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Practical Valuation - Volume 18

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Practical Valuation - Volume 18

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Mohit

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You are on page 1/ 673

PRACTICAL VALUATION - VOLUME 18

(Fourth revision - May 2020)

REGISTERED VALUER EXAMINATION

LAND & BUILDING

MULTIPLE CHOICE QUESTIONS FOR 71 MARKS

B. KANAGA SABAPATHY
(II)
(i)

MULTIPLE CHOICE QUESTIONS FOR

REGISTERED VALUER EXAMINATION

(on certain topics related to Real estate valuation mentioned in the
syllabus for Registered Valuer Examination - Land & Building)

PRACTICAL VALUATION - VOL. 18

(All subsequent additions Vol. 18A to Vol. 18J and addition in syllabus
with effect from 01.06.2020 are incorporated)

B. KANAGA SABAPATHY
BE, FIV, FIE, FICA, C. Engg., PE.,..

No.1, Prestige Flats Off : 0431 - 2462232

No.6, Reynolds Road, Mob & Whatsapp : 97918 - 74829
Cantonment Email : bkvaluer@gmail.com
Tiruchirappalli - 620 001 (TN) Web : www.bkanagasabapathy.com

Soft copy : Rs. 1,000/-

(ii)

March 2018
July 2018
First revised edition - August 2018
Second revised edition - November 2018
Third revised edition - September 2019
Fourth revised edition - May 2020

Price : Soft copy : Rs. 1,000/-

Publisher & Seller :

Mrs. EZHILARASI KANAGA SABAPATHY
1, Prestige Flats; 6, Reynolds Road
Tiruchirappalli - 620 001 (TN)
Phone : 0431 - 2462232
Mobile & Whatsapp : 97918 - 74829
E.mail : bkvaluer@gmail.com
Web : www.bkanagasabapathy.com

Typeset : M. PREETHI

Printers : RAJKUMAR PRINTERS

Puthur, Tiruchirappalli - 620 017
Phone : 0431 - 2771845

Note :

1) All the 25 books on valuation written by this

author are available only in the above address.

2) Those who are interested in purchasing the

soft copy of the book can credit the amount
Rs. 1,000/- in the following account and SMS
or whatsapp complete details including their
Email id to 97918 - 74829 and also email to :
bkvaluer@gmail.com

K. EZHILARASI
City Union Bank, Cantonment
Tiruchirappalli - 620 001. (TN)
Savings account no. 500 101010 597268
IFS Code: CIUB 0000 153

3) The website www.bkanagasabapathy.com

may be referred for the contents of the book
and for more details.
(iii)

DEDICATED TO

Mr. R. Jayaraman
(a fellow valuer and faculty from Tiruchirappalli)
who motivated me to write this book
(iv)

DISCLAIMER

• While every effort is taken to avoid errors or omissions in this publication, any
mistake or omission that might have crept in is not intentional. It may be taken
note of that neither the publisher nor the author will be responsible for any
damage or loss of any kind arising to any one in any manner of account of such
errors and omissions.

• Mistakes / errors, if any, may please be highlighted.

(v)

B. Kanaga sabapathy 01.09.2020

Author of 25 books on valuation

PREFACE - III

1. After incorporating the changes made in the revised syllabus which is effective
from 01.06.2020, this edition is made available for the aspirants who appear for
Insolvency and Bankruptey Board of India (IBBI) examination.

2. Since 71 marks are allotted for the technical portions which include 20 marks
exclusively for the case studies, I expect that the valuers can secure the pass mark of
60 comfortably. Let us be optimistic. Consistent hardwork is necessary and
combined study is advised.

3. Contents of this book are for the purpose of overall guidance only.

4. With utmost good intention to help the valuers to appear for the examination, this book
has been prepared after referring many books and after consulting many fellow valuers.
The answer may change according to the amendments made then and there.
Readers must be well aware of those things. Errors, if any, may please be highlighted.

5. Please do not be under the impression that the questions & case studies given in this
book will appear (again) in the examination. The question pattern may change every
year.

“Success often comes to those who dare and act;

And seldom it goes to timids”.

Best wishes,

B. Kanaga sabapathy Tiruchirappalli - 620 001

01.09.2020
(vi)

B. Kanaga sabapathy 25.11.2018

PREFACE - II

Preliminary coaching for Registered valuer examination

1.0. Based upon the request from the aspirants of IBBI examination who have completed
their 50 hours mandatory education programme, I have been conducting regular
refresher courses for the sake of those who are yet to pass the examination.

2.0. For the purpose of giving coaching for the participants, I have prepared a few lessons
on twelve mark case studies, one mark theory questions, frequently asked questions
in the examination and mock tests. Certain revisions have also been made.

3.0. I have consolidated these revisions and additions and incorporated in the main book
of Practical valuation - Vol. 18 so that a reader can have access through the entire
materials. The ultimate aim is everyone must pass the examination.

4.0. I convey my thanks to Mr. R. Jayaraman, Tiruchirappalli who has shared his
knowledge with me in preparing this book. His interest and willingness to share the
knowledge with others are highly appreciated.

5.0. Suggestions for perfection are welcome.

Tiruchirappalli - 620 001 B. Kanaga sabapathy

25.11.2018
(vii)

B. Kanaga sabapathy 1, Prestige flats

Author of 20 books on valuation 6, Reynolds road,
Tiruchirappalli - 620 001

14.03.2018
PREFACE - I

Preliminary coaching for Registered valuer examination as prescribed by IBBI

1.0. From the year 2014, I have been conducting training programmes on valuation at
Tiruchirappalli in ten levels mainly for the sake of beginners and youngsters in the
profession.
Level I - Fundamental principles of valuation
Level II - Valuation for banks - Part I (Preliminary learning)
Level III - Valuation for taxation - Part I (Preliminary learning)
Level IV - Fixation of fair rent in Tamilnadu
Level V - Valuation for banks - Part II (Advanced learning)
Level VI - Valuation for taxation - Part II (Advanced learning)
Level VII - Court Judgements
Level VIII - Leasehold properties
Level IX - Valuation of apartments
Level X - Any advanced topic in valuation

Number of valuers who have been benefitted through these programmes have
crossed 2000.

2.0. For the purpose of conducting Registered valuer examination, Insolvency and
Bankruptcy Board of India (IBBI), the authority authorised by Ministry of Corporate
Affairs (MCA) has prescribed syllabus which consists of 33 marks for non -
technical topics and 67 marks for subjects related to Real estate valuation. A
candidate is expected to attempt 100 questions in two hours. Every question will be
of multiple choice, having four alteratives. Only one alternative will be correct and
unique. The candidate should tick the correct answer out of four. Examination will
be by on-line.

3.0. Pursuant to the request from many participants who have already undergone
(viii)

training under me, I have come forward to conduct an exclusive programme under
Level X as “Preliminary Coaching for Registered valuer examination.

4.0. Initially, I have taken up giving coaching for subjects related to real estate valuation,
i.e., for questions 34 to 94. With the little experience I have in the field of valuation,
I have prepared a set of multiple choice questions related to certain topics
indicated in the syllabus prescribed by IBBI. I intend to add some more questions in
future for the other topics left out. A set of mock test questions are also provided
alongwith the respective answers. The valuers must understand that these
questions are only indicative and they are given here mainly for the purpose for
giving preliminary coaching to the youngsters. Whether one is going to appear for
the examination or not, he must understand clearly that an opportunity has been
given to him to learn something more.

5.0. This booklet is a part of the training programme materials and they are meant purely
for internal circulation only.

All the questions and answers have been prepared with due care and diligence.
In the process of preparing the above questions, I have referred the books of Annamalai
University, Mr. R.K. Gandhi, Dr. Ashok Nain and others. I have taken a few case
studies from those books. I am thankful to them.

It must be borne in mind that these questions are only indicative. Suggestions for
further improvements are certainly welcome. Mistakes / errors can be pointed out.

6.0. I thank Mr. R. Jayaraman and N. Ravindran for their assistance in preparing the
questions.

7.0. AIM of the Level - X program : LET US LEARN SOMETHING MORE

bkvaluer@gmail.com B. Kanaga sabapathy

www.bkanagasabapathy.com 14.03.2018
(ix)

CONTENTS

Part I - Revised syllabus as prescribed by IBBI with effect - 1 - 10

from 01.06.2020.

Part II - Indicative multiple choice questions for 51 marks - 11 - 116

Sl.no. 7 to 10 of syllabus

Part III - Case studies for 20 marks - Sl.no. 11 of syllabus - 117 - 236
(Vol. 18A)

Part IV - One mark case studies - 52 nos. (Vol. 18B) - 237 - 264

Part V - A few more one mark theory questions - 156 nos. - 265 - 298
(Vol. 18C)

Part VI - Frequently asked questions in the examination - 299 - 390

- 449 nos. (Vol. 18D & E)

Part VII - Model question paper prescribed by IBBI - 391 - 408

Part VIII - Mock tests - 3 nos. - 409 - 468

Part IX - Frequently asked questions in the - 469 - 508

examination - 175 nos. (Vol. 18F, G, H, I & J)

Part X - Attachments - 3 Nos. - 509 - 540

• Model question paper as per the revised syllabus
01.04.2019
• Case studies appeared in the revised model
question paper 01.04.2019
• A few case studies useful to those who wish to
appear for Registered valuer examination

Part XI - Copy of judgements related to “Case - Laws on - 541 - 636

Principle of valuation of Real estate”

Part XII - List of reference books - 637 - 640

Part XIII - Model question paper for valuation examination in - 641 - 656
the asset class : Land & building (Based on revised
syllabus with effect from 1st June 2020)

* * *
(x)

FURTHER STUDY MATERIALS

The following study materials may also be helpful for preparing IBBI examination.

1. My book “1010 Quiz - (Practical valuation - Volume 22)” will be helpful to the

beginners not only to acquire basic knowledge in valuation but also for IBBI

examination.

2. The books - “Guide for IBBI Registered Valuers examination - Vol. 1, 2 & 3”

authored by Mr. K.S. Nagarajaiah, Bangalore. (Mob : 97400 11418 & Mail :

nagarajaiah.valuer@gmail.com)

3. IBBI examination notes - prepared by a group of practising valuers.

Contact : Mr. Samarendra Chakraborty (Mob : 93310 - 26872 & Mail :

samar_c123@yahoo.co.in).

4. Lessons prepared by various registered valuers foundation like IOVRVF,

PVAI VPO, CVSRTA, etc.

* * *
(xi)

Attention Readers

1. Please note that these study materials are mainly for the purpose of giving an overall
guidance for the purpose of IBBI examination. Depending upon the prevalent
conditions, amendments, you must take a judicious approach and answer the
questions accordingly.

2. a) Go through the study materials not only for the purpose of preparing for the
examination but also to enrich your knowledge.

b) Share these materials to others so that they can also pass the examination.
“Let Knowledge Spread”.

c) Ignore if there are any repetitions.

d) Please give feedback if there are any mistakes / errors.

3. I advise you to refer the books of the following authors to have more knowledge in the
field of valuation. You must have atleast 50 books on valuation in your library if you
want to call yourself a Professional Valuer.

i) Mr. R.K. Gandhi

ii) Dr. Ashok Nain
iii) Mr. Kirit P. Budhbhatti
iv) Mr. Shyamales Datta
v) Mr. S.H. Gondane
vi) Mr. P.T. Hardikar
vii) Mr. N.K. Rajkumar
viii) Mr. Mahendra Kakule
ix) Centre for Valuation Studies, Research and Training Association
(CVSRTA), India.

* * *
(xii)
1

Pages 1 - 10
PART - I

• SYLLABUS AS PRESCRIBED BY IBBI WITH

EFFECT FROM 01.06.2020.

• COMPARISON OF WEIGHTAGES IN IBBI

SYLLABUS 2018, 2019 & 2020
2

This page is kept vacant intentionally.

Insolvency and Bankruptcy Board of India

28th February 2020

Subject: Syllabus of Valuation Examination for Asset Class - Land and Building with
effect from 1st June 2020

In pursuance of the rule 5 (3) of the Companies (Registered Valuers and Valuation) Rules,
2017, the Insolvency and Bankruptcy Board of India, being the Authority, hereby publishes the
syllabus, format and frequency of the ‘Valuation Examination’ for the asset class: Land and
Building to be commenced from 1st June 2020.

I. Syllabus

Sl. Coverage Weight

No. (%)
1. Principles of Economics - Microeconomics 3
- Consumption: Indifference curve, consumer surplus, elasticity
- Price mechanism: determinants of price mechanism; individual and
market demand schedules; conditions, exceptions and limitations of
law of demand; individual and market supply schedules; conditions
and limitations of law of supply; highest, lowest and equilibrium price;
importance of time element
- Pricing of products under different market conditions: perfect and
imperfect competition, monopoly etc.
- Factors of production and their pricing: land, labour, capital,
entrepreneur and other factors
- Theory of rent
- Capital and interest: types of capital, gross interest, net interest
- Organisation and profit: functions of entrepreneur; meaning of profit
and theories of profit
Macroeconomics 3
- Functions and role of money
- Inflation: types of inflation; causes and effects of inflation;
Inflationary gap
- Control of inflation: monetary, fiscal and direct measures
- Deflation: causes and effects of deflation; deflationary gap; measures
to control deflation; deficit financing
- Savings and investment: savings and types of savings; determinants of
savings; investment and types of investment; determinants of
investment; relationship between savings and investment
- Components of economy: primary sector, secondary sector, tertiary
sector; informal sector in urban economy; parasitic components in
urban economy
- Concepts of gross domestic product and gross national product; capital
formation etc.

Parallel Economy 1
- Definition of parallel economy; causes of parallel economy and effects
on use of land and its valuation
- Impact on real estate market and construction industry
Syllabus of Valuation Examination for Asset Class - Land and Building with effect from 1st June 2020
4

Sl. Coverage Weight

No. (%)
2. Book-keeping and Accountancy 3
- Meaning and objects of book-keeping; double entry book-keeping
- Books of prime entry and subsidiary books: cash book, bank book,
journal, ledger, purchase and sale books, debit and credit notes
register; writing of books; posting and closing of accounts
- Trading account; profit and loss account; income and expenditure
account
- Preliminary analysis of financial statements
- Cost and costing; elements of cost - fixed expenses, variable expenses,
break-even point

3. Law - General 7
- Indian legal system: salient features of the Indian Constitution,
fundamental rights, directive principles of state policy
- Government: executive, legislature and judiciary
- Laws of contract: formation of a contract, parties, void, voidable and
unenforceable contract, contingent contract, misrepresentation, fraud
and effect thereof, termination of contract, remedies for breach,
performance of contract, indemnity and guarantee, law of agency
- Tort: general principles of tort, tort affecting valuation
- Law of arbitration and conciliation: salient features
- Auction: authority of auctioneer, duties of vendor, purchaser and
public, mis-description and misrepresentation, advertisements,
particulars and catalogues, statements on the rostrum, conduct of sale,
reservation of price, right to bid, bidding agreements, memorandum of
the sale, deposit, rights of auctioneer against vendor and purchaser
- Laws of evidence: burden of proof, presumptions, conclusive proof

- Salient features of the Insolvency and Bankruptcy Code, 2016 3

concerning valuation
- The Companies Act, 2013: Section 192(2), 230 (1), 230 (2), 230 (3),
231, 232, 247 and 281(1)
- Salient features of the Companies (Registered Valuers and Valuation)
Rules, 2017
- Salient features of the Securitization and Reconstruction of the
Financial Assets and Enforcement of Security Interest Act, 2002
(SARFAESI Act, 2002) concerning valuation
- Section 5(n) of the Banking Regulation Act, 1949 on “secured loan or
advance”

4. Introduction to Statistics 2
- Data classifications and processing, graphical representation of data,
frequency distributions
- Measures of central tendency, dispersion and skewness
- Elementary theory of probability and probability distributions,
sampling and sampling distributions
- Simple test of significance, regression and correlation, multiple
correlation coefficient
- Time series
- Index numbers
Syllabus of Valuation Examination for Asset Class - Land and Building with effect from 1st June 2020
5

No. (%)
10. Report writing 3
- Reports: quality, structure, style
- Report writing for various purposes of valuation: sale, purchase,
purchase, mortgage, taxation, insurance, liquidation etc.
- Contents of the report: instruction of clients; date as on which
valuation is made and date of report; site inspection; location;
ownership history; data collection and analysis; type of construction;
valuation method; value estimation; assumptions and limiting
conditions including caveats and conclusion
11. Case Study 20
Two case studies on valuation of land and building:
- One case study with six 2-mark questions, for 12 marks
- One case study with four 2-mark questions, for 8 marks
(This section will have case studies for application of valuation
techniques. For each case there will be a comprehension narrating the
transaction based on which questions will be asked from the case)
Total 100
Note: Wherever any Law, Act of Parliament or any Rule/Regulation is referred in the syllabus,
the same shall be taken as updated as on 29th February 2020.

