTERS TO BE CONSIDERED IN DETERMINING COMPENSATION

• IN DETERMINING THE AMOUNT OF COMPENSATION TO BE AWARDED FOR LAND ACQUIRED UNDER THIS ACT, THE COURT SHALL TAKE INTO CONSIDERATION.• FIRST, THE MARKET VALUE OF THE LAND AT

THE DATE OF PUBLICATION OF THE NOTIFICATION U/S 4 SUB-SECTION (1), • SECONDLY, THE DAMAGE SUSTAINED BY THE

PERSON INTERESTED, BY REASON OF THE TAKING OF ANY STANDING CROPS OR TREES WHICH MAY BE ON THE LAND AT THE TIME OF THE COLLECTOR’S TAKING POSSESSION THEREOF,

MATTERS TO BE CONSIDERED IN DETERMINING COMPENSATION

• THIRDLY, THE DAMAGE (IF ANY) SUSTAINED BY THE PERSON INTERESTED AT THE TIME OF THE COLLECTOR’S TAKING POSSESSION OF THE LAND, BY REASON OF SEVERING SUCH LAND FROM HIS OTHER LAND,

• FOURTHLY, THE DAMAGE (IF ANY) SUSTAINED BY THE PERSON INTERESTED AT THE TIME OF THE COLLECTOR’S TAKING POSSESSION OF THE LAND BY REASON OF THE ACQUISITION INJURIOUSLY AFFECTING HIS OTHER PROPERTY MOVABLE OR IMMOVABLE, IN ANY OTHER MANNER OF HIS EARNINGS,

MATTERS TO BE CONSIDERED IN DETERMINING COMPENSATION

• FIFTHLY, IF IN CONSEQUENCE OF THE ACQUISITION OF THE LAND BY THE COLLECTOR THE PERSON INTERESTED IS COMPELLED TO CHANGE HIS RESIDENCE OR PLACE OF BUSINESS, THE REASONABLE EXPENSES (IF ANY) INCIDENTAL TO SUCH CHANGE, AND

• SIXTHLY,THE DAMAGE (IF ANY) BONAFIDE RESULTING FROM DIMINUTION OF THE PROFITS OF THE LAND BETWEEN THE TIME OF THE PUBLICATION OF THE DECLARATION U/S 6 AND THE TIME OF THE COLLECTOR’S TAKING POSSESSION OF THE LAND.(2) IN ADDITION TO THE MARKET VALUE OF THE LAND AS ABOVE PROVIDED, THE COURT SHALL IN EVERY CASE AWARD A SUM OF THIRTY PERCENTUM ON SUCH MARKET VALUE, IN CONSIDERATION OF THE COMPULSORY NATURE OF THE ACQUISITION.

MATTERS TO BE NEGLECTED IN DETERMINING COMPENSATION

• FIRST, THE DEGREE OF URGENCY WHICH HAS LED TO THE ACQUISITION,

• SECONDLY, ANY DISINCLINATION OF THE PERSON INTERESTED TO PART WITH THE LAND ACQUIRED,

• THIRDLY, ANY DAMAGE SUSTAINED BY HIM WHICH,IF CAUSED BY A PRIVATE PERSON WOULD NOT RENDER SUCH PERSON LIABLE TO A SUIT,

• FOURTHLY, ANY DAMAGE, WHICH IS LIKELY TO BE CAUSED TO THE LAND ACQUIRED, AFTER THE DATE OF THE PUBLICATION OF THE DECLARATION U/S 6, BY OR IN CONSEQUENCE OF THE USE TO WHICH IT WILL BE PUT,

MATTERS TO BE NEGLECTED IN DETERMINING COMPENSATION

• FIFTHLY, ANY INCREASE TO THE VALUE OF THE LAND ACQUIRED, LIKELY TO ACCRUE FROM THE USE TO WHICH IT WILL BE PUT WHEN ACQUIRED,

