VALUATION OF BUILDINGS

Post 295 – by Gautam Shah

.

Valuation of buildings is done on many different counts. A building stands on a land. So the absolute value of a building consists of Land and the Structure. A land nominally has a Foot-Print, an area measure in parallel to the gravity plane. As city administration assigns a Building Capacity in proportion to not only footprint area, but for submerged, eroded, or cut-offs for used in public utilities.

Uline_Ice_Company_Plant.jpg

The ownership of land, in a modern day urban area is conditioned by several conditions. Footprint areas could be several time less (or in a rare case, more) then an area recorded in historic Land documents. Similarly the capacity to build on it does not depend on a real footprint (Satellite picture or surveyed plan), but several administrative conditions.

City Facade Architecture Europe Frame Renovation

Valuation of Land is dependent primarily on How much, one can build on it, and for What purpose one can develop it (commercial, residential, industrial, services, etc.) It is, however, more dependent on the nature and tenure of ownership of the land. A land may be fully owned (as described in tradition land purchase documents –ownership entitlement from bottom of earth to the topmast part of sky). The tenure may be permanent (as described in tradition land purchase documents, –Tenure to last as long as sun, moon and stars remain). The land ownership may be a leased entity for a short (19-99 years) or very long term (999 years) basis. Short term lease often expires before a building perishes.

connaught_place,_new_delhi_-_img_1958

The most complicated ownership entitlement is where the Land is owned in terms of capacity to build (FSI) on it. An FSI or Floor Space Index is an assignment of specific proportion of building capacity. The FSI remotely relates to the Land Foot print, but does not represent the reality. It is made more complicated when existing owners-occupiers of the land sell the right to build further over an existing structure, or in the residual parcel of open land.

bombay_c_1890

Land has a contextual value depending on its location and surroundings. The location related value may go up or down due to many extraneous circumstantial reasons. Urban lands have a value in capacity to get the possession of the land by financial enticement, alternative arrangement, force or legal means.

old_factory_buildings_by_the_avon_2_-_geograph.org.uk_-_1051585

A Structure on land has three sets of values, ONE -relates to its utilitarian purpose (nearly matching the original concept), TWO -concerns with remaining life as a sheer built form or shell (presumably utilisable for some other occupational use -different from the original intention -salvage value), and THREE -bears on its debris value. A comprehensive judgement of all three aspects is made to define the value of a building.

ahmedabad_stock_exchange

 

In another valuation system, a land or building, or both together, are considered an asset with an absolute value. The asset value can be exploited to yield a rent. From the Rent, expenses for regular inputs, periodic repairs, and maintenance, etc., are deducted. The monetary surplus is considered an income (or loss), if its rate of return is higher when compared to an investment in other fields (equal to the absolute value).

Land + Building, are assets (real or possible), and the Valuation is carried out to assess the income potential, actual profit or loss. Valuations are carried out on year to year or occasion to occasion basis, to ascertain addition or deduction in the value. Such assessments help in computation of wealth, and other taxes, and for calculating depreciation, insurance premiums, etc.

.

Advertisements

COSTING

Post 152   by Gautam Shah ➔

Costing (cost finding) is a tool to derive the cost of a product, providing a service, performing a function, or operating a department. Some of these are historical facts -historic costs such as –How much did it cost? -while others are predictive -budgetary costs such as –What will it cost?

Cost has relevance primarily to the person, who wishes to acquire or dispose off the item. But often a person to assess the ‘value’ of an object, wish to determine its worth through the costing.

Costs and Values are rated in terms of Money, but need not be…

Cost of a product is the total expenditure (cost of raw materials, labour, rent for plants, and producers’ profit etc.) incurred to produce or procure an item, or its exact replica. Costing can be conducted through two routes: cost analysis and rate analysis.

⊗  COST ANALYSIS: take into consideration all factors that form an item or service. It has one to one relevance. Cost analysis is more effective, for whole items, that is when an item is at a design or conceptual stage, and its parts have not yet been perceived. Yet it requires fairly clear perception of the system. Unless external conditions change a product, the cost analysis is specific, fairly stable, and may not need frequent revisions.

⊗  RATE ANALYSIS: is in a way a comprehensive application of various costs (arrived through cost analysis). Unlike cost analysis the rate analysis takes into consideration the optimum costs of production or supply (economics of volume, batch sizes, packing unit), wastage, residues, etc.