II. Format and Frequency of Examination

a. The examination is conducted online (computer-based in a proctored environment) with
objective multiple-choice questions;
b. The examination centres are available at various locations across the country;
c. The examination is available on every working day;
d. A candidate may choose the time, the date and the Examination Centre of his choice for
taking the Examination. For this purpose, he needs to enrol and register at
https://certifications.nism.ac.in/nismaol/ ;
e. A fee of Rs.1500 (One thousand five hundred rupees) is applicable on every enrolment;
f. The duration of the examination is 2 hours;
g. A candidate is required to answer all questions;
h. A wrong answer attracts a negative mark of 25% of the marks assigned for the question;
i. A candidate needs to secure 60 % of marks for passing;
j. A successful candidate is awarded a certificate by the Authority;
k. A candidate is issued a temporary mark sheet on submission of answer paper;
l. No workbook or study material is allowed or provided;
m. No electronic devices including mobile phones and smart watches are allowed; and
n. Use of only a non-memory-based calculator is permitted. Scientific Calculators
(memory based or otherwise) are not allowed.

Further details of the Examination, if any, will be provided subsequently.

*****

Syllabus of Valuation Examination for Asset Class - Land and Building with effect from 1st June 2020
9

COMPARISON OF WEIGHTAGES IN IBBI SYLLABUS 2018, 2019 & 2020

S.No. Subject Weightage % Weightage % Weightage %

in 2018 in 04/2019 in 06/2020

01. Micro Economics Total - 10 marks 4 marks 3 marks

Macro Economics 4 marks 3 marks

Parallel Economy 2 marks 1 mark

02. Book keeping & 5 marks 3 marks 3 marks

Accountancy

03. Law - General 6 marks 12 marks 10 marks

04. Introduction to Statistics 4 marks 2 marks 2 marks

05. Environmental issues in 4 marks 4 marks 3 marks

valuation

06. Professional Ethics & 4 marks 2 marks 4 marks

Standards

33 marks 33 marks 29 marks

07. Law - Real Estate 10 marks 8 marks 8 marks

08. Valuation of Real estate 13 marks 14 marks 10 marks

Income approach to value 7 marks 8 marks 7 marks

Market approach to value 5 marks 8 marks 7 marks

Cost approach to value 5 marks 8 marks 7 marks

Various purposes of 6 marks 4 marks 4 marks

valuation

Important Case laws on 2 marks 2 marks 2 marks

Principles of valuation

09. Principles of Insurance 5 marks 4 marks 3 marks

and Loss assessment

10. Report writing 2 marks 3 marks 3 marks

11. Case study 12 marks 8 marks 20 marks

67 marks 67 marks 71 marks

Total marks 100 marks 100 marks 100 marks

This page is kept vacant intentionally.

Pages 11 - 116
PART - II

MULTIPLE CHOICE QUESTIONS

Sl.no. 7 of syllabus - 08 marks Pages 13 - 29

Sl.no. 8 of syllabus - 37 marks Pages 30 - 108

Sl.no. 9 of syllabus - 03 marks Pages 109 - 114

Sl.no. 10 of syllabus - 03 marks Pages 115 - 116

51 marks
12

This page is kept vacant intentionally.

INDICATIVE MULTIPLE CHOICE QUESTIONS

7. LAW - REAL ESTATE (TOTAL 8 MARKS)

1. How the market value of the property is determined in LARAR?

a) 5 years average GLV b) 3 years average GLV

c) GLV as on the date d) Property on going market value

2. What is the basis of fixing market value in LARAR?

a) Value nearer to that place b) 3 Kms surrounding that place

or village
c) Property value on current d) Mutual agreement value
market rate

3. Who has the power of taking possession of acquired land?

a) District Collector b) Village Administration officer

c) The District Court d) Central Government
4. As per Section 23 of LARAR, the market value is determined as on which date?

a) Date of publication b) Date of Notification

c) Date of possession d) Date of compensation of award

5. As per Section 23, what is the additional percentage value given for compulsory
acquisition by court?

a) 15% b) 20% c) 30% d) 40%

6. As per Section 49, who has the power to acquire a part or full area of the building?

a) District Collector b) Village Administrative officer

c) The District Court d) Central Government

7. What is the minimum period for return of the unutilized acquired property?
14

a) 5 years b) 3 years
c) 7 years d) 2 years

8. Can an assigned government / patta land can be taken for acquisition?

a) It can be taken b) It cannot be taken

c) Depending on the value of land d) Only a part of land is taken

9. Limit of acquisition of land is restricted for

a) Railways b) Highways
c) Power lines d) Agricultural lands

10. What is the power given in Section 51 of LARAR?

a) Exemption of stamp duty b) Award more value for acquisition

c) Release of property to owner d) Acquiring additional area

11. Basement as per Building bylaws is excluded in floor area ratio if

a) Used as shop b) Used as car park

c) Used as residence d) Used as godown

12. For group housing, the density pattern is taken per dwelling unit as

a) 4.50 persons per DU b) 6.00 persons per DU

c) 2.50 persons per DU d) 3.50 persons per DU

13. Is it right to say that size of the plot determines the number of dwelling unit?

a) Correct b) Not correct

c) May be d) Irrelevant

14. As per the building bye-laws, the minimum open car space as per parking standards
is

a) 18.00 square metre b) 28.00 square metre

c) 13.00 square metre d) 23.00 square metre

15. As per the building bye-laws, the minimum covered car space as per parking
standards, is
15

a) 18.00 square metre b) 28.00 square metre

c) 13.00 square metre d) 23.00 square metre

16. As per the building bye-laws, the minimum basement car space as per parking
standards, is

a) 18.00 square metre b) 28.00 square metre

c) 13.00 square metre d) 23.00 square metre

17. Rent Control Act is applicable for properties like

a) Public building b) Agricultural

c) Owner occupied d) Tenanted property

18. As per which Act, the tenancy right is only occupancy right and the eviction right is
to the landlord?

a) Succession Act b) SARFEASI Act

c) Easement Act d) Rent control Act

19. Ownership rights in rent controlled properties

a) Can be transferred b) Can not be transferred

c) Has pledging rights d) Power to make improvements

20. The value of the Rent Controlled properties will have a

a) High market value b) Both low and high

c) No difference d) Low market value

21. In rent control act, the fair rent is to be determined on which date?

a) Date of Petition b) Date of inspection

c) Date of valuation d) Date of award

22. In rent control act, the depreciation is determined by

a) W D V Method b) Any method can be followed

c) Linear Method d) Straight line method
16

23. What is an appurtenant land, as defined in rent control act (Tamilnadu)?

a) 50% over building plinth area b) Total extent of property land

c) 70% over building plinth area d) 60% over building plinth area

24. In case of a rented building in third floor, how the land is proportioned (Tamilnadu)?

a) 1/3 share of the land b) Total extent of property land

c) 30% over building plinth area d) 50% over building plinth area

25. Ownership rights under licensed properties

a) Transferred b) Cannot be transferred

c) Pledging rights d) Power to make improvements

26. Tenancy period under licensed properties is

a) Limited to 5 years b) As per the license agreement

c) Cannot be stipulated d) Rest only with the licensee

27. The value of the licensed property can be done by

a) Cost approach b) Market approach

c) Any other method d) Income approach

28. The revocation of licensed property is not applicable

a) Granted for a limited period b) When licensee is not releasing

c) Licensee becomes absolute d) License is unbroken for 20 years
owner

* * *

Answers :

1 - b 9 - d 17 - d 25 - b
2 - a 10 - a 18 - d 26 - b
3 - a 11 - b 19 - b 27 - d
4 - a 12 - a 20 - d 28 - c

5 - a 13 - a 21 - a
6 - c 14 - a 22 - c
7 - a 15 - d 23 - a
8 - a 16 - b 24 - a
17

THE TRANSFER OF PROPERTY ACT, 1882

1. What is the law by which the property acquisition cannot be made?

a) Government Grants act 1895 b) Indian succession Act, 1925

c) Indian Limitation act 1963 d) Indian Easement Act, 1882

2. What is the name of the act which governs grant?

a) Government Grants act 1895 b) Indian succession Act, 1925

c) Indian Limitation act 1963 c) Transfer of Property Act, 1882

3. How the Government land is transferred?

a) By assignment b) By Will
c) By adverse possession d) By Gift

4. What is the Method of assignment?

a) Assignment by issue of patta b) Will

c) Adverse possession d) Gift

5. What is the property type which is not assigned by the Government normally?

a) Mining lands b) Quarries

c) Settlement lands d) Town property

6. What is the act which governs succession?

a) Government Grants act 1895 b) Indian succession Act, 1925

c) Indian Limitation act 1963 d) Transfer of Property act, 1882

7. What is the law which is not governing succession?

a) Indian succession Act, 1925 b) Hindu Succession act

c) Mohammedan law of Succession d) Transfer of Property act, 1882

8. Which person can acquire ownership by succession?

a) Property owner b) Owner’s legal heir

c) Under adverse possession d) Trespasser

9. Which is not the way for property transfer to owner’s legal heir?

a) Will b) Lease c) Gift d) Settlement

10. An adverse possession is governed by which law?

a) Indian succession Act, 1925 b) Government Grants act 1895

c) Laws of prescription of Indian d) Transfer of Property act, 1882
limitation act 1963

11. Which act governs the Conveyance of property?

a) Indian succession Act, 1925 b) Government Grants act 1895,

c) Laws of prescription of Indian d) Transfer of Property act, 1882
limitation act 1963

12. What is an Immoveable property as per transfer of Property Act?

a) Standing timber b) Growing crops or grass

c) Transport vehicle d) Imbedded to earth –building

13. Which is not required for registration of property in transfer?

a) A Registered document b) Physical delivery of property

c) Attestation of Witnesses for d) Property ownership possession
registration

14. Who are not eligible for registration of property in transfer?

a) Companies b) Associations of persons

c) One or more living persons d) Mentally retarded / legally
disqualified

15. Which are not corporeal rights?

a) Right on tangible assets b) Right on material objects

c) Right on movable & immovable d) Rights is on intangible assets
properties
19

16. A sole ownership means

a) A person owning a thing b) Two persons owning a thing

c) Exclusive ownership of a c) A trust owning a property
company

17. A co-ownership or concurrent ownership means

a) A person owning a thing b) Two persons owning at the same

time
c) Exclusive ownership of a d) A trust owning a property company

18. A trust and beneficial ownership is

a) Solely for the benefit of the trust b) 2 persons owning at the same time
c) Exclusive ownership of a company d) A person owning a thing

19. An absolute ownership means

a) Trustee on land ownership b) Clear, perfect title, vested ownership

c) Legal ownership of the property d) Exclusive ownership

20. A contingent ownership means

a) Trustee’s land ownership b) Conditional right, with limitations

c) Legal ownership of the property d) Exclusive ownership

21. A corporeal Possession or a direct and primary Possession is

a) Owner of a building, car, factory b) Copyrights, patents, trademarks

c) Leasehold rights d) Firm goodwill

22. What is a Representative Possession?

a) Owner of a building, car, factory b) Copyrights, patents, trademarks

c) Servant holding owner’s money d) Leasehold rights / Firm goodwill

23. What is a Concurrent Possession?

a) Sole owner of a building, car, b) Copyrights, patents, trademarks

factory
20

c) Leasehold rights / Firm goodwill d) By 2 persons jointly at the same time

24. What is an Adverse Possession?

a) Sole owner of a building, car, b) Copyrights, patents, trademarks

factory
c) Leasehold rights / Firm goodwill d) Undue ownership rights claim by
other person not having the right

25. Transfer of property act, 1882 applies to?

a) Transfer by government b) Non-living person

c) By will d) Conveyance of property

26. As per Transfer of property act, 1882, the property that can be transferred is

a) Succession by legal heirship b) Tenancy rights of occupancy

c) Right of entry or breach of d) Clear perfect title ownership
conditions

27. Who is called a mortgagor?

a) Account holder b) Banker

c) Sundry Creditor d) Person pledging an interest

28. Who is called a mortgagee?

a) Account holder b) Person securing loan advanced

c) Sundry Creditor d) Person pledging an interest

29. What is called a mortgage money?

a) Sundry Credits b) Loan advanced

c) Principal + interest on loan d) Interest security
secured

30. What is called a mortgage deed?

a) Transfer deed for loan secured b) Loan statement

c) Lien document on deposits d) Interest statement
21

31. When does a mortgage by conditional sale become non-effective?

a) On default of mortgage-money b) Sale is void if the mortgagor pays

payment
c) Mortgaged property buyer has to d) If sale conditions are not there in
retransfer the property when loan the mortgage deed
is fore closed

32. The Local body authorities for nonpayment of statutory taxes, has taken land of a
company as security and mortgaged towards the taxes due to them. Till the time of
repayment of taxes it enjoys the land and derived the benefits and adjusted towards
the company’s dues to them. What is the type of mortgage?

a) Simple mortgage b) Conditional Sale

c) Usufructuary mortgage d) English mortgage

33. As per Section 96, mortgage done by deposit of title-deeds is called as?

a) Simple mortgage b) Conditional Sale

c) Usufructuary mortgage d) English mortgage

34. What are rights conferred in assignment?

a) Transfer of rights held by the b) Assignee involvement in a contract

assignor
c) Transfer of an equitable interest d) Non-consent of non-assigning party

35. When revocability of a gifted assignment cannot be carried out?

a) If the obligor has already b) If the assignee is in custody of

performed investments
c) Assignor’s death or bankruptcy d) Contract containing
non assignment clause

36. When a lien is not called as common-law lien?

a) A passive right to retain & b) No power of sale

cannot be transferred
c) If law conferring sale power d) If surrendered & contract sale
22

37. Lease requires registration as per the

a) Government Grants act 1895 b) Indian succession Act, 1925

c) Indian Limitation act 1963 d) Transfer of Property Act, 1882

38. Conditional transfer as per Sec. 25 is possible if?

a) Forbidden by law or immoral b) Fraudulent conditions

conditions
c) Implies injury to person or property d) The condition is possible & can be
fulfilled

39. Transfer as per Sec. 53 does not mean fraudulent if?

a) Intention to delay the transferor b) With fraudulent conditions

c) Transfer is done with d) Intention to defraud by reason
consideration done

* * *

Answers :

1 - d 9 - b 17 - b 25 - d 33 - a
2 - a 10 - c 18 - a 26 - d 34 - d
3 - a 11 - d 19 - b 27 - d 35 - d
4 - a 12 - d 20 - b 28 - b 36 - c

5 - d 13 - b 21 - a 29 - c 37 - d
6 - b 14 - d 22 - c 30 - a 38 - d
7 - d 15 - d 23 - d 31 - d 39 - c
8 - b 16 - a 24 - d 32 - c
23

LEASE OF IMMOVABLE PROPERTY

1. While transfer of property to lessee under lease, the lessor is not required to pay
capital gains

a) False b) True c) May or may not d) Not relevant

2. If both land and building are given on lease, it is called occupational lease.

a) False b) True c) May or may not d) Not relevant

3. A leased property is normally valued by income approach.

a) False b) True c) May or may not d) Not relevant

4. Capital value is net income multiplied by years purchase.

a) False b) True c) May or may not d) Not relevant

5. 99 years lease with renemal clause is called a perpetual lease.