• SIXTHLY, ANY INCREASE TO THE VALUE OF THE OTHER LAND OF THE PERSONS INTERESTED LIKELY TO ACCRUE FROM THE USE TO WHICH THE LAND ACQUIRED WILL BE PUT, OR,

• SEVENTHLY, ANY OUTLAY OR IMPROVEMENTS ON OR DISPOSAL OF THE LAND ACQUIRED,COMMENCED, MADE OR EFFECTED WITHOUT THE SANCTION OF THE COLLECTOR AFTER THE DATE OF THE PUBLICATION OF THE NOTIFICATION UNDER SECTION 4, SUB-SECTION (1).

MATTERS TO BE CONSIDERED IN DETERMINING COMPENSATION

• IN DETERMINING THE AMOUNT OF COMPENSATION TO BE AWARDED FOR LAND ACQUIRED UNDER SECTION 23 OF THE LAND ACQUISITION ACT, 1894, THE COURT SHALL TAKE INTO CONSIDERATION.• THE MARKET VALUE OF THE LAND AT

THE DATE OF PUBLICATION OF THE NOTIFICATION U/S 4 SUB-SECTION (1).

VALUATION OF

IMMOVABLE PROPERTY

DEFINITION OF MARKET VALUE

“ THE MARKET VALUE OF A PARTICULAR INTEREST IN LANDED PROPERTY MAY BE DEFINED AS THE AMOUNT OF MONEY OFFERED BY A WILLING PURCHASER TO A WILLING SELLER OF THAT INTEREST,IN THE OPEN MARKET, WHERE THERE IS COMPETITION, AND BOTH PARTIES ARE BEING ACTUATED BY ECONOMIC CONSIDERATIONS, AND WHERE THERE IS NO UNDUE PRESSURE ON EITHER OF THEM.”

VALUATION OF IMMOVABLE PROPERTIES

• PROPERTY: - Right to own and possess and to put to Legal and possible uses. - Land together with building improvements plus anything permanently affixed to it.• IMMOVABLE: Land + Anything attached to it + Anything embedded in it.• VALUATION: For highest, best and most profitable legal use.

COST AND PRICE

• COST – Expenditure on inputs.• PRICE – Expenditure on input + Profit.

VALUE

• Result of Interaction of Demand and supply.• Value is not intrinsic in Object. People create Value.• Individual / Subjective Value.• Market / Objective Value.

CHARACTERISTICS OF VALUE

• FUNDAMENTAL PRINCIPLE OF ECONOMICS IS THAT,FOR AN OBJECT TO HAVE VALUE. IT MUST SATISFY FOLLOWING BASIC CONDITIONS

• UTILITY – The power to render a service or fill a need.• SCARCITY – in relation to supply and demand and possible alternative uses.• DEMAND – Need with monetary power to fill demand. • TRANSFERABILITY – Rights of possession and control of ownership of property.

VALUATION• It is an art or science of estimating the value for a specific

purpose of a particular interest in property at a particular moment in time taking into account all features of the property and considering all factors of the market.

PURPOSE OF VALUATION

• I) PURCHASE FOR INVESTMENT OR FOR OCCUPATION.• II) SALE/TRANSFER OF THE PROPERTY.• III) MORTGAGE AND OTHER SECURITY.• IV) RENT FIXATION.• V) LAND ACQUISITION.• VI) BETTERMENT CHARGES.• VII) AUCTION BIDS.• VIII) PROBATE.• IX) SPECULATION.• X) TAXATION.• XI) INSURANCE.• XII) PARTITION.• XIII) COURT FEES & STAMP DUTY – READY RECKONER.• XIV) RATABLE VALUE.• XV) ARBITRATION.• XVI) LEASE’S INTEREST/LESSEE’S INTEREST.• XVII) MERGER AND ACQUISITION OF INDUSTRIAL UNITS. REVALUATION OF

ASSETS FOR MARKET CAPITALIZATION.