Items that have not been well detailed, or vaguely or partially conceived, various cost parameters like cost per unit of length, area, volume, or unit of the entity derived from known situations, are applied. Often cost of a known thing is considered a typical rate and applied to nearly similar things, with accommodation of the variations, as plus or minus factors. Costing done through rate analysis provides a generalised picture. Rate analysis is preferred for task-based items (assignments that have universal identity).

Valuation of Coffee

External conditions affect a rate, extensively and often unpredictably. Costings made through rate analysis need to be continuously improvised.

Cost analysis and rate analysis have very thin differentiation, so some consider them to be the same.

Designers’ specify-choose entities, or increase or decrease their use by predicting the costs. Designers develop their own cost determination methods, appropriate for the jobs they handle, and for types of items specified in their projects. Input data like market rates for materials, parts, components, labour etc. are continuously updated or sought as and when estimates are to be prepared. Updating feedback is also available through the historic estimates conducted on completion of a project.

In design offices predictive cost analysis is made through Rate analysis. Average prices of all commonly used materials, operations, etc. are collected routinely, reformatted and stored. These are presumed as standard rates, and form the basis for the cost analysis.

To simplify the process of cost analysis, number of items and their individual rates or prices are reduced by approximation (through definition of a factor for variation) in quantity and quality.

.

VALUATIONS

Post     -by Gautam Shah 

.

In any professional practice one often deals with real and probable assets, advantages and rights. These accrue to a client as a result of not only a professionals’ actions, but often intentions and presence.

Professionals and Clients on their own and together try to assess the cost and value of things they deal with. Professionals have to operate within certain limits. These limits are monetary requirements and non-monetary obligations such as the laws, social confirmation and professional ethics.

Monetary requirements are largely defined by the costing of the action or involvement. The professional, however, would go beyond the costing process and justify the professionalism by Valuation. In functional sense the value shows how much professionalism has helped a client gain something beyond the nominal cost of acquisition. Whereas, a Client wants to know, if the intervention of a professional, translates into an advantage.

1915_Ford_Model_T_Runabout

Valuations determine, what one would gain by acquiring, or disposing something. Value reflects an addition or deduction to wealth. Cost at the moment of transfer of ownership or usage rights may or may not reflect the Value of an item, but it helps in a better judgement of the Value.

Cost, Value and Design Practice: In design field valuation is made for all types of properties to assess their wealth. Whereas, the Costing is done to determine the expenditure (actual or probable) and thus the immediate Value of an object. Often people (connoisseurs) need to know, if an entity means wealth in the Cost or Value Terms, and in what proportion, and, so may carry out both. Routine jobs have a predictable Cost. However, jobs with substantial intellectual effort accomplish more than the cost of implementation. So, a dilemma occurs, should one charge a Professional Fee on the total Cost of the job, or Value accruing out of the job? Authors of creative efforts must know how to Value their accomplishments, and thereby demand fair compensation or ‘Commission’ for it. Designers need to know both the Cost and Value of their professional services.

There are two types of Valuations. Valuation of monetary nature, and Valuations of Non-monetary nature. Both together provide to true assessment of a possession.

The Danish Royal Library Wikipedia Image

Valuation of Monetary nature

Monetary valuations are not very different from Costing exercises. Though here utility, desirability, scarcity, availability and marketability etc. of an item are assessed in Monetary Terms, rather than Market equivalent Costs of such items. Value Assessments are very subjective, and so may not seem rational. It is the experience of the Valuer that imparts some degree of objectivity and also reliability to the valuation.

QueueValuations of Non-monetary nature

Valuations of non-monetary nature, are made to check the adherence to values, customs, traditions, ethos, rules, regulations, laws, etc. Greater adherence to these issues results into higher Value application to the product. Non monetary Valuations have a relevance only to people who are concerned with it in some way. Often negative or repulsive aspect of an entity, such as Hitler’s memorabilia, blacks magic tools, due to their rarity, invites a connoisseur’s favour. Non monetary Valuation based on one aspect or few concerns are not very useful, desirable, or even reliable. Non monetary Valuations based on too many factors are not comparable, so must be scaled into some economic or monetary component. These, makes Valuation, a very complicated process.

Lakefront_Airport_-_Restored_Deco_Interior

Evaluations

Quantity estimates deal with actual measures and real life conditions but, in some situations do not serve much purposes. Quantity estimates to be meaningful are correlated with other values. With quantity estimates remaining constant, the co-related values are considered as the variables. The most common is the ever changing monetary value. Many such Values are measurable and realistic that, compared to other difficult to measure and abstract values like the ecological or social relevancies.

food_street_lahore

.