a) False b) True c) May or may not d) Not relevant

6. Lease for life is not common in India.

a) False b) True c) May or may not d) Not relevant

7. Net profit rent for lessee = Rack rent minus ground rent minus outgoings.

a) False b) True c) May or may not d) Not relevant

8. The rights of lessor / lessee depends upon the conditions stipulated in the lease
deed.

a) False b) True c) May or may not d) Not relevant

9. Even in a perpetual lease, the lessee’s right will be low, if the unexpired period is
less.

a) False b) True c) May or may not d) Not relevant

10. The handing over of open land back to the lessor is called Reversion.

a) False b) True c) May or may not d) Not relevant

11. A property is a bundle of rights.

a) False b) True c) May or may not d) Not relevant

12. The word “covenant” indicates the terms and conditions stipulated in any deed.

a) False b) True c) May or may not d) Not relevant

13. A man cannot grant a lease to himself.

a) False b) True c) May or may not d) Not relevant

14. Perusal of lease deed is the first duty of a valuer if he wants to value a leasehold
property.

a) False b) True c) May or may not d) Not relevant

15. A “deposit” is the amount which is returnable on fulfillment of certain conditions.

a) False b) True c) May or may not d) Not relevant

16. The amount of Re. 1 per annum is the reciprocal of the sinking fund.

a) False b) True c) May or may not d) Not relevant

17. The rate of capitalisation in leasehold depends on the money market from time to
time.

a) False b) True c) May or may not d) Not relevant

18. The capital value of income can be detemined from the net income and the
percentage return required on investment.

a) False b) True c) May or may not d) Not relevant

19. The rate of capitalisation for a leasehold interest in general is 1% more than the
freehold interest.

a) False b) True c) May or may not d) Not relevant

20. A token amount or a nominal rent is called as a Acknowledgement rent.

a) False b) True c) May or may not d) Not relevant

21. If the unexpired period of lease is short, the value of lessor’s share will be more.

a) False b) True c) May or may not d) Not relevant

22. If the unexpired period of lease is very long, the value of lessee’s share will be
more.

a) False b) True c) May or may not d) Not relevant

23. A leaseholder’s interest in a property will normally decrease with the passage of
time and ultimately extinguish with the expiry of lease.

a) False b) True c) May or may not d) Not relevant

24. Net Rent = Gross rent - Outgoings.

a) False b) True c) May or may not d) Not relevant

25. Longer period of lease enables the lessee to recover his capital invested in the
improvement of the land.

a) False b) True c) May or may not d) Not relevant

26. Ground rent is well secured when improvement is done on the land given on lease.

a) False b) True c) May or may not d) Not relevant

27. In the case of sub - lease, if the proposed ground rent is higher han the original
ground rent, then it is known as improved ground rent.

a) False b) True c) May or may not d) Not relevant

28. Valuation procedure for a freehold property and a leasehold property with a
perpetual lease is not same.

a) False b) True c) May or may not d) Not relevant

29. The provisions or terms of lease would decide the share value of lessor and
lessee.

a) False b) True c) May or may not d) Not relevant

30. When lessor’s interest is valued, single rate table is normally to be used.

a) False b) True c) May or may not d) Not relevant

31. A lease where lessee has undertaken to carryout all the repairs and to bear all
outgoings is called as “Full Repairing Lease”.

a) False b) True c) May or may not d) Not relevant

32. In the case of perpetual lease with covenant of renewal, the lessor cannot
terminate the lease or refuse to renew the same as long as the lessee do not
violate any terms specified in the lease agreement.

a) False b) True c) May or may not d) Not relevant

33. Higher the rate of capitalisation, lower is the value of the asset.

a) False b) True c) May or may not d) Not relevant

34. Lower the rate of capitalisation, higher is the value of the asset.

a) False b) True c) May or may not d) Not relevant

35. If the document creates an interest in the property, it is a lease. But, if it only
permits another person to make use of the property for a temporary period, then it
is a licence.

a) False b) True c) May or may not d) Not relevant

36. The owner of a freehold property can do anything with his property.

a) False b) True c) May or may not d) Not relevant

37. A freehold property is the highest form of ownership.

a) False b) True c) May or may not d) Not relevant

38. Licence and lease are not same.

a) False b) True c) May or may not d) Not relevant

39. The leaseholds are less attractive than freeholds from the investment point of view.

a) False b) True c) May or may not d) Not relevant

40. The sub - lease can be granted only for a period which is less than the original
lease period.

a) False b) True c) May or may not d) Not relevant

41. A rent is governed by the Rent control act. A licence is governed by the Easement
act. A lease is governed by the Transfer of Property act.

a) False b) True c) May or may not d) Not relevant

42. Schedule III can not be adopted for valuation of leasehold rights.

a) False b) True c) May or may not d) Not relevant

* * *
Answers :

1 to 42 - b
28

THE TRANSFER OF PROPERTY ACT, 1882

1. Which one of the following sections of the transfer of property act, defines notice?

a) Section 2 b) Section 3
c) Section 5 d) Explanantion II of section 3

2. Transfer of property is defined in

a) Section 4 b) Section 5
c) Section 6 d) Section 10

3. Which section lays down that property of any kind may be transferred, except as
otherwise provided by this act or by any other law for the time being in force

a) Section 6 b) Section 7
c) Section 8 d) Section 9

4. Fraudulent transfer is contained in

a) Section 53 b) Section 54
c) Section 55 d) Section 56

5. Plaintiff seeks specific performance of an oral contract and alternatively pleads

benefit of section 53 - A of the transfer of property Act - whether alternative relief

a) Can be granted b) Can be granted subject to

conditions
c) Depends on proof by plaintiff d) Cannot be granted

* * *

Answers :

1 - b, 2 - b, 3 - a, 4 - a, 5 - d

Courtesy : Mr. K.S. Nagarajaiah

MOHMEDAN - PERSONAL LAW, THE HINDU SUCCESSION ACT, 1956, THE HINDU
SUCCESSION (AMENDMENT) ACT, 2005 (39 OF 2005)

THE INDIAN SUCCESSION ACT, 1925, LAW OF SUCCESSION FOR PERSON

OTHER THAN HINDU AND MOHMEDAN, WILL & TESTAMENT; SUCCESSION
CERTIFICATE

1. Property acquired by a male under Hindu succession act is his

a) Separate property
b) Ancestral property
c) Separate property in relation to existing members
d) None of these (Depends on facts and circumstances)

2. A Hindu dies intestate leaving behind two sons one daughter and window. His
property shall devolve to

a) Sons only b) Widow only

c) Sons and daughter only d) Sons, daughter and widow only

3. As per Muslim law the estate of a deceased person devolves upon his hers

a) After his death b) Before his death

c) At the moment of this death d) None of the above

4. In Muslim law, a gift consideration is called

a) Hibba b) Hiba - bil - iwaz

c) Ariyat d) Sadaque

5. Under Muslim law, the only natural guardian is

a) Father b) Mother
c) Grand father d) Grand mother

* * *
Answers :

1 - d, 2 - d, 3 - a, 4 - b, 5 - a

Courtesy : Mr. K.S. Nagarajaiah

8. VALUATION OF REAL ESTATE - COST, PRICE AND VALUE (TOTAL 37 MARKS)

1. The actual expenditure in manufacturing an asset is called as

a) Cost b) Price c) Value d) Worth

2. The amount paid for acquiring ownership is called

a) Cost b) Price c) Value d) Worth

3. Cost plus profit is called as

a) Value b) Increase cost c) Price d) Worth

4. Price is always more than the cost.

a) Need not be b) Always more c) Always less d) Definitely more

5. An estimate of the price as it ought to be, is called as

a) Cost b) Value c) Price d) Worth

6. Mr. X has spent Rs. 1 crore in constructing a residential building and he offers
Rs. 1.15 crores to sell it. The cost is

a) Rs. 1.075 crores b) Rs. 1.15 crores

c) Rs. 1 crore d) More than 1.5 crores

7. Mr. Y purchases a house for Rs. 1.15 crores as against the cost of 1.00 crore as
incurred by Mr. X. What is the cost in the hands of Mr. Y.

a) Rs. 1.15 crores b) Rs. 1.00 crore

c) Rs. 1.075 crores d) above Rs. 1.15 crores

8. The tag attached to a product in a shop for the purpose of selling is called as

a) Cost tag b) Price tag c) Value tag d) Worth tag

9. For the purpose of giving loan to a property under mortgage, the bank is directing
its valuer to certify

a) Price b) Cost c) Value d) Worth

10. To construct a new building, Mr. X has applied loan. After the construction is
completed, the bank directs the valuer to certify the

a) Cost b) Value c) Price d) Worth

11. After the construction of his new building, the assessee for the purpose of income
tax approaches the valuer and request him to certify the

a) Value b) Cost c) Price d) Worth

* * *

Answers :
1 - a 5 - b 9 - c
2 - b 6 - c 10 - a
3 - c 7 - a 11 - b
4 - a 8 - b
32

VALUATION OF REAL ESTATE - TYPES OF VALUE

1. The rental value of the property assessed by the local authority for levy of property
tax is called as

a) Market value b) Annual letting value

c) Book value d) Distress value

2 The value which can be defined as an estimate of the price the property would
realise in the open market under private or public auction is called as

a) Market value b) Auction value

b) Distress value d) Forced sale value

3. The written down value of an asset as shown in the books of account is called as

a) Market value b) Depreciated value

c) Book value d) Fair value

4. When a property is sold by the owner under distress condition, the sale price is
called as

a) Distress value b) Forced sale value

c) Fair value d) Market value

5. When a property is sold in the open market under normal conditions, such value is
called as

a) Auction value b) Market value

c) Distress sale value d) Forced sale value

6. The value of a running business of an industrial or commercial establishment with

all its tangible and intangible assets is called as

a) Investment value b) Fair market value

c) Liquidation value d) Going concern value

7 When the auction is carried out under order of the court and is also supervised by
the court, such value is usually called as
33

a) Auction value b) Liquidation value

c) Distress sale value d) Fair market value

8. When sufficient time is given for auction to liquidate the assets, it is called as

a) Forced liquidation value b) Orderly liquidation value

c) Distressed sale value d) Forced sale value

9. When the assets are liquidated as quickly as possible with a very little market
exposure and short time, it is called as

a) Orderly liquidation value b) Distressed sale value

c) Forced liquidation value d) Forced sale value

10. The estimate value of mortgage loan amount that could be safely advanced by the
bank is called as

a) Forced sale value b) Mortgage value

c) Liquidation value d) Distressed sale value

11. Replacement cost minus depreciation is called as

a) Depreciated replacement cost (DRC) b) Present market value

c) Depreciation value d) Market value

12. It is an estimated value of the property worked out on notional concepts for special
purpose, say for purpose of taxation. The value is called as

a) Notional value b) Market value

c) Tax value d) Fair value

13. This term in common parlance would mean net money likely to be realised by the
owner after the sale of the property. The value is called as

a) Fair value b) Net value

c) Market value d) Realisable value

14. The minimum price mentioned in the advertisement for the purpose of auctioning is
called as

a) Advertisement value b) Upset value (Reserve value)

c) Auction value d) Fair value

15. It is the price expected for a building whose useful span of life is over but is still
continued use. It is the value at the end of utility period of the asset without being
dismantled.

a) Salvage value b) Scrap value

c) Junk value d) Depreciated value

16. It is the value of dismantled materials which has become completely useless for
any further use. The value is called as

a) Depreciation value b) Salvage value

c) Scrap value (Junk value) d) Useless value

17. It is the value of a property to a speculator who invests in the property with the sale
motive of selling the property at a profit within a short time.

a) Speculative value b) Desired value

c) Future value d) Potential value

18. Mr. ‘X’ would like to buy a car with the special registration number 1 or 786 by giving
extra amount. This value is called as

a) Potential value b) Desired value

c) Fair value d) Special value

19. It is the true value of the property as distinct from the agreement value. A property
is purchased for Rs. 50 lakhs but the sale agreement is made for Rs. 25 lakhs.
Rs. 50 lakhs is called as

a) Intrinsic value b) Deed value

c) Agreement value d) Stamp duty value

20. It is a value of the property estimated in accordance with the provisions of the
concerned statute like wealth tax schedule III. The value is called as

a) Statutory value b) Tax value

c) Market value d) Book value

* * *
Answers :
1 - b 5 - b 9 - c 13 - d 17 - a
2 - b 6 - d 10 - b 14 - b 18 - d
3 - c 7 - b 11 - a 15 - a 19 - a
4 - a 8 - b 12 - a 16 - c 20 - a
35

VALUATION OF REAL ESTATE - BASIC ELEMENTS OF VALUE -

MARKETABILITY, UTILITY, SCARCITY AND TRANSFERABILITY

1. The four essential elements of value are

a) Utility, scarcity, demand and transferability

b) Size, area, shape, access
c) Location, amenities, facilities, services
d) Engineering aspect, architectural aspect, design, occupation

2. No one would like to buy a property if it has no

a) Utility b) Drawing approval

c) Legal opinion d) Tax assessment

3. The property has value only if it can be

a) Transferable b) Non - transferable

c) Non - marketable d) Temple property

4. A temple property is

a) Non - transferable b) Marketable

c) Transferable d) Non - marketable property

5. A temple property is not marketable, yet it has got value. Instead of market value,
we may call it as

a) Notional value b) Special value

c) Religion value d) Fair value

6. A temple property can be valued by assuming

a) Hypothetical sale (not actual sale) b) Comparable sale

c) Guideline rate d) Prevailing market trend
36

7. If any commodity is available in abundance, it will

a) Lose its original value b) Increase its value

c) Have no market at all d) Not be sold at all

8. If there is no demand for a product or no paying capacity to buy a product,

a) It gains more value b) It loses value

c) The value is stable d) It cannot be sold

9. The property has a value only if it can

a) Be transferable b) Have drawing approval

c) Have a title deed d) Have proper approach

10. In order to possess value, an asset ought to have

a) Title deed b) Utility

c) Tax assessment d) Rent yielding

11. The properties which are available in limited quantity and are not in abundance
command

a) Low value b) High value

c) No value d) Stable value

12. The ownership and possession of the property can be transferred by way of sale,
lease, mortgage, will, etc. and hence it has a value. This is called

a) Transferability b) Scarcity
c) Marketability d) Utility

* * *

Answers :
1 - a 5 - a 9 - a
2 - a 6 - a 10 - b
3 - a 7 - a 11 - b
4 - d 8 - b 12 - a
37

FACTORS AFFECTING VALUATION - PHYSICAL AND ECONOMIC

1. The factors such as local population, employment opportunities, changes in

services, trade and commerce, per capital income at district / state level, paying
capacity of local residents, trend of city growth are

a) Micro economic factors b) Macro economic factors

c) Physical factors d) Social factors

2. Domestic savings, fixed capital formation in construction and real estate sector,
flow of capital investments in bank, fixed deposits, shares, debentures,
government securities are

a) Macro economic factors b) Micro economic factors

c) Physical factors d) Social factors

3. Demand and supply of properties and income fetching properties are called as

a) Economic factors b) Legal factors

c) Physical factors d) Social factors

4. State and Central governments, policies of land development, economic &

Taxation policies of government, money market situation, recession period in real
estate are

a) Economic factors b) Legal factors

c) Physical factors d) Social factors

5. Inflation or deflation in nation’s economy, availability of money on credit from bank,

burden of property tax, employment opportunity are

a) Economic factors b) Legal factors

c) Physical factors d) Social factors
38

6. Land characteristics like size, shape, plot area, frontage, orientations, soil type,
topography are

a) Legal factors b) Physical (Technical) factors

c) Economic factors d) Social factors

7. Infrastructure facility like roads, water supply, drainage, power supply,

telecommunication links are

a) Legal factors b) Physical (Technical) factors

c) Economic factors d) Social factors

8. Prominence and placement like main road, by - lane, dead end road, remote area
location are

a) Legal factors b) Physical (Technical) factors

c) Economic factors d) Social factors

9. Building characteristics like RCC framed structure, further life, age of structure,
deterioration, specification of building, workmanship quality, intelligent building &
green building concepts, obsolescence, maintenance are

a) Legal factors b) Physical (Technical) factors

c) Economic factors d) Social factors

10. Functional aspects like optimum use of inner space with minimum wastage,
amenities like swimming pool, garden, lift, security system, intercom facility, health
club, children’s play area are

a) Legal factors b) Physical (Technical) factors

c) Economic factors d) Social factors

11. Environmental aspects like noise, smoke pollution level, sea front, nuisance due to
railway track, industries, air port, climatic conditions are

a) Economic factors b) Legal factors

c) Physical factors d) Social factors
39

12. Natural calamity like earth quake prone areas, flooding and cyclone hazards,
Tsunami prone area are

a) Economic factors b) Legal factors

c) Physical factors d) Social factors

13. Soil condition - Rocky soil, hard muram, black cotton soil, reclaimed soil, filled up
ground are

a) Economic factors b) Legal factors

c) Physical factors d) Social factors

* * *

Answers :
1 - a 5 - a 9 - b 13 - c
2 - a 6 - b 10 - b
3 - a 7 - b 11 - c
4 - a 8 - b 12 - c
40