INTERESTS IN LANDED PROPERTY

1] FREEHOLD INTEREST.2] LEASEHOLD INTEREST.3] SUBLEASEHOLD INTEREST.4] LIFE INTEREST.6] RIGHTS OF OCCUPANCY.7] RIGHT OF WAY.8] RIGHT OF LIGHT AND VENTILATION.

PARTICULAR MOMENT IN TIME

• The valuation of a property is related to the date of valuation and is different at different moments in time.

FEATURES OF THE PROPERTY

• Location• Situation• User – Residential/Industrial/Commercial• Size – Small/Gross• Shape – Regular/Irregular• F.S.I. permissible• Road Frontage – Small/Large, • Important Road/Local Road

FACTORS OF MARKET

• Impact of Political, Legal, Social, Urban and Economic forces influence the valuation of the property.

TYPES OF LANDED PROPERTY

1] RESIDENTIAL. a) HOUSES OF VARIOUS TYPES. b) FLATS AND TENEMENTS.2] INDUSTRIAL. I) FACTORIES. II) WAREHOUSES AND GODOWNS.3] COMMERCIAL. a) SHOPS. b) OFFICES.4] AGRICULTURAL.

METHODS OF VALUATION

1] THE DIRECT COMPARISON OR COMPARATIVE METHOD.2] THE CONTRACTOR’S METHOD.3] THE PROFITS OR ACCOUNTS METHOD.4] THE RESIDUAL METHOD.5] THE INVESTMENT METHOD.

COMPARATIVE METHOD

FIND OUT CONSIDERATION ACTUALLY PAID FOR OTHER SIMILAR PROPERTIES IN THE SAME LOCALITY AND THREE TO FIVE YEARS PRIOR TO THE DATE OF VALUATION.

FACTORS TO BE TAKEN INTO CONSIDERATION: 1] LOCATION OF PROPERTY. 2] SITUATION. 3] LEVEL OF AMENITIES & FACILITIES. 4] USER OF PROPERTY. 5] AGE OF PROPERTY. 6] CONDITION OF PROPERTY. 7] FACILITES AVAILABLE IN THE PROPERTY. 8] SIZE (FLOOR AREA) OF PROPERTY.

The Evidence

The Market

Should be based on

Transactions of similar properties

IN the same area

Obtained from

Recent Records

Comparative Valuation

Should be fairly stable

Underlying economic factors should be studied

of Frequent transactions

The evidence

Transactions of similar properties COMPARATIVE

VALUATION

In the same area

Recent Records Frequent Transactions

The Market

Should beFairly stable

UnderlyingEconomic

Factors shouldBe studied

COMPARATIVE METHOD.

Belting Method

• If the depth of the plot is more than then the depth of the comparable plots in sales considered, this method is adopted to value the land.

1st Belt

2nd Belt

3rd Belt

X

1 ½ X

Remaining

Full Value

3/4th Value

Of 1st Belt

½ Value

Of 1st Belt

Recess Land

¾ of Belt Value

Recess Land¾ of Belt Value

R O A D

Belting Method

CONSIDERATION FOR DIFFERENT LANDS

• Land with return frontage :- Give positive allowance depending on the importance of road on which return frontage.

• Land with irregular shape :- Carve out regular shape by drawing perpendiculars to road and give negative allowance to remaining land.

THANK YOU

CONTRACTOR’S METHOD OR CAPITAL VALUE METHOD.

• USED IN ASSESSMENT IN CASE OF PROPERTIES NOT USUALLY SOLD, NOT INTENDED TO BE SOLD OR EVEN INCAPABLE OF BEING SOLD IN OPEN MARKET.

• PROPERTIES CLASSIFIED INTO THREE GROUPS:

• 1] PUBLIC PROPERTIES -- MUSEUMS,SCHOOLS,COLLEGS,LIBRARIES.

