Land and Building Valuation Applications
What this domain tests
Applications test whether you can adapt the same valuation principles to a purpose: mortgage security, insolvency, insurance, taxation, financial reporting, rental or acquisition. The purpose changes the basis, assumptions and reporting, not the underlying arithmetic.
Core rules
- Mortgage: the lender wants sustainable market value and forced-sale sensitivity. Loan-to-value (LTV) is a lending decision, not a valuation output. State whether value is with vacant possession or subject to tenancy.
- Insolvency: under the IBC read with the CIRP Regulations, 2016, the resolution professional appoints two registered valuers to determine liquidation value, defined as the estimated realisable value if the assets were liquidated. Use the valuation date and assume a constrained sale.
- Insurance: reinstatement value, not market value; include demolition and professional fees as instructed.
- Taxation and financial reporting: stamp-duty circle rates are a floor for guidance, not evidence of market value; Ind AS 113 fair value is an exit price.
Worked example
Market value of a factory is ₹10.0 crore. For liquidation value, apply a 15% forced-sale discount (₹1.5 crore) and deduct selling costs of 4% of market value (₹0.4 crore): ₹10.0 − ₹1.5 − ₹0.4 = ₹8.1 crore. The discount must reflect the specific asset, market depth and legal constraints; it is not a standard percentage.
Traps
Using insurance reinstatement value for a mortgage; quoting a forced-sale figure without disclosing the assumption; ignoring tenancy in insolvency valuations; confusing circle rate with market value; applying a generic haircut.