FACTORS AFFECTING VALUATION - LEGAL AND SOCIAL

1. Rent control act, Urban land ceiling act, Coastal regulations, Ecological restriction
are examples for

a) Legal factors b) Economic factors

c) Social factors d) Physical factors

2. Transfer of property act with lease provisions, Covenants under lease or

conveyance deed, Easement act for licenses, Civil procedure code are examples
for

a) Legal factors b) Economic factors

c) Social factors d) Physical factors

3. Land acquisition act, Building Bye-laws, Town planning acts, Zoning regulations,
Laws governing building construction like development control rules, FSI norms,
Open space regulations, etc, Wealth tax, Income tax act are examples for

a) Legal factors b) Economic factors

c) Social factors d) Physical factors

4. Law on earth quake resistant building, Reservation under different acts are
examples for

a) Legal factors b) Economic factors

c) Social factors d) Physical factors

5. Safety distance from industrial belt, hazardous zone, etc., height restriction rules
near airport area, safety distance from high tension lines, railway tracks, highways,
water courses, are examples for

a) Legal factors b) Economic factors

c) Social factors d) Physical factors
41

6. Locality (like poor class, middle class, posh areas); Neighbourhood (like well
developed, less developed, slum, cremation ground, dumping ground, nuisance
due to community hall); Civic amenities (like proximity of shops, mall, market,
hospital, bus stand, railway station) are examples for

a) Economic factors b) Physical factors

c) Social factors d) Legal factors

7. Populations (density in area and population growth), Means of communication

(railway, roadway or waterways) are

a) Economic factors b) Physical factors

c) Social factors d) Legal factors

8. Prestige aspect (prominent location, renowned personality, well known celebrity,

famous sport champion, industrialist, politician); Political factor (Linguistic or
religious communal unrest) are examples for

a) Economic factors b) Physical factors

c) Social factors d) Legal factors

9. Racial habitation (like parsi colony, mohamedan colony, hindu colony, catholic
colony), Religious factors (like proximity of temple, church, mosque) are the
examples for

a) Economic factors b) Physical factors

c) Social factors d) Legal factors

10. Personal factors like Sentimental, Considerations, Belief in vaastu, Liking for
specific neighbourhood are the examples for

a) Economic factors b) Physical factors

c) Social factors d) Legal factors

* * *

Answers :
1 to 5 - a 6 to 10 - c
42

HIGHEST AND BEST USE, VALUE IN USE AND VALUE IN EXCHANGE

1. It is worth of an asset to specific user and therefore it is subjective and is usually

measured by cost of replacing the property less depreciation. It is non market based
value. It is called as

a) Value in exchange b) Desired value

c) Going concern value d) Value in use

2. It is the price that would tend to prevail in a free, open and competitive market on
the basis of an equilibrium, set by forces of demand and supply. Highest and best
use or alternative use of the property is also considered while estimating value. We
may say it is also Fair market value

a) Forced sale value b) Value in use

c) Going concern value d) Value in exchange

* * *

Answers :
1 - d 2 - d
43

REAL PROPERTY - RIGHTS AND INTERESTS IN REAL ESTATE

TYPES OF OWNERSHIP IN REAL ESTATE

1. The things which can be physically touched or felt like land, furniture, jewelry are
called as

a) Tangible asset b) Intangible asset

c) Physical asset d) Imaginary asset

2. The things which cannot be touched but have the right of ownership of
non - material things are called

a) Tangible asset b) Intangible asset

c) Physical asset d) Imaginary asset

3. Land, building are the examples of

a) Imaginary asset b) Intangible asset

c) Physical asset d) Tangible asset

4. Copyrights, goodwill are the examples of

a) Physical asset b) Tangible asset

c) Intangible asset d) Intellectual right

5. Property consisting of land and objects and substances permanently attached to

the ground is called

a) Real property b) Unreal property

c) Imaginary property d) Physical property

6. Plant and machinery, jewellery are considered as

a) Immovable property b) Movable property

c) Stable property d) Imaginary property
44

7. A property is a

a) Bundle of rights b) Bundle of ownership

c) Bundle of encumbrance d) Bundle of legalities

8. If a thing can be owned only by one person at a time, it is called as

a) Partnership b) Sole ownership

c) Association of persons d) Trust

9. If two or more persons own a thing as in the case of a house or land. It is called

a) Cooperative society b) Proprietorship

c) Trust d) Co-ownership

10. It is an example of duplicate ownership which allows the separation of the powers
of the management and the rights of management. It is called as

a) Trust b) Association of persons

c) Partnership d) Sole - ownership

11. The legal relation between a person and an object denoted as

a) Ownership b) Lease c) Tenant d) Lessee

12. ............. is one in which a property is conveyed to a person only for the terms of his
life. It is

a) Leasehold b) Life estate

c) Freehold d) Easement

13. It is the most complete ownership in real property. It implies absolute ownership.
The owner’s right is unrestricted in time (till perpetuity). This is called as

a) Easement b) Leasehold
c) Rented d) Freehold

14. A freeholder gives out to someone for use for a fixed duration under certain terms
and conditions. This is called as

a) Sale b) Rent c) Lease d) Mortgage

15. The use of someone’s land without obtaining the title is called as

a) Lease b) Easement
c) Sub - lease d) Ground rent

16. The owner of the adjacent premises may use the land owned by his neighbour on
a temporary basis is called as

a) Ground rent b) Leasehold

c) Sub - lease d) Easement right

* * *

Answers :
1 - a 5 - a 9 - d 13 - d
2 - b 6 - b 10 - a 14 - c
3 - d 7 - a 11 - a 15 - b
4 - c 8 - b 12 - b 16 - d
46

VALUATION OF REAL ESTATE - ANNUITIES, CAPITALISATION, RATE OF

CAPITALISATION, YEARS PURCHASE, SINKING FUND, REDEMPTION OF
CAPITAL, REVERSIONARY VALUE

1. It is a rate of interest at which the investor is willing to invest his capital to get
benefit. It is called

a) Rate of capitalisation b) Capital value

c) Years purchase d) Sinking fund

2. If a person deposits Rs. 10,00,000, in a bank as fixed deposit, the bank offers
interest at 8% on Fixed deposit. This 8% is called as

a) Yield rate b) Rate of capitalisation

c) Years purchase d) Rate of redemption

3. The rate of return expected by the investor for recoupment of capital invested in the
property is called as

a) Rate of sinking fund b) Rate of capitalisation

c) Rate of return d) Rate of redemption of capital

4. Rate of capitalisation is known as

a) Years purchase b) Discount rate

c) Remunerative rate of interest d) Reversion

5. Rate of redemption is also called as

a) Accumulative rate of interest b) Remunerative rate of interest

c) Years purchase d) Reversion

Capital value x Re. 1

6. is called as
Rate of capitalisation

a) Years purchase b) Reversion

c) Accumulative rate d) Remunerative rate

7. The year purchase to receive annuity of Re. 1 at 8% rate of return is

a) 9 b) 8 c) 10 d) 12.5

8. Net Income x Years Purchase gives

a) Annual value b) Reversionary value

c) Redemption value d) Capital value

9. The amount that has to be set aside annually by building owner at given rate of
interest for the period equal to past age of the building is called

a) Capital value b) Redemption value

c) Sinking fund d) Reversion value
R
10. The formula indicates for
(1 + R)n - 1

a) Simple interest b) Compound interest

c) Annual sinking fund d) Annual value

11. It is defined as the net annual payment (return on investment) for the capital
invested in an immovable property

a) Annuity b) Sinking fund

c) Capital value d) Reversionary value

12. Mr. X get a rate of return of 6% from his investment on commercial shop of value
1 crore. What is the annuity?

a) Rs. 6,00,000 b) Rs. 50,000

c) Rs. 10,00,000 d) Rs. 60,000

13. Mr. X invests money in a nationalised bank as fixed deposit. The bank gives 8% as
annual interest on fixed deposit. The monthly interest amount Rs. 80,000. What is
the fixed deposit amount (Capital value)?

a) Rs. 1,20,00,000 b) Rs. 1,00,00,000

c) Rs. 1,50,00,000 d) Rs. 1,10,00,000

14. Mr. X invests money Rs. 15,00,000 in a bank and he gets ever month Rs. 10,000
as monthly interest. What is the rate of interest (Rate of capitalisation)?

a) 8% b) 7% c) 6% d) 5%

* * *
Answers :
1 - a 5 - a 9 - c 13 - a
2 - b 6 - a 10 - c 14 - a
3 - d 7 - d 11 - a
4 - c 8 - d 12 - a
48

ANNUITIES, CAPITALIZATION, RATE OF CAPITALIZATION, YEARS PURCHASE,

SINKING FUND, REDEMPTION OF CAPITAL, REVERSIONARY VALUE

1. What is annuity?

a) Investment value b) Net annual income

c) Reversionary value d) Deferment value

2. What is valuation concept of an annuity?

a) Investment value b) Time value, interest rate, future

value
c) Reversionary value d) Deferment value

3. What is Capitalization?

a) Present Amount invested b) Invested Amount + interest

received
c) Interest received d) Profit amount received

4. What is yield rate?

a) Profit interest rate of income b) Interest versus capital value

c) Compound interest d) Simple interest

5. What is Discount rate?

a) Terminable rate b) Inverse interest rate

c) Reversionary yield d) Compounded interest

6. What is the Remunerative rate of interest?

a) Rate of capitalization b) Comparable rates with other

investments
c) Interest Rate of short term d) Interest Rate of profit
investments
49

7. What is accumulative rate of interest?

a) Interest portion received b) Total interest portion on

accumulation
c) Terminable rate d) Interest Rate of investments

8. What is the Year’s Purchase?

a) Present capital value b) Method of valuing future income

c) Average annual cash-flow d) Future Capital value

9. What is Rate of return?

a) Interest rate on capital value b) % net income of capital value

invested investment
c) Capital appreciation or capital d) Inverse interest rate
erosion

10. What is sinking fund?

a) Present Amount invested b) Reserve fund for future capital

expense
c) Net annual income d) Interest Rate of profit

11. What will be the range of Rate of sinking fund?

a) 1% b) 3 % to 8%
c) 2% d) More than 8%

12. What is redemption of capital?

a) Invested capital amount b) Capital+ accumulative interest

recoupment
c) Reserve fund d) Capital appreciation

13. What is the rate of redemption of capital when compared to market rate?

a) Equal b) Lower
c) Higher d) Cannot judge
50

14. For short term period leased properties or building having a shorter life span, the
rate of redemption of capital has to be dealt with

a) Net annual income b) Terminable income

c) High rate of recoupment d) Sinking fund

15. What is reversionary value?

a) Investment value b) Difference of capitalization value

and market rent value
c) Future Capital value d) Deferment value

16. What is reversionary yield?

a) Annualized rents percentage b) Anticipated yield on estimated

rental value
c) Higher yield for recoup investment d) Lower yield for recoup investment

* * *

Answers :

1 to 16 - b
51

VALUATION OF REAL ESTATE -

CONSTRUCTION AND USE OF VALUATION TABLES

1. The formula for Amount (A) is

(1 + i)n - 1 r
a) b)
i (1 + r)n - 1
1
1-
(1 + i)n
c) A = P (1 + i)n d)
i

2. The formula for Amount of Re. 1 per annum (APA) is

r
a) A = P (1 + i)n b)
(1 + r)n - 1
1
n 1-
(1 + i) - 1 (1 + i)n
c) d)
i i

3. The formula for Annual Sinking Fund (ASF) is

(1 + i)n - 1
a) A = P (1 + i)n b)
i
1
1-
r (1 + i)n
c) d)
(1 + r)n - 1 i

4. The formula for Present value of Re. 1 per annum at Years Purchase is

n (1 + i)n - 1
a) A = P (1 + i) b)
i
1
1-
(1 + i)n r
c) d)
i (1 + r)n - 1
52

5. The formula for Present value (PV)

(1 + i)n - 1
a) A = P (1 + i)n b)
i

1 r
c) (1 + i)n d) (1 + r)n - 1

6. A leasehold property is normally valued by

a) Cost approach b) Market approach

c) None of the above d) Income approach

7. If years purchase (Y.P.) is 12.5, then the rate of return is

a) 10% b) 6% c) 10% d) 8%

8. If the unexpired period in lease is short, then the lessor’s share will be

a) less b) equal c) depends d) more

9. If the unexpired period is very long, the value of lessee’s share will be

a) less b) depends c) stable d) more

10. The value in the hands of lessor and lessee mainly depends on

a) Rental income b) Rate of return

c) Advance received d) Terms & conditions of the deed

* * *

Answers :

1 to 5 - c 6 to 10 - d
53

CONSTRUCTION AND USE OF VALUATION TABLES

1. What is the gross amount which will fetch for Rs 1,000 at 10% on simple Interest for
2 years term?

a) Rs. 1,100 b) Rs. 1,200 c) Rs. 1,000 d) Rs. 1,150

2. What is the gross amount which will fetch for Rs 1,000 at 10% on Compound interest
amount for 2 years term?

a) Rs. 1,000 b) Rs. 1,210 c) Rs. 1,100 d) Rs. 1,200

3. Present value of rupee Calculation - What is the Present value of rupee for Capital
amount receivable at a future date of Rs 10,00,000 at 6 % compound interest rate for
10 year term?

a) Rs. 5,85,390 b) Rs. 5,58,390 c) Rs. 8,55,390 d) Rs. 5,26,850

4. Amount of Re. 1 / year (annum) Calculation - Rs 500 deducted every month and
invested annually towards PF account from salary for a period of 20 year terms and at
a 7% of compound interest?

a) Rs. 2,56,000 b) Rs. 2,46,000 c) Rs. 2,26,000 d) Rs. 1,50,000

5. Annual sinking fund Calculation - To find out the depreciated worth of the building to
set aside annually for 10 lakhs as Capital recoupment amount expected at a 4% interest
rate for the period unexpired period of lease of 60 years

a) Rs. 2,400 b) Rs. 4,200 c) Rs. 3,200 d) Rs. 4,000

6. Present value of future income of Re. 1 / year (Single rate basis) - Annual Rental
income from property is Rs 48,000 /-. If the building is demolished after 40 years, what
will be the present value of the property @ 7% interest rate?

a) Rs. 6,00,000 b) Rs. 6,39,936 c) Rs. 6,28,745 d) Rs. 6,93,935

7. Present value of future income of Re. 1 / year (Duel rate basis) - The annual rent
received from the property is rs 48000 /-. Expected rate of return is 10% future life of
the building is 50 years. Recoupment rate is 4% on capital. Find the purchase price.

