How To Calculate Land Value In India

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Land is one of the fixed assets that can assure a fixed return on investment in the future. Thus, it is pivotal to determine its actual worth. The market valuation of land is an amount the buyer will pay for it, considering its location, size, zoning, shape, and other key factors.

There are numerous methods of calculating the market value of land before selling or investing in land. Also, one must note that the value of land keeps fluctuating with the evolving economy. Know how to calculate land value with the below given methods.

1. Comparative Method for Market Valuation of Land

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

Consider a case where your plot measures 1200 sq.ft. 

A similar plot of size 2500 sq.ft. was sold in your locality for 90 lacs. 

So, it’s per sq.ft. rate would be 3600/-

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

                                                                                                   = 43.2 Lacs/-

To know how to calculate land value in India, 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 Lakhs.

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 upcoming Navi Mumbai International Airport. 

Once the plans for the airport were firmed up, the prices started rising spectacularly.

As per Hindustan Times – Plots that used to cost ₹10,000 per sqm have now appreciated to ₹2.5 lakh sqm!

To know more about increasing land prices, you should know the best places for land investment in India.

Here’s the formula on how to calculate 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 –  You should use this method when you want to calculate the potential value of a land parcel that is near a proposed infrastructure project such as a sea-link or an airport. 

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3. Land & Building Method for Land Valuation

With this method, the land and building value are calculated separately to find the final value of the property. 

Here’s how to calculate land value by the land & building method – 

So, consider a case where it takes around 40 lakhs to reconstruct a building and its estimated depreciation value is 7 lakhs. 

The building value would be = 40 – 7 lakhs

                                          = 33 lakhs

Now say the value of your property after calculating the rental income is 70 lakhs. 

So, the land value here would be = 70 – 33

                                                        = 37 lakhs 

When to use this method – Use this mode of land value calculation if you want to separately know the value of the land and the building constructed on it. 

4. Belting Method to Calculate Land Value

Under the belting method, the total land is divided into 3 belts. 

• The 1st belt is the nearest to the main road, and it is given the highest value. It usually stretches till 10 to 100 ft. 
• The 2nd belt is usually taken from 100 to 200 ft. It is given 75% of the value of the first belt. 
• The 3rd belt is taken from 200 ft. onwards. It is given 50% of the value of the first belt.

So, if belt 1 costs 20 lakhs, belt 2 would cost 15 lakhs, and belt 3 would be 10 lakhs. 

The total land value = 20 + 15 + 10 

                        = 45 Lakhs

When to use this method – 

It is quite useful if you want to know how to calculate land value rates for a large number of acres. 

Often, it becomes quite difficult to measure the rates for huge plot sizes such as say, 200 acres of land. 

Remember that not every acre in the 200 acre land parcel would have the same value. 

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. 

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. 

5 Steps To Get A Land Valuation Certificate

1. Fill the application form for a land valuation certificate at the Tehsildar Office
2. Submit the form with the required documents such as land deed, survey number, revenue receipt, etc. 
3. The concerned authority will review your application 
4. Once it is approved, you need to pay the application fee for which you will receive an acknowledgement receipt.
5. It can take around 15 days for your application to be processed, after which you will receive the land valuation certificate.

To sum up, land is a great asset and you should know all about land investment and how it is beneficial in India. Once you know its importance and how to calculate land value, you will be able to make an informed decision before buying or selling a plot of land.

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