• 2] PROPERTIES HAVING POTENTIAL FOR PROFIT – STADIUMS, THEATRES,MUSIC HALLS,RACE COURSE ETC.

• 3] PROPERTIES OF PUBLIC UTILITY UNDERTAKINGS – RAILWAYS, WATER WORKS, ELECTRICITY UNDERTAKINGS, DOCKS.

CONTRACTOR’S METHOD

•METHOD

• 1] ESTIMATE VALUE OF LAND IN ITS EXISTING USE.• 2] ESTIMATE COST OF CONSTRUCTION OF BUILDING.• 3] ALLOW FOR DEPRECIATION ON ACCOUNT OF

AGE,OBSOLESANCE ETC.• 4] CAPITAL VALUE = LAND VALUE PLUS DEPRECIATED

COST OF BUILDING

CONTRACTOR’S METHOD

• Methods to determine replacement cost of building:-1. Plinth area rate.2. Cubical content rate.3. Item-rate.

Contractor’s MethodDepreciation

• Depreciation is calculated for period of present life with due consideration to its future life and total life.

• Methods:-1. Straight-line Method – Allocates depreciation uniformly

throughout its service life Depreciation=original cost – salvage value Total life2. Declining balance Method – Fixed % of unit cost at the

beginning of the year is allowed to be deducted at the end of year annually.

Contractor’s MethodDepreciation

3. Sinking Fund Method – Depreciation=1-Y.P. future life at certain % Y.P. full life at same % Presumes normal and regular maintenance and repairs. If

neglected, more allowance should be made, depending on the state of maintenance and repairs.

CONTRACTOR’S METHOD

• Approximate life span:-1. R.C.C. framed Structure 75-90 years2. R.C.C. Brick built 60-65 years3. C.G.I.Sheet+BBMasonary 50-60 years4. A.C.C.Sheet+BBMasonary 40-50 years5. Country Tiled + bricks 20-30 years6. Temporary sheds 10-20 years

Weakness of Contractor’s Method

• No direct co-relation between cost of property and Market value, which depends on forces of supply and demand.• Requires assumptions relative to unit costs.

More probability of assumption being wrong.• Requires assumptions as to original economic

life and/or remaining economic life. Greater probability of assumptions being in error.

PROFIT METHOD

• PROFITS MADE BY AN OCCUPIER DETERMINES THE RENT A TENANT WOULD BE WILLING TO PAY FOR HIRING THE PREMISES.

METHOD.1] ESTIMATE THE GROSS AVERAGE RECEIPTS OF THE OCCUPIER.2] DEDUCT THE EXPENSES INCURRED FOR EARNING THOSE RECEIPTS.3] DEDUCT THE TENANT’S SHARE OF REASONABLE PROFITS,WHICH INCLUDE INTEREST ON HIS CAPITAL, REMUNERATION OF HIS SERVICES AND COMPENSATION FOR HIS RISK.4] THE RESIDUE WILL BE THE LANDLORD’S SHARE OF RENT.NOTE: BEAR IN MIND THAT WHAT IS ASSESSIBLE IS THE PROPERTY AND NOT THE TRADE.

RESIDUAL METHOD• This method is used to value property with Development

potential.• Development potential is also called “Latent Value”.• Increased value of property after carrying out development

will be more than expenditure incurred.

RESIDUAL METHOD

• Assess optimum development for the property. Estimate gross Development value [A].

• Assess cost of development [B].• Assess Developers risk and Profit [C].• Residual Value= [A] – {[B] +[C]}.

RESIDUAL METHOD

• Cost of each item of infrastructure is estimated and • Allowances made for each relevant factor which are deducted

from sale value of small plots, carved out from larger plot.

RESIDUAL METHOD• Cost of development will include:-1.Building costs2.Architects fees [% of cost of development]3.Engineers fees4.Other professional fees [% of proceeds of sell]5.Advertising and legal fees