a) Rs. 4,85,672 b) Rs. 4,50,672 c) Rs. 4,60,672 d) Rs. 4,75,672

* * *
Answers :
1 to 7 - b
54

URBAN INFRASTRUCTURE AND ITS INFLUENCE ON VALUE OF REAL ESTATE

1. What affects the real estate value?

a) Increased Rapid urbanization b) Availability of urban infrastructure

c) Quick Implementation of services d) Poor Govt. budgetary allocations

2. When the real estate value comes down?

a) Availability of water supply b) Availability of sewage & sanitation

c) Availability of drainage d) No urban infrastructure
development

3. Which is not a finance type used for urban infrastructure development?

a) Market Based Finances b) Pooled Financing

c) Project Finance d) JNNURM linking

4. Who is the authority for Rating of bonds?

a) MOUD b) SEBI
c) CRISIL d) IT Act

5. Which is not a Public - Private Finance options?

a) Project Finance b) O & M

c) Joint Sector &BOT d) Bonds

6. Which is not a function of JNNURM?

a) Improved service delivery systems b) Improved economic level

c) Enhanced quality of life d) Centralization of Governance

* * *

Answers :
1 to 3 - d 5 to 6 - d
4 - c
55

REAL ESTATE MARKET AND ITS CHARACTERISTICS, INVESTMENT IN

REAL ESTATE, FACTORS INFLUENCING DEMAND AND SUPPLY
SCHEDULE IN REAL ESTATE

1. Investment in immovable properties is considered as

a) Sound investment b) Unstable investment

c) Not a wise investment d) Wrong investment

2. When compared to the yield rate available for long term investment in Government
security, the return on investment in real estate is considered as

a) Higher b) Lower
c) Not preferable d) Same

3. In case of any sale or transfer, getting back the capital invested is

a) Not certain b) Certain

c) Doubtful d) Not possible at all

4. For owner occupied properties in a developed area, capital appreciation is

a) Fairly bad chance b) Fairly good chance

c) Worst chance d) No chance

* * *

Answers :
1 to 2 - a 3 to 4 - b
56

INCOME APPROACH TO VALUE

1. If the Land alone is fully developed and rented out, the method to be used

a) Any method b) Cost Approach

c) Market Approach d) Income approach

2. Land fully developed, partly owner occupation partly rented out

a) Only by income approach b) Only by market approach

c) Owner by market approach & d) Composite rate approach
rented portion by income approach

3. Land partly developed and rented, additional FSI available in the property

a) Income approach b) Market Approach

c) Cost Approach d) Rental method & market approach

4. Rental method is applicable for properties like

a) Public building b) Agricultural

c) Owner occupied d) Tenanted property

5. As per which Act, the tenancy right is only occupancy right

a) Succession Act b) SARFAESI Act

c) Easement Act d) Rent control Act

6. As per which Act, the eviction right is to the landlord

a) Succession Act b) Easement Act

c) SARFAESI Act d) Rent control Act

7. As per which Act, Reversion of the property is to the landlord

a) Succession Act b) Easement Act

c) SARFEASI Act c) Rent Control Act

8. The value of the Rent Controlled properties will have a

a) High market value b) Both low and high

c) No difference d) Low market value
57

9. What is the Government Act for lease

a) Succession Act b) SARFEASI Act

c) Rent Control Act d) Transfer of property Act

10. Deduction allowable under Indian Act on rental income of house property

a) 15% b) 20% c) 25% d) 30%

11. License is defined in Section 52 of

a) Succession Act b) Rent Control Act

c) SARFEASI Act d) Indian Easement Act

12. When a parcel of land is given on lease, the rent reserved in lease is known as

a) Standard rent b) Rack rent

c) Virtual rent d) Ground rent

13. The rent mutually fixed by the owner and the tenant is called as

a) Fair rent b) Standard rent

c) Head rent d) Contractual rent

14. The rent which can be legally charged by a landlord from a tenant or the rent derived
by a court of law is called as

a) Head rent b) Rack rent

c) Virtual rent d) Standard rent

15. The rent which includes the premium is called

a) Head rent b) Rack rent

c) Standard rent d) Virtual rent

16. When the lessor leases the property on lease he will get

a) Virtual rent b) Rack rent

c) Standard rent d) Head rent

17. When the head lessee sub leases the property he will get

a) Virtual rent b) Head rent

c) Standard rent d) Rack rent
58

18. The difference amount between the amount received by the head lessee by sub leasing
the leasehold property and amount paid by the head lessee to the lessor is called

a) Virtual rent b) Head rent

c) Rack rent d) Profit rent

19. What is the difference in rate of return of Secured ground rent in comparison with
unsecured ground rent?

a) 2% to 3% more b) 2% to 3% less
c) 1% to 2% more d) 1% to 2% less

20. What is the rent assumed if the property is Owner occupied or vacant premises

a) Profit rent b) Head rent

c) Standard rent d) Notional rent

21. Lease requires registration as per the

a) Rent Control Act b) Easement Act

c) SARFEASI Act d) Transfer of Property Act

22. 99 years with due provision for renewal is specifically called as

a) Long lease b) Short lease

c) Building lease d) Perpetual lease

23. Lessor gives an Open plot of land on lease to the lessee for the construction of
building for a lease period. This lease is

a) Occupational lease b) Sub - lease

c) Life lease d) Building lease

24. Lessor gives a building (i.e.) both land and building on lease to the lessee for a lease
period. This lease is

a) Building lease b) Full repair lease

c) Life lease d) Occupational lease

25. A lease agreement in which the lessee pays all outgoings apart from his head rent.
Such lease is called

a) Building lease b) Occupational lease

c) Life lease d) Full repair lease
59

26. What is the lease name when the lease period is fixed till the death of lessee and the
lease period expires on lessee’s death

a) Full repair lease b) Occupational lease

c) Building lease d) Life lease

27. A perpetual lease can be valued in the hands of

a) Lessor b) Tenant c) Head lessor d) Lessee

28. A leasehold property is normally valued by

a) All methods b) Cost approach

c) Market approach d) Income approach

29. If years purchase (Y.P.) is 12.5, then the rate of return is

a) 10.00% b) 12.50% c) 6.00% d) 8.00%

30. The value in the hands of lessor and lessee mainly depends on

a) Rental income b) Rate of return

c) Advance received d) Deed Terms

31. If the unexpired period in lease is short, then the lessor’s share normally will be

a) Less b) Same as lessee c) Equal d) More

32. If the renewal clause is not stipulated in the lease agreement then the lessor’s share
will be

a) Less b) Same as lessee c) Equal d) More

33. If the lessee surrenders the development in the property free of cost after expiry of
lease period then the lessor’s share will be

a) Less b) Same as lessee c) Equal d) More

34. If the periodical rent revision in terms of market rent during lease period, then the
lessor’s share

a) Less b) Same as lessee c) Equal d) More

35. If the unexpired period is very long, the value of lessee’s share will be

a) Same as lessor b) Equal c) Less d) More

36. If there is no restrictive conditions in the lease deed, then the value of lessee’s share
will be

a) Same as lessor b) Equal c) Less d) More

37. If the profit rent is more and balance lease period is more, then the value of lessee’s
share will be

a) Same as lessor b) Equal c) Less c) more

38. Premium means

a) None b) Refundable deposit amount

c) Annual lease rent d) Non-refundable Price

39. Premium is defined in transfer of Property Act

a) Section 108 b) Section 107

c) Section 106 d) Section 105

40. Remunerative rate / Accumulated rate of investment of lease period for 50 years
and above will be

a) cannot be ascertained b) More

c) Less d) Equal

* * *

Answers :

1 - d 9 - d 17 - d 25 - d 33 - d
2 - c 10 - d 18 - d 26 - d 34 - d
3 - d 11 - d 19 - d 27 - d 35 - d
4 - d 12 - d 20 - d 28 - d 36 - d

5 - d 13 - d 21 - d 29 - d 37 - d
6 - d 14 - d 22 - d 30 - d 38 - d
7 - d 15 - d 23 - d 31 - d 39 - d
8 - d 16 - d 24 - d 32 - d 40 - d
61

1. Real estate economics is the application used for

a) Predict patterns of prices b) Predict patterns of supply

c) Predict patterns of demand d) All the above

2. Who are not the main participants in real estate markets?

a) Owner using as an investment b) Tenant

or for renting out or lease
c) Financial institutions d) Developers

3. Who are all forming demand side of the market?

a) Owner using for his own b) Owner for investment purpose

c) Renter or tenant d) all the above

4. Which people are all not forming supply side of the market?

a) Property developers b) Building renovators

c) Financial institutions d) Insurance companies

5. What are the characteristics of real estate economics?

a) Durability on construction b) Heterogeneity in terms of its

location, the building, and its
financing.
c) Pricing of real estate d) All the above

6. What are the market adjustment process subject to?

a) Time delays b) Due to delayed finance

c) Design and construction d) All the above

7. When the real estate market considered in terms of both an investment and
consumption good?

a) The expectation of attaining b) the intention of using it

a return
c) Both the above
62

8. What are the variables affecting demand schedule in real estate?

a) Population size and population b) More people in the economy

growth
c) Family size, family age d) All the above
composition, net migration,
death rates

9. How the market demand is calculated?

a) Household demand and b) Income or permanent income or

measure of wealth annual income
c) The price and quality factor d) All the above

10. What are the variables affecting supply schedule in real estate?

a) Availability of land b) Availability of labour

c) Electrical Power, water and d) All the above
building materials

11. How supply restrictions can affect substitutability?

a) Lack of supply of skilled labour b) Land availability

c) Land-use controls such as d) All the above
zoning bylaws

12. How supply factor reacts to increase in costs?

a) Developers will find their b) Developers may leave the industry

business less profitable
c) Quantity of housing starts will d) All the above
decrease and prices will tend
to rise

13. What are called as property concepts?

a) Exclusive right of acquiring b) Right of possessing

c) Enjoying and disposing d) All the above
63

14. Define Ownership?

a) An unlimited right in point b) Unrestricted in point of disposition

of duration

c) Subject to control of reduction d) All the above

by contractual obligation

15. How land ownership affected by government?

a) Imposes taxation and the right b) Right to revert back in the

for compulsory acquisition legitimate inheritance absence

c) Imposes restrictions on land use d) All the above

and rights of interest by
development through zoning
regulations, Environmental
requirements

16. The owner is entitle to?

a) Use the property in any manner b) Enjoy by exclusive possession,

or abuse the property derive benefits, income/ profits
from it

c) Disposing it during his lifetime d) All the above

by sale, gift or will

* * *

Answers :
1 - d 5 - d 9 - d 13 - d
2 - c 6 - d 10 - d 14 - d
3 - d 7 - c 11 - d 15 - d
4 - d 8 - d 12 - d 16 - d
64

MARKET APPROACH - TYPES OF MARKET, DEMAND AND SUPPLY, CURVE,

BELL CURVE FOR OVERALL SALES PERFORMANCE

1. When the supply is in excess of demand, it is called as

a) Buyers market b) Sellers market

c) Stable market d) No market

2. When the supply is less than demand, it is called as

a) Buyers market b) Sellers market

c) Stable market d) No market

3. In buyers market, the king is

a) Public b) Seller c) Buyer d) None

4. In sellers market, the king is

a) Broker b) Buyer c) Public d) Seller

5. Expectations of people about likely fall in price of real estate in near future results in

a) Stable market b) Buyers market

c) Sellers market d) No market

6. Under market approach, we can normally value only

a) Non - marketable properties b) Marketable properties

c) Religious properties d) Leasehold properties

7. Non - marketable properties can be valued by

a) Income approach b) Market approach

c) Cost approach d) Composite rate method

8. ‘Highest and Best use’ aspect is to be considered in

a) Composite rate method b) Cost approach

c) Income approach d) Market approach

9. ‘Market is Supreme’ - This aspect holds good in

a) Market approach b) Cost approach

c) Income approach d) Composite rate method

10. In the demand and supply curve, price is plotted as

a) X axis b) Y axis c) Z axis d) None

11. In the demand and supply curve, quantity of goods available is plotted as

a) Z axis b) Y axis c) X axis d) None

12. Transaction takes place after higgle haggle (bargaining) for the price. This
process is explained by

a) Sellers curve b) Supply and demand curve

c) Buyers curve d) Bell curve

13. The four factors - economic, physical, social and legal factors mainly affect

a) Value b) Cost c) Price d) None

14. Sale recorded at Registrar’s office is one of the sources where

a) Market value can be collected b) Sale instances can be collected

c) Cost can be collected d) Price can be collected

* * *

Answers :
1 - a 5 - a 9 - a 13 - a
2 - b 6 - b 10 - b 14 - b
3 - c 7 - c 11 - c
4 - d 8 - d 12 - d
66

MARKET APPROACH - COMPARISON OF SALE INSTANCES - FACTORS OF

COMPARISON AND WEIGHTAGES OF ADJUSTMENT IN VALUE

1. Formula for success in any valuation assignment is

a) Inspect before you value b) Allot the work to your staff

c) Receive the fees before d) Valuation report

accepting the assignment

2. For collecting data for sale comparisons, a good source of information is

a) Court b) Registrar of documents

c) Corporation d) Town planning department

3. Before undertaking comparison with sale transactions, the valuer’s prime duty is

a) Study the tax receipt b) Study the drawing

c) Study the title deed d) Study the encumbrance certificate

4. Sale transaction records cannot be fully relied upon because of

a) Wrong representation b) Under valuation

c) Over valuation d) Black money transaction
(parallel economy)

5. The weightages adopted in sale transaction may

a) Change from locality to locality b) Be constant everywhere

c) Change from purpose to purpose d) Change from time to time

6. The weightage to be applied to sale instance rate in the case of landlocked land
is

a) + 15% b) - 75%
c) + 25% d) - 15%
67

7. The weightage to be applied for forced sale by authorities is say,

a) + 5% b) + 10%
c) - 15% d) + 15%

8. The weightage to be applied for low lying plots

a) - 50% b) - 25%
c) - 30% d) Deduct for cost of earth filling

9. The weightage to be applied for large size plot

a) - 15% to - 40% b) + 15% to + 40%

c) + 60% d) - 100%

10. The weightage to be applied for properties pending litigation (stay in the court
against sale)

a) + 10% b) - 30% or more

c) + 20% d) Zero

* * *

Answers :
1 - a 5 - a 9 - a
2 - b 6 - b 10 - b
3 - c 7 - c
4 - d 8 - d
68

MARKET APPROACH TO VALUE - HEDONIC MODEL AND ADJUSTMENT GRID

MODEL UNDER SALES COMPARISON METHOD

1. The adjustment grid model can be adopted mainly for

a) Flats b) Restaurant
c) Cinema theatre d) Agricultural land

2. For adjustment grid model, the (minimum) main attributes of the properties are

a) 3 (Location, size, age) b) 4 (Location, size, age, specification)

c) 2 (Location, size) d) 1 (Location)

3. In the adjustment grid model, negative weightages are given for

a) Normal specification b) Superior specification

c) Inferior specification d) Posh specification

4. In the adjustment grid model, positive weightages are given for

a) Substandard specification b) Inferior specification

c) Normal specification d) Superior specification

5. Under the adjustment grid model, the rate adjustment is mainly to be given first
for

a) Time b) Location c) Size d) Age

6. The factors to be considered under Hedonic Pricing Model (Adhoc Comparison

Technique) are

a) Size, Time, Location b) Size, Time, Location, Age

c) Size, Time d) Size

* * *
Answers :
1 - a 5 - a
2 - b 6 - b
3 - c
4 - d
69

MARKET APPROACH TO VALUE - LAND CHARACTERISTICS AND ITS

EFFECT ON LAND VALUES

1. The value of land mainly depends on

a) Economic, technical, social and legal aspects

b) Size, encumbrance, climate, building bye-laws
c) Topography, prestige aspect, view aspect, Tenure
d) Community aspect, vaastu aspect, landlocked concept, environment aspect

2. If the land is situated in a business area of the town, the rental value is

a) Less b) More
c) Double d) Stable

3. The important criteria for the selection of the best land in the town is

a) More width of road b) Commercial zone

c) Location, location & location d) Residential zone

4. If the land is situated where there are no infrastructure facilities like water, power,
drainage, the value is

a) Half the value of other plot b) More

c) Stable d) Less

5. When the land is large, the land rate is comparatively

a) Lower b) Higher
c) Stable d) Unstable

6. Wider frontage plot in a commercial zone is valued

a) Less b) More
c) Constant d) No value
70

7. Return frontage is known as

a) Tandem plot b) Intermittent plot

c) Corner plot d) Middle plot

8. The plots having road in the front and rear side is called as

a) Single frontage b) Return frontage

c) Multi frontage d) Double frontage

9. When the width of road is more, normally the value is said to be

a) More b) Less
c) Double the normal value d) Half the normal value

10. The concept of floating FSI or transferable right for development of the land is

a) Building bye-laws b) TDR aspect

c) Tenure aspect d) Environment aspect

* * *

Answers :
1 - a 5 - a 9 - a
2 - b 6 - b 10 - b
3 - c 7 - c
4 - d 8 - d
71

MARKET APPROACH TO VALUE - HYPOTHETICAL PLOTTING SCHEME FOR

VALUE OF LARGE SIZE LAND - RESIDUAL TECHNIQUE AND OTHER
DEVELOPMENT METHODS - VALUATION FOR JOINT VENTURE
DEVELOPMENT OF PROPERTY

