Post 460 -by Gautam Shah
A building is located on a land, and both have a very complex base of market value. The building as an asset depreciates continuously, except in relative terms (in comparison to earlier years) it may seem to have increased. A land is a commodity whose value is contextual, but as a commodity its supply never increases. Though, factors like, facilities, laws, conversion (from one use to another), political stability and macro relevance, etc., change the availability for a while, and in a location.
Buildings are physically formed assets involving labour, material and technical know-how. The labour is non-recoverable expense to shape the materials into a built form. A built-form as soon as it is ready, begins to be affected by environment, usage, and technological irrelevance, and so depreciates. After some period it becomes advisable to construct a new on or shift to a new one. And a building even if it were not to cost more to construct a unit of similar functionality, it would still require new investment and time.
Buildings must remain consistently functional and valuable to remain valid. During reconstruction or substantial reformations, the building ceases to be fruitful. The existing activities require temporary relocation, the cost of it, cessation of income due to it, and optional legal redressal for it, all add to cost of the new entity.
The Land is rarely a free commodity. It is owned by the Government (or king), or else occupied by some authorized-approved-accepted entity or a squatter. The right to use a land are of many types, some permanent (or Allodial title), long-lasting or leased (for specific period). Nominally right to land includes right to occupy, build on it with a purpose, form, and volume (for farm and other lands it could include agriculture and mining). The right to land also include easement rights that allow the owner-lease holder to use a neighbouring property in a specified and limited scale, such as right of access, ventilation, view, illumination, aeration, drainage of rain water, etc. A new buyer checks out if these are transferable rights and if there are charges or other liabilities with it.
A building is relevant for the purpose it is designed, and later on reformation, how it adjusts to the intended functions. The functionality of a building derives primarily from the land’s location or neighbourhood, and secondarily from its technical virtues, style, and in few instances its past history. A building surviving at a location is continuously affected by the changes occurring in the neighbourhood, urban matrices and environment. Human settlements grow exponentially by new rings, absorbing the suburbs, but creating new sub-centers. Such shifts affect, connectivity, traffic, density and hastens or decelerate the new development in specific locations.
The existing user-owners will not vacate the properties unless offered sufficient incentive. The process of change becomes faster in countries that have holding or land owning companies leasing out sections. In India, urban residential areas abutting wide roads first turn into linear commercial precincts, but converting the back lane properties into warehouses. Both types of changes reduce the real residents, forcing the rest of the lot to flee.
Buildings of the older generation are massive structures where useful (carpet area) area to built-up area difference could be as much as 22% and compared to these, new buildings with thinner structures and leaner services, the difference is 9.5%. This acts as one major incentive to reconstruct the building. In some areas newer building laws allow more total construction. The deterrents to this are several conditions such as provision of parking space and smaller footprints of individual land holdings.