1. Hypothetical plotting scheme is mainly used to value

a) Large open land b) Flats

c) Industries d) Residential building

2. Hypothetical building scheme is normally used for

a) Large utilised property b) Under utilised property

with more FSI with less FSI
c) Industries d) Flats

3. Sale comparison method and development method (Residual technique) are the
two main methods under

a) Income approach b) Cost approach

c) Market approach d) Composite rate method

4. When total unavailability of sale instances are there, the method useful to find
the land rate is called as

a) Profit method b) Sale comparison method

c) Land & building method d) Development method
(Residual technique)

5. By using this method, land value can be arrived at. The method is called as

a) Development method b) Profit method

c) Composite rate method d) Income capitalisation method

6. Joint venture is mostly applicable for

a) Individual residential building b) Apartment building

c) Cinema theatre d) Hotel
72

7. In a joint venture development, the ratio normally represents

a) Landlord : Contractor b) Landlord : Promoter

c) Promoter : Landlord d) Engineer : Landlord

8. In a joint venture, the land rate is to be considered based on

a) Average of market & guideline rate b) Guideline rate

c) Whichever is more d) Prevailing market rate

9. In a joint venture agreement, the building is rate is based on

a) The proposed specifications b) State PWD rates

of building
c) CPWD rates d) Rates adopted by the
registrar’s office

10. In a joint venture arrangement, the share of the landlord will be more if the land rate is

a) Less b) High
c) Average d) Adopted based on Guideline rate

11. In a joint venture agreement, the share of the builder is less when

a) Building rate is equal to the land component

b) Building rate is more than the land component
c) Building rate is less than the land component
d) The FSI is less

12. In a joint venture agreement, the two main factors which decide the ratio normally is

a) Demand b) Plot coverage

c) Approved plan d) Land rate & FSI

* * *
Answers :
1 - a 5 - a 9 - a
2 - b 6 - b 10 - b
3 - c 7 - c 11 - c
4 - d 8 - d 12 - d
73

COST APPROACH TO VALUE - METHODS OF COST ESTIMATES FOR BUILDINGS

1. The actual cost of construction of a building in terms of money as actually spent

by the owner is called as

a) Historic cost b) Original cost

c) Replacement cost d) Reproduction cost

2. The cost of building in the year 1990 is 5 lakhs to Mr. A; If it is sold to Mr. B for
Rs. 10 lakhs in the year 2000, the original cost to Mr. B is

a) Rs. 5 lakhs b) Rs. 10 lakhs

c) Rs. 7.5 lakhs d) Rs. 15 lakhs

3. The depreciated replacement cost of the building to the new owner is called

a) Price b) Historic cost

c) Original cost d) Value

4. The term - loss in money value due to age, usage, wear and tear is called as

a) Scrap b) Appreciation
c) Salvage d) Depreciation

5. To arrive at the book value, the essential data is

a) Historic cost b) Replacement cost

c) Original cost d) Depreciated value

6. The area of the building multiplied by unit rate of building is called as

a) Book value method b) Flat rate method

c) Cost index method d) Detailed quantity method
74

7. The method devised by CPWD to work out the cost estimate for the building
proposed to be constructed is called as

a) Detailed quantity method b) Flat rate method

c) Cost index method d) Book value method

8. Latest CPWD plinth area rates are as on

a) 01.01.1955 b) 01.01.1992
c) 01.10.1976 d) 01.10.2012

9. The most reliable and accurate method to estimate the cost is

a) Detailed estimate method b) Cost index method

c) Flat rate method d) Reinstatement method

10. This method is videly used to file claim under land acquisition act and for
insurance companies

a) Detailed estimate method b) Reinstatement method

c) Flat rate method d) Cost index method

* * *

Answers :
1 - a 5 - a 9 - a
2 - b 6 - b 10 - b
3 - c 7 - c
4 - d 8 - d
75

COST APPROACH TO VALUE - LIFE OF BUILDING - ECONOMIC / PHYSICAL / LEGAL

1. The actual service life (planned life) of the building is called

a) Economic life b) Physical life

c) Life due to legal constrains d) Life due to obsolescence

2. Economic life of a RCC roofed load bearing building is normally considered as

a) 100 Years b) 50 - 60 Years

c) 40 Years d) 25 Years

3. The actual survival life of the building before collapse is called as

a) Life due to legal constrains b) Economic life

c) Physical life d) Life due to obsolescence

4. The life of building becomes obsolete due to changes in life style of society. This
is called

a) Life due to legal constrains b) Economy life

c) Physical life d) Obsolescence life

5. A building is erected in a lease land which has 30 year lease period. The valuer
has to adopt the life of the building as 30 years only. This is called

a) Life due to legal constrains b) Obsolescence life

c) Physical life d) Economic life

6. Excess wear and tear

a) Increases the life b) Reduces the life

c) Maintain the life d) None
76

7. The economic life of RCC framed structure is normally

a) 30 - 40 Years b) 40 - 60 Years
c) 60 - 80 Years d) 20 - 30 Years

8. For the purpose of calculating depreciation, a valuer normally adopts

a) Physical life b) Obsolescence life

c) Life due to legal constrains d) Economic life

9. High rise RCC framed buildings which are not designed for earthquake
resistance features like shear walls may have

a) Reduced life b) Increase the life

c) Constant life d) None

10. Materials used in the construction, workmanship, soil conditions, weather

conditions, etc., determines

a) Depreciation of the building b) Total life of building

c) Present value of the building d) Historic cost

* * *

Answers :
1 - a 5 - a 9 - a
2 - b 6 - b 10 - b
3 - c 7 - c
4 - d 8 - d
77

MARKET APPROACH TO VALUE - VARIOUS METHODS OF COMPUTATION

OF DEPRECIATION, FUNCTIONAL, TECHNOLOGICAL AND ECONOMIC
OBSOLESCENCE.

1. Decrease in value of the property through wear, deterioration and obsolescence is

called as

a) Depreciation b) Appreciation
c) Functional obsolescence d) Technical obsolescence

2. The normal wear and tear which occurs due to the usage of the asset is called as

a) Economic depreciation b) Physical depreciation

c) Functional obsolescence d) Technological obsolescence

3. A residential building existing on the plot which is placed in commercial zone is a

glaring example of

a) Technological obsolescence b) Functional obsolescence

c) Economic obsolescence d) Physical obsolescence

4. Dilapidation of building or heavy structural repair is also

a) Physical obsolescence b) Functional obsolescence

c) Technological obsolescence d) Economic obsolescence

5. Many palaces are converted into Hotels. This is due to

a) Functional obsolescence b) Economic obsolescence

c) Physical obsolescence d) Technological obsolescence

6. A computer may become obsolete within two or three years due to

a) Physical obsolescence b) Functional obsolescence

c) Technological obsolescence d) Economic obsolescence

7. Old load bearing structure with more thick walls is an example for

a) Physical obsolescence b) Economic obsolescence

c) Technological obsolescence d) Functional obsolescence
78

8. The method of depreciation widely used by Chartered Accountants for Taxation

purpose is called as

a) Sinking fund method b) Straight line method

c) Constant percentage method d) Written down value method

9. Statutory depreciation method is also called as

a) Written down method b) Constant percentage method

c) Straight line method d) Sinking fund method

10. The method where equal percentage of depreciation is allowed on its original cost
(Replacement cost) for each year of life is called as

a) Written down method b) Straight line method

c) Constant percentage method d) Sinking fund method

11. In this method, constant rate of depreciation is first assumed and depreciation is
calculated by applying formula.

a) Written down method b) Straight line method

c) Constant percentage method d) Sinking fund method

12. Optimum economic benefit of the land and building is not achieved. This is called as

a) Depreciation due to functional b) Depreciation due to physical

obsolescence obsolescence
c) Depreciation due to technological d) Economic obsolescence
obsolescence

13. An asset suffering from severe economic or functional obsolescence may have

a) High depreciation b) High appreciation

c) Normal depreciation d) Normal appreciation

* * *

Answers :
1 - a 5 - a 9 - a 13 - a
2 - b 6 - b 10 - b
3 - c 7 - c 11 - c
4 - d 8 - d 12 - d
79

COST APPROACH TO VALUE - REPRODUCTION COST / REPLACEMENT COST,

DEPRECIATED REPLACEMENT COST (DRC) WORKING, ADOPTING
DRC AS VALUE SUBJECT TO DEMAND AND SUPPLY ASPECT.

1. Cost of creating a new building having identical utility and performing similar
functions as being performed by the existing old asset is called as

a) Replacement cost b) Reproduction cost

c) Original cost d) Historic cost

2. It is cost to produce exactly similar asset (i.e. exact replica - mirror image) of the
old existing asset to be valued. It has same utility, functions, similar specification.
It is called as

a) Replacement cost b) Reproduction cost

c) Original cost d) Historic cost

3. Current replacement cost minus depreciation is called as

a) Scrap value b) Depreciation value

c) Depreciated cost (Net present value) d) Salvage cost

4. To calculate depreciated replacement cost, the value to be considered is only

a) Historic cost b) Book value

c) Written down value d) Replacement cost

5. Replacement cost and reproduction cost is one and the same.

a) Not same b) Same

c) May be same d) May not be same

6. For building insurance, only this cost is to be used

a) Replacement cost b) Reproduction cost

c) Historic cost d) Book cost
80

7. In land acquisition matters, if any ornamental building is acquired, this cost to be

considered is only

a) Book cost b) Net present value

c) Depreciated reproduction cost d) Written down cost

8. Net present value is used to indicate

a) Historic cost of the asset b) Written down value of the asset

c) Book value of the asset d) Current value of the asset

9. Net present value is also called as

a) Depreciated cost b) Depreciation cost

c) Book cost d) Historic value

10. Market value of the building is estimated by using the formula Net Present Value
= Replacement cost - Depreciation. This approach is called as

a) Income approach b) Cost approach

c) Market approach d) Composite rate method

* * *

Answers :
1 - a 5 - a 9 - a
2 - b 6 - b 10 - b
3 - c 7 - c
4 - d 8 - d
81

LAND VALUE BY MARKET APPROACH AND BUILDING VALUE BY COST

ESTIMATION METHOD FOR OWNER OCCUPIED BUNGALOWS, FACTORIES,
PUBLIC BUILDINGS.

1. This method is not helpful in estimating values of premises which are rented

a) Cost approach b) Market approach

c) Income approach d) Composite rate method

2. In this method, land is separately valued and building is separately valued

a) Market approach b) Cost approach

c) Income approach d) Composite rate method

3. Land married with structure does not fetch same price in market as a

a) Recess land b) Tandem plot

c) Virgin land d) Belt shaped plot

4. In the areas where much sale transactions have not taken place, land value
estimation is

a) Not at all difficult b) Very easy

c) Not difficult d) Very difficult

* * *

Answers :
1 - a 3 - c
2 - b 4 - d
82

VALUATION OF REAL ESTATE

1. Forced sale value and orderly liquidation value are the two classifications under

a) Liquidation b) Market value

c) Fair market value d) Open market value

2. When the property is to be partitioned according to predetermined shares, the

basis of valuation should always be

a) Guideline value b) Market value

c) As per rent control Act d) As per PWD rates

3. Forced sale value and realisable value are one and the same?

a) Same b) Not related

c) Not same d) Depends on purpose

4. Value of brick field is usually calculated on the basis of .......... years profit for the
lessee’s interest

a) 20 years b) 10 years
c) 30 years d) 40 years

5. When doing valuation of fisheries, the year’s purchase for such fisheries normally
can be

a) 20 to 30 on net profit b) 10 to 12 on gross income

c) 10 to 12 on net profit d) 20 to 30 on gross income

6. Collecting stamp duty for the deeds registered in the registrar’s office is

a) State subject b) Central subject

c) Quasi government subject d) CPWD subject
83

7. The procedure adopted by many states for fixing guideline rate is

a) Same b) Not uniform

c) Can be same d) Need not be the same

8. Market value by adopting guideline rate fixed by local registrar’s office and by
adopting prevailing market rate - are they one and same?

a) Can be same b) Same

c) Not same d) No comparison

9. An applicant has proposed to construct a residential building and he applies loan

from a bank. The bank releases loan amount in installments. After the completion
of the building, the bank asks the valuer to certify the

a) Cost b) Price
c) Value d) Market value

10. A borrower is pledging his property as a collateral security to a bank. The bank
directs the valuer to certify the

a) Market value b) Distressed rate value

c) Auction value d) Salvage value

11. The borrower’s account becomes NPA. The bank has taken symbolic possession.
Under the SARFAESI act, the bank directs the value to certify the

a) Reserve value b) Upset value

c) Auction value d) Salvage value

12. When the pledged property is to be auctioned, the upset price is to be fixed by the

a) Advocate b) Valuer
c) Bank d) Owner of the property

13. Debt Recovery Tribunal and SARFAESI are one and the same?

a) Not related b) They are same

c) They may be the same on d) They are not the same

few occasions
84

14. The reserve price (upset price) will be fixed based on the

a) Auction department b) Advice from the advocate

c) Request from the borrower d) Value certified by the valuer

15. Reserve price will be

a) As suggested by the b) More than the value certified by the

advocate valuer

c) Same value as certified d) Less than the value certified by the

by the valuer valuer

16. In the probate petition of the legal heirs, a valuation report is required to

a) Decide the court fees b) To know the cost

c) To know the liquidation value d) To know the depreciated
value

17. When a person dies after leaving a WILL, it is necessary for the executor of the
WILL to obtain a ............. from the high court.

a) Clearance b) Probate
c) No objection d) Endorsement

18. Even if the WILL is signed by the deceased, it will be declared null and void if it is
not countersigned by

a) Wife b) Sons
c) Daughters d) Two witnesses

19. The value of the property for probate purpose is to be determined as on

a) The date of filing probate b) The date of death of the deceased

petition to the court

c) The date of signing the d) The date of sign by the witnesses

will by the deceased
85

20. Courts have upheld that valuation of property for probate purposes and court fees
for probate cases should be estimated as per the provisions of

a) Fair rent act b) Income tax rules

c) Wealth tax rules d) Principles of valuation

21. The process of officially proving a WILL to be valid is called

a) Probate b) Notarised
c) Testimony d) Endorsement

22. Certificate issued by a court that the WILL of a deceased is legally valid and that
the executors appointed under the WILL are authorised to administer. This process
is called

a) Endorsement b) Notarised
c) Testimony d) Probate

23. Probate for WILL is required to be carried out

a) Only in Calcutta, Madras, b) Only in Delhi, Calcutta, Madras,

Mumbai Mumbai
c) All the places in the country d) It is not required now

* * *

Answers :

1 - a 5 - c 9 - a 13 - d 17 - b
2 - b 6 - a 10 - a 14 - d 18 - d
3 - c 7 - b 11 - c 15 - d 19 - a
4 - b 8 - c 12 - c 16 - a 20 - c

21 - a
22 - d
23 - a
86

MORTGAGE

1. A person who mortgages his property in lieu of security payment or loan is called as

a) Mortgagor b) Mortgagee
c) Borrower d) Applicant

2. The person who advances funds or loan amount against the security offered by
the property owner is called as

a) Mortgagee b) Mortgagor
c) Applicant d) Borrower

3. Mortgagor does not give possession of the property to the mortgagee but he gives
personal undertaking to repay loan amount with interest. This mortgages is called
as

a) Usufructuary mortgage b) Mortgage by conditional sale

c) Equitable mortgage d) Simple mortgage

4. The mortgage deed provides for conditional sale of the property by the mortgagor
to the mortgagee. This mortgage is called as

a) Usufructuary mortgage b) Simple mortgage

c) Equitable mortgage d) Mortgage by conditional sale

5. The Mortgagor delivers possession of the property to the mortgagee. The

mortgagee receives rents and profits from the property and retains possession till
the full loan money is paid. This mortgage is called as

a) Equitable mortgage b) Mortgage by conditional sale

c) Usufructuary mortgage d) Simple mortgage

6. The Mortgagor delivers to the mortgagee title deeds with intent to create a security
thereon. This mortgage is called as

a) Mortgage by conditional sale b) Simple mortgage

c) Equitable mortgage d) Usufructuary mortgage
87

7. If an asset is created through finance obtained from the bank, such security is
known as

a) Collateral security b) Primary security

c) Preliminary security d) Secondary security

8. The additional security (apart from the primary security) pledged to the bank is
called as

a) Primary security b) Collateral security

c) Preliminary security d) Secondary security

9. For the construction of a residential building, an applicant obtains loan from a bank.
On completion of the construction, the bank directs the panel valuer to certify

a) The cost on completion b) Market value

c) Forced sale value d) Auction value

10. In the case of collateral securities, the bank directs the valuer to certify

a) Market value b) Cost of the property

c) Written down value d) Book value

11. If there is a default of repayment of loan by the borrower, the account becomes
N.P.A. The bank decides to auction the property to recover the loan. In this case,
the bank directs the valuer to certify

a) Cost of the property b) Auction value

c) Written down value d) Book value

12. Valuers prefer to estimate forced sale value a certain percentage less than the fair
market value. This percentage normally is

a) 30% b) 15%
c) 40% d) 50%

13. The term in common parlance would mean net money likely to be realised after the
sale of the property is

a) Auction value b) Market value

c) Forced sale value d) Realisable value
88

14. Valuers prefer to estimate auction value a certain percentage less than the fair
market value. This percentage normally is

a) 5% b) 15%
c) 10% d) 30%

15. An estimate of minimum price likely to be offered by the bidders in the public
auction of the mortgaged property is called as

a) Realisable value b) Market value

c) Reserve price d) Forced sale value

16. Before proceeding with valuation, is it the duty of a valuer to ask for documents like
title deeds, plan, etc.

a) It is the bank’s duty to process b) It is not correct

the document

c) Yes, it is his duty d) It is the advocate’s job to look

into it

17. Valuer is not a fortune teller and he can at the most foresee market conditions only
for

a) 1 year b) 5 years
c) 7 years d) 10 years

18. Is there any hard and fast rule that auction value should be always lower than the
fair market value?

a) No, there is no rule b) Yes, it is always lower

c) Not related d) It is always higher

19. Authorised officer under this act has more powers than a court receiver. He can
take not only symbolic possession of the property but can also take physical
possession of the property from the tenants also. This act is known as

a) Transfer of property Act b) DRT

c) LARAR Act d) SARFAESI Act 2002
89

20. A temple is a

a) Property that be sold easily b) Marketable property

c) Marketable but not saleabled) Non marketable property

21. To ascertain the rent for the premises proposed to be occupied by Central
government department, who is ascertaining the rent for them?

a) CPWD b) State Public Works Department

c) Panel engineer d) Local authority

22. Which rate is being adopted by CPWD at the time of fixing rent for the buildings
proposed to be occupied by the Central government departments?

a) Plinth area rates prescribed by b) Plinth area rates prescribed by

CPWD State PWD

c) Plinth area rates prescribed by d) Prevailing plinth area rates

Supt. Engineer of the district

23. While fixing rent for the premises, CPWD follows the method purely based on
recognised principles of valuation?

a) Yes b) Also on the basis of comparative

study of prevailing rent in that
locality
c) They compare the rent as per d) They fix arbitrarily
the local government rent

24. In the case of metropolitan cities, the percentage rate of return to fix rent for
non-residential purposes adopted by CPWD is

a) 8% b) 10% c) 6% d) 4%

25. In the case of mofussil towns the percentage rate of return to fix rent for
non-residential purposes adopted by CPWD is

a) 5% b) 7% c) 9% d) 3%

26. In the case of metropolitan cities, the percentage rate of return to fix rent for
residential purposes adopted by CPWD is
90

a) 5.5% b) 7.5% c) 9.5% d) 3.5%

27. In the case of mofussil towns, the percentage of rate of return to fix rent for
residential purposes adopted by CPWD is

a) 2.5% b) 6.5% c) 4.5% d) 8.5%

28. To ascertain the rent based on the recognised principles, which method of
depreciation is adopted by CPWD?

a) Sinking fund method b) Constant percentage method

c) Linear method d) Straight line method

29. The cost inflation index is prescribed by

a) CBDT b) CPWD
c) Valuation cell d) Public works department

30. When a property is sold after 01.04.2017, the fair market value of the property (for
the purpose of ascertaining capital gain) is to be ascertained as on

a) 01.04.2001 b) 01.04.1981 c) 01.04.1991 d) 01.04.1971

31. When a property is sold on 31.03.2017, the fair market value of the property (for
the purpose of computing the capital gains) is to be ascertained as on

a) 01.04.2001 b) 01.04.1981 c) 01.04.1991 d) 01.04.1971

32. If the FMV is to be ascertained as on 01.04.1981, then cost inflation index for
1981 - 82 is

a) 110 b) 100 c) 120 d) 130

33. If the FMV is to be ascertained as on 01.04.2001, then the cost inflation index for
2001 - 02 is

a) 520 b) 426 c) 100 d) 626

34. Any profit or gains arising from the transfer of a capital asset effected from the
previous year is called as
91

a) Net gain b) Capital loss c) Capital gain d) Gross gain

35. The capital gain tax percentage for an individual as on August 2020 is

a) 50% b) 30% c) 40% d) 20%

36. The capital gain tax percentage for association of persons (AOP) as on Aug 2020 is

a) 50% b) 30% c) 40% d) 20%

37. The capital gain tax percentage for companies as on August 2020 is

a) 50% b) 40% c) 30% d) 20%

38. Cost inflation index and cost index are one and the same?

a) They are not same b) They are same

c) May be same d) May not be same

39. A capital asset held by an assessee for not more than 24 months immediately
proceeding the date of its transfer is called as

a) Medium term capital asset b) Long term capital asset

c) Short term capital asset d) Narrow term capital asset

40. Sale consideration minus indexed cost of acquisition minus indexed cost of
improvement is

a) Capital loss for seller b) Capital gain for purchaser

c) Taxable capital gain for seller d) Income in the hands of the seller

* * *

Answers :

1 - a 9 - a 17 - a 25 - c 33 - c
2 - a 10 - a 18 - a 26 - c 34 - c
3 - d 11 - b 19 - d 27 - d 35 - d
4 - d 12 - b 20 - d 28 - d 36 - d

5 - c 13 - d 21 - a 29 - a 37 - d
6 - c 14 - d 22 - a 30 - a 38 - a
7 - b 15 - c 23 - b 31 - b 39 - c
8 - b 16 - c 24 - b 32 - b 40 - c
92

ASSET VALUATION UNDER SARFAESI ACT 2002

1. SARFAESI ACT was enacted based on the recommendation from

a) Narasimhan committee b) Rajendran committee

c) Rajeswaran committee d) Thillainayagam committee

2. In which year SARFAESI ACT was enacted?

a) 2002 b) 1993 c) 2012 d) 1992

3. Debt Recovery Tribunal and SARFAESI are one and the same

a) They are not same b) They are same

c) They may be same d) Not relevant to each other

4. NPA means

a) Non - productive account b) Non - performing asset

c) Non - productive asset d) No performance asset

5. Under the SARFAESI Act, the powers of taking possession and sell them are vested
with

a) Lawyer b) Banks c) Court d) Police

6. SARFAESI act consists of chapters

a) 5 b) 6 c) 4 d) 3

7. Regulations of securitisation and Reconstruction of Financial Assets of banks and

financial institution is covered in chapter

a) Chapter V b) Chapter III c) Chapter IV d) Chapter II

8. Enforcement of security interest is covered in

a) Chapter VI b) Chapter IV c) Chapter V d) Chapter III

9. Offences and penalties are covered in chapter

a) Chapter II b) Chapter III c) Chapter I d) Chapter V

10. Under which rule, ‘approved value’ is dealt with?

a) Rule 8 (5) b) Rule 5 c) Rule 2 d d) Rule 12

11. Under which rule, valuation of immovable properties are dealt with

a) Rule 8 (5) b) Rule 2 d c) Rule 5 d) Rule 12

12. Under which rule, sale of immovable secured assets are dealt with

a) Rule 5 b) Rule 2 d c) Rule 8 (5) d) Rule 12

13. Which are the properties that cannot be considered as security under SARFAESI
act

a) Aircraft, ship, agricultural lands b) Plot, building, petrol bunk

c) Commercial ship, flat d) Cinema theatre

14. Who is the authority to empanel the approved valuer under SAFAESI act (as on
2017)

a) Board of directors of the bank b) IBA

c) IBBI d) MCA

15. LARAR Act deals with

a) Land acquisition b) Bank loan recovery

c) Licence and Rent control d) Debt recovery

16. LARAR Act was implemented on

a) 2013 b) 1993 c) 2003 d) 2013

17. LARAR Act is under the purviews of

a) Ministry of law and justice b) Ministry of finance

c) Ministry of social affairs d) Ministry for company act

18. The provisions of this Act relating to land acquisition, compensation, rehabilitation
and settlement shall apply

a) When the government acquires b) When the government takes the

land for its own use land on lease basis

c) When the government takes the d) When any private party purchases
land on monthly rental basis the land

19. The number of chapters involved in LARAR Act is

a) 12 b) 13 c) 11 d) 10

20. Chapter I of LARAR Act deals with

a) Determination of social impacts b) Preliminary

and public purpose

c) Social provision to safeguard d) Notification and acquisition

food security

21. Chapter 5 of LARAR Act deals with

a) Procedure and manner of b) Rehabilitation and Resettlement

Rehabilitation and resettlement award

c) National monitoring committee d) Establishment of land acquisition

of rehabilitation

22. Chapter 9 of LARAR Act deals with

a) Payment b) Apportionment of compensation

c) Temporary occupation of land d) Offences and penalties
95

23. The collector shall determine the market value of land

a) As per the oral enquiry b) As per the prevailing market rate

c) As per the stamp duty value d) As per the income capitalisation

24. The date of determination of market value shall be the

a) Date of processing b) Date of award

c) Date of notification d) Date of appeal

25. The collector having determined the total compensation to be paid, shall, to arrive
at the final award, impose a ‘solatium’ amount equivalent to ................% of the
compensation amount

a) 50% b) 30% c) 100% d) 10%

26. The collector in determining the market value of building and other immovable
property used the services of a

a) Surveyor b) Architect
c) Competent engineer d) Draftsman

27. The collector for the purpose of determining the value of trees and plants attached
to the land acquired uses the services of

a) Land surveyor b) Plant & Machinery valuer

c) Civil engineer d) Experienced persons in the

field of agriculture

* * *

Answers :

1 - a 9 - d 17 - a 25 - c
2 - a 10 - c 18 - a 26 - c
3 - a 11 - c 19 - b 27 - d
4 - b 12 - c 20 - b

5 - b 13 - a 21 - b
6 - b 14 - a 22 - b
7 - d 15 - a 23 - c
8 - d 16 - a 24 - c
96

CONCEPT OF TRANSFERABLE DEVELOPMENT RIGHTS (TDR), CONCEPT OF

TIME SHARE INTEREST IN REAL PROPERTY, VALUATION OF TDR, TIME SHARE
INTEREST AND EASEMENT RIGHTS

1. The right granted by a landowner to an owner of another property for the non-exclusive
use of a portion of the land of a specific purpose or enjoyment of certain rights, is
called as

a) Easement rights b) Transferable development rights

c) Time share interests d) Leasehold rights

2. When a family is partitioned and its members agree amongst themselves that in case
any of the parties wish to sell even at a future date, they must do so to one of the other
members. This is called as

a) Self-imposed easement b) Legal easement

c) Time share interest d) Transferable development rights

3. When a co-operative society admits only vegetarians as its members, it is called as

a) Legal easement b) Self imposed easement

c) Time share interest d) Transferable development rights

4. To fix electric lines over certain lands or the right to construct underground drains over
certain lands or right to dispose water through adjoining property, right to use water
from a reservoir constructed over another property is called as

a) Self imposed easement b) Legal easement

c) Time share interest d) Transferable development rights

5. Easements are not attached to owners, but they are attached only to

a) Local authorities b) Tenants

c) Properties d) Owner

6. Easements can be created or extinguished by owners and cannot be created by

a) Advocate b) Neighbours
c) Lessees / Tenants d) Municipal authorities
97

7. When the benefit of an easement is not exercised over a long period of time, then the
easement may be considered as

a) Automatic renewal b) Full right

c) Continue to enjoy right d) Extinguished or released

8. Ownership of a particular property (say a flat) is held for a specified period of time
during a year - is called as

a) Transferable development right b) Temporary ownership

c) limited ownership d) Time share property

9. The concept of time sharing was initially introduced in the mid 1960s at a resort in the

a) French Alps b) Suiss Alps c) Australia d) New Zealand

10. In India, the concept of time sharing started in the year

a) 1980 b) 1990 c) 1970 d) 1960

11. The promoter runs the business and lets to the owner to use the premises, as per the
agreement, for the specific time of the year. The agreement may be for 20 years.
Once the period is over, the entire property reverts to the original developers. This
type of arrangement is called as

a) Form of rent on a long term basis b) Form of lease on a long term basis
c) Form of rent on a short term basis d) Form of lease on perpetuity

12. Time share concept is advantageous to

a) Developer b) Developer and purchaser

c) Purchaser d) None

13. In a hill station, this period of time share will be more valuable comparatively to other
period

a) December b) January c) May d) October

14. Transfer of Development Rights was initially developed in

a) Australia b) U.K. c) USA d) Canada

15. If a person is denied the right to use his land in a particular way, he should be offered
alternative facilities to ulitise these rights in some other way so that a public purpose
is served and at the same time the interest of the land owner is preserved. It is called
as

a) Leasehold Rights b) Easement Rights

c) Time Share Rights d) Transfer of Development Rights

16. TDR is a concept in

a) Forest management b) Air management

c) Water management d) Land management

17. TDR scheme was first started in the city of

a) Bombay b) Kolkatta c) Chennai d) Delhi

18. Transferring the building potential from one plot (originating plot) to some other site
(receiving plot) under certain terms and conditions is called

a) Transfer of Development Rights b) Time Share Rights

c) Easement Rights d) Leasehold Rights

19. One of the essential conditions of the TDR is both the originating and receiving plot
must fall within the territorial jurisdiction of the

a) Different locality b) Same local authority

c) Anywhere in the country d) Neighbouring local authority

20. The Development Right certificate can be sold to

a) Neighbour b) Any other person

c) None d) Government only

21. The DRC is issued by

a) Magistrate b) Collector
c) Commissioner of the local authority d) Chief Engineer, PWD

22. For the use of TDR, areas near railway track, highways and coastal areas are
99

a) Can be included / excluded depending b) Included

upon the decision of local authority
c) Excluded d) None

23. The rights under “Development Right Certificate” can

a) Be tradable and not transferable b) Not be transferred

c) Be transferred and not tradable d) Be transferable and tradable

24. TDR originated out of free surrender of plot reserved for public purposes like garden,
school, play ground, etc. is called as

a) Heritage TDR b) Road TDR

c) Slum TDR d) General TDR

25. TDR originated out of free surrender of plot or portion of plot affected by new road or
road widening of existing municipal road, is called as

a) Road TDR b) General TDR

c) Slum TDR d) Heritage TDR

26. TDR granted to developers, in lieu of carrying out redevelopment work of ‘slum area’
plot as per government policy & norms is called

a) Slum TDR b) General TDR

c) Road TDR d) Heritage TDR

27. Owner of plot on which ‘Heritage’ building exists and when FSI of such plot is
underutilised and when such owner is prevented to use such unutilised FSI on his
land, this TDR is granted to owner which corresponds to unulitised FSI area in the
plot. Such TDR is called as

a) General TDR b) Heritage TDR

c) Slum TDR d) Road TDR

28. If originating TDR is from residential zone, it cannot be used on plot in industrial or
commercial zone and vice versa. This is

a) False b) True
c) Not applicable d) No such rule
100

29. The definition for easement is given in

a) Section 4 of SARFAESI b) Section 4 of Transfer of Property

Act Act
c) Section 4 of Indian d) Section 4 of Debt Recovery
Easement Act Tribunal Act

30. A contract for leave and licence is a right of ‘Licence’ as per section 52 of

a) Sarfaesi Act b) Transfer of property Act

c) Indian Easement Act d) DRT Act

* * *

Answers :

1 - a 9 - a 17 - a 25 - a
2 - a 10 - a 18 - a 26 - a
3 - b 11 - b 19 - b 27 - b
4 - b 12 - b 20 - b 28 - b

5 - c 13 - c 21 - c 29 - c
6 - c 14 - c 22 - c 30 - c
7 - d 15 - d 23 - d
8 - d 16 - d 24 - d

STUDY OF INDIAN ACCOUNTING STANDARDS (IND AS) AS APPLICABLE TO

VALUATION OF REAL ESTATE. STUDY OF INTERNATIONAL VALUATION
STANDARDS (IVS) AS APPLICABLE TO VALUATION OF REAL ESTATE

1. “Market value is the estimated amount for which a property should exchange on the
date of valuation between a willing buyer and a willing seller in an arm’s length
transaction after proper marketing where in parties had each acted knowledgeably
predently and without compulsion”. This is as per which standard?

a) Indain Standard b) American Standard

c) British Standard d) International Valuation Standard

* * *
Answers :

1 - d
101

IMPORTANT CASE LAWS ON PRINCIPLES OF VALUATION OF REAL ESTATE

1. RUSTAM C. COOPER vs Property means the highest right a man can have
UNION OF INDIA to anything, it includes ownership, estates and
interest in coporeal things and also rights such
as trademarks, copy rights, patents, etc. Court
has included all types of property viz tangible.

2. SORAB TALATI vs The court approved of investment theory to fix

JOSHEPH MICHEM standard rent of the rent controlled premises.
Return or yield from Gilt Edged Security is the
basis for determining the fair return to the
landlord for his investments in land & buildings.

3. COMMISSIONER OF In determining the values of the leasehold

WEALTH TAX vs interest of the assessee in the land for the
P.N. SIKAND purpose of wealth tax assessment, the price
would have to be reduced by 50% of the
unearned increase in the value of the land (which
is diverted to the lessor).

4. WENGER & CO vs DISTRICT Combination of methods (Owner occupied - sale

VALUATION OFFICER - comparison & tenanted portion - capitalization
DELHI HC method) - adopted by DVO and his approach is
not only acceptable but also in accordance with
the principles of evaluation.

5. JAWAJI NAGNATHAN vs Basic valuation register prepared and maintained

REVENUE DIVISIONAL for the purpose of collecting stamp duty cannot
OFFICER form foundation to determine the market value
of the property under registration.

6. CHIMANLAL The court cannot take into account the award

HARIGOVINDDAS vs passed by the SLAO unless it is produced and
SPECIAL LAND proved before the court. The market value is to
ACQUISITION OFFICER be determined as on date of publication of the
102

notification under sec 4 of LAA. Plus factors and

minus factors are to be considered while
determining the market value.

7. CONTROLLER OF ESTATE • Rented properties must be valued by rental

DUTY VS. RADHA DEVI method.
JALAN
• In case of building which are in posession of
tenant and the tenants cannot either be evicted
or the rent payable by them cannot be
enhanced, except in accordance with the
provisions of the rent act, the only appropriate
method of valuation is to capitalise the annual
rent by certain number of year’s purchase.

• The method of valuing the land and the

building separately and adding up the value
would be improper in such cases, because
that would ignore the impact of the Rent
Control Act on the value of the land the
building.

8. COMMISSIONER OF • The court approved of Tribunal’s decision to

INCOME TAX VS. allow 10% deduction in value to account for
SMT. ASHIMA SINHA sale of undivided share in the property.

• The court has held that

“In the method adopted by the valuation
officer, the value of land is taken twice viz,
i) the amount included in the yield method and
ii) again under the reversionary method. This
is a novel approach but in our view is
erroneous”.

(Note : The calcutta high court has virtually held that

there is no such thing as ‘Reversionary value’
and the concept of reversionary value is
erroneous. It is well known that the courts have
to consider only the evidence duly proved and
the arguments submitted before them in the
court. It seems that the advocates submitting
103

arguments on behalf of the valuation officer

have not properly understood the logical
reasoning behind the reversionery value and
therefore failed in producing proper evidence
and properly presenting the concept of
reversionary value before the High court. The
High court has therefore misled in delivering
such absolutely incorrect and erroneous
judgement. It needs to be cautioned at this
stage, that the judgements of the courts should
always be read in the context of the evidence
duly proved and arguments submitted before
the court and should never be followed blindly.
- (Courtesy : Book “Basics in Real Estate valua-
tion” - Mr. H.T. Hardikar - Page 234)

9. COMMISSIONER OF • The valuation officer under the method adopted

INCOME TAX VS. ANUP by him, has taken the value of the land twice,
KUMAR KAPOOR AND ORS. once in arriving at the figure by the’yield or
rental’ method and again in applying the
‘reversionary’ method. This is in our view was
wholly wrong.

• In this case Calcutta court rejected concept of

reversionery value of land. The above case was
fully tenanted property and obviously therefore
land reversion was not possible and hence its
value could not be added.

10. COMMISSIONER OF • The rate of capitalisation should be not unreal

INCOME TAX VS. VIMLABEN and must have regard to the commercial rate
BHAGWANDAS PATEL of return after taking into consideration the
various constraints and insecurities in the
property market.

• After considering payment provision v/s 11(1)

of U.L.C.R. Act of 1976, the court opined,
“In our opinion, the reasonable and appropriate rate
of capitalisation would be 81/3 time the net average
annual income which would give yield of 12% per
annum on the investment of capital in property”.

* * *
104

FAQ

01. Property includes ownership, estates and interests in corporeal things and also
rights such as trademarks, copyrights, patents.

a) Sorab Talati Vs Josheph Michem

b) Rustam C Cooper Vs Union of India
c) Commissioner of Wealth Tax Vs P. N. Sikand
d) Wenger & Co Vs District Valuation Officer - Delhi Hc

02. In this case, the court approved of investment theory in preference to comparable
rent theory to fix standard rent of the rent controlled premises. The court
considered return or yield from Gilt Edged security as the basis.

a) Rustam C. Cooper Vs Union of India

b) Sorab Talati Vs Josheph Michem
c) Commissioner of Wealth Tax Vs P. N. Sikand
d) Wenger & Co Vs District Valuation Officer - Delhi HC

03. In which of the following case, the court has for the first time approved of
Investment theory of Rent fixation, by allowing 1.50 percent more return than the
return on gilt edged security on value of land and 2.5 percent extra yield on the cost
of the building, as fair return to the landlord on his investment in an immovable
property?

a) Commissioner of Wealth Tax Vs P. N. Sikand

b) Sorab Talati Vs Joseph Michem
c) Wenger & Co Vs District Valuation Officer - Delhi HC
d) Jawaji Nagnathan Vs Revenue Divisional Officer

04. The Doctrine of Unearned Increase was enunciated because of a famous court
judgement. Select the correct judgement.

a) Sorab Talati Vs Josheph Michem

b) Commissioner of Wealth Tax, New Delhi vs. Sri P.N. Sikand
c) Wenger & Co Vs District Valuation Officer - Delhi HC
d) Jawaji Nagnathan Vs Revenue Divisional Officer

05. The landmark judgement, Commissioner of Wealth Tax, New Delhi Vs. Sri P.N.
Sikand (1979) 107 ITR 922 (SC) states that:

a) only the lessor has the right to the increase in value

105

b) the increase in value of the leasehold interest of the property leased is to be

equally shared by both the lessor and lessee.
c) only the lessee has the right to the increase in value
d) the ratio of the lessor’s and lessee’s share is to be determined by negotiation.

06. For owner occupied portion, the District valuation officer calculated the value on
the basis of what were the rates prevalent for sale of commercial flats in cannaught
place. For the tenanted portion, he capitalised the rental value. The method adopted
by him is acceptable.

a) Commissioner of Wealth Tax Vs P.N. Sikand

b) Wenger & Co Vs District Valuation Officer - Delhi HC
c) Jawaji Nagnathan Vs Revenue Divisional Officer
d) Sorab Talati vs Josheph Michem

07. In which of the following cases, the court approved comparable sales method of
valuation for owner occupied portion of the building and rental method of valuation
for tenanted portion of the same building.

a) Rustam C. Cooper Vs Union of India

b) Wenger & Co Vs District Valuation Officer - Delhi HC
c) Sorab Talati Vs Josheph Michem
d) Commissioner of Wealth Tax Vs P.N. Sikand

08. Basic valuation register for the purpose of collecting stamp duty cannot form a
foundation to determine the market value

a) Commissioner Of Wealth Tax Vs P. N. Sikand

b) Jawaji Nagnathan Vs Revenue Divisional Officer
c) Chimanlal Harigovinddas Vs Special Land Acquisition Officer
d) Wenger & Co Vs District Valuation Officer - Delhi HC

09. The court cannot take into account the award passed by the SLAO unless it is
produced and proved before the court. The market value is to be determined as on
date of publication of the notification under sec 4 of LAA. Plus factors and minus
factors are to be considered while determining the market value.

a) Jawaji Nagnathan Vs Revenue Divisional Officer

b) Chimanlal Harigovinddas Vs Special Land Acquisition Officer
c) Commissioner Of Wealth Tax Vs P. N. Sikand
d) Wenger & Co Vs District Valuation Officer - Delhi HC
106

10. The method of valuing the land and the building separately and adding up the
value would be improper in such cases, because that would ignore the impact of
Rent Control Act on the value of the land and building.

a) Chimanlal Harigovinddas Vs Special Land Acquisition Officer

b) Controller of Estate Duty Vs Radha Devi Jalan
c) Commissioner of Income Tax Vs Vimlaben Bhagwandas Patel
d) Commissioner of Income Tax Vs Anup Kumar Kapoor and ors.

11. The rate of capitalisation should be not unreal and must have regard to the
commercial rate of return after taking inro consideration the various constraints
and insecurities in the propety market.

a) Controller of Estate Duty Vs Radha Devi Jalan

b) Commissioner of Income Tax Vs Vimlaben Bhagwandas Patel
c) Commissioner of Income Tax Vs Anup Kumar Kapoor and ors.
d) Commissioner of Income Tax Vs Smt. Ashima Sinha

12. The valuation officer under the method adopted by him, has taken the value of the
land twice, once in arriving at the figure by the yield or rental method and again in
applying the reversionary method. This is in our view was wholly wrong.

a) Commissioner of Income Tax Vs Vimlaben Bhagwandas Patel

b) Commissioner of Income Tax Vs Anup Kumar Kapoor and ors.
c) Chimanlal Harigovinddas Vs Special Land Acquisition Officer
d) Controller of Estate Duty Vs Radha Devi Jalan

13. The court approved of Tribunal’s decision to allow 10% deduction in value to
account for sale of undivided share in the property.
or
In the method adopted by the valuation officer, the value of land taken twice viz.
i) the amount included in the yield method and ii) again under the reversionary
method. This is a novel approach but in our view is erroneous.

a) Chimanlal Harigovinddas Vs Special Land Acquisition Officer

b) Commissioner of Income Tax Vs Smt. Ashima Sinha
c) Commissioner of Income Tax Vs Vimlaben Bhagwandas Patel
d) Controller of Estate Duty Vs Radha Devi Jalan

Answers :

1 to 13 - b

* * *
107

VALUER AS AN EXPERT WITNESS IN COURT

1. A valuer is not witness of facts but he is witness of opinion of facts, i.e., on fair value
of the property. Is this correct?

a) May be correct b) Not correct

c) Correct d) May not be correct

2. If A has sold a property to B for 20 lakhs through a broker, then the broker is a

a) Witness of opinion b) Witness of fact

c) Not a witness of fact d) Not a witness of opinion

3. A has sold a property to B for Rs. 20 lakhs through a broker,. The valuer as expert
witness deposes that the value of said property is Rs. 25 lakhs. Then, the valuer is

a) Witness of fact b) Witness of opinion

c) Not a witness of opinion d) Not a witness of fact

4. What must be the first requirement of a valuer if he is directed to give an expert

witness?

a) Give me the copy of my valuation report (documents)

b) Give me the copy of drawing
c) Give me the copy of legal opinion
d) Give me the copy of approval letter

5. The first important quality of an expert honest valuer while being cross examined is

a) Never tell a lie b) Do not tell the truth

c) Never admit the mistake d) Never say yes

6. A valuer should always remember that

a) He is not witness of fact but witness of opinion

b) He is a witness of fact but not a witness of opinion
c) His words are final in the court’s verdict
d) His words will be taken as perfect by the court

7. Any opinion without reasoning has no value

a) This is not true b) This is true

108

c) May be true d) May not be true

8. A valuer who has never faced cross examination by a senior counsel in the court,
will never reach perfection in field of valuation, in spite of several years of practice
as valuer

a) Not correct b) This is wrong notion

c) Need not be correct d) This is correct

9. It is science of morals, that branch of philosophy which is concerned with human

character and conduct ..... It is called as

a) Ethics b) Conduct
c) Discipline d) Character

10. Inadequate physical inspection or doing valuation without inspecting the property
is considered as

a) Indiscipline of a valuer b) Negligence of a valuer

c) Incompetence of a valuer d) Irresponsibility of a valuer

11. Failure to ascertain restrictive covenants is considered as

a) Indiscipline of a valuer b) Negligence of a valuer

c) Incompetence of a valuer d) Irresponsibility of a valuer

12. Which of the following is expressed by a valuer while giving expert evidence in the
examination - in - chief in the Court?

a) Opinions regarding values b) Evidence of facts

with reasoning
c) Answers without reasoning d) Answers only in ‘yes’ or ‘no’

13. A flat was valued by ‘A’ at Rs. 21 Lakhs and then purchaser ‘B’ purchased from seller
‘C’ said flat for Rs. 20 Lakhs with the help of broker ‘D’. In a court case about correct
sale value, which of the following is not called a ‘witness of fact’?

a) Purchaser ‘B’ b) Valuer ‘A’

c) Seller ‘C’ d) Broker ‘D’

* * *

Ans
1 - c, 2 - b, 3 - b, 4 - a, 5 - a, 6 - a, 7 - b, 8 - d, 9 - a, 10 - b, 11 - b, 12 - a, 13 - b
109

9. PRINCIPLES OF INSURANCE AND LOSS ASSESSMENT (TOTAL 3 MARKS)

1. Valuation of property for insurance purpose does not involve

a) Land valuation b) Building valuation

c) Machinery valuation d) Equipments valuation

2. Land does not need any insurance because it

a) Is not depreciable b) Is not destructible

c) Can be destroyed d) Can be deteriorated

3. The insurance company do not insure

a) Machinery b) Building c) Land d) Equipments

4. A building is a ............... and hence requires insurance

a) Moveable asset b) Immovable asset

c) Solid asset d) Destructible asset

5. In the language of insurance, the risks like fire, earth quake, riot, terrorism,
explosion, flooding. tsunami, storm, cyclone, lightening are called

a) Perils b) Non - perils c) Damage d) Destroy

6. Insurance policy is basically a ....................... under which insurance company

promises to indemnify the insured person for the loss or damage caused by the
insured peril (fire, flood) to the insured property.

a) Registered deed b) Contract document

c) Oral agreement d) Lease deed

7. Insurance was first established in the country

a) France b) USA c) Britain d) Russia

110

8. The number of subsidiaries to the head company general insurance (India) is

a) 10 b) 3 c) 2 d) 4

9. To regulate the insurance business in India, Government of India introduced a

body named as

a) IRDA b) SARFAESI c) DRT d) IBBI

10. The insurance company who undertakes risk of the person taking insurance policy
is called as

a) Insured b) Insurer c) Company d) Institution

11. The person who seeks indemnity and insurance cover for his asset from an
insurance company is called as

a) Owner b) Insurer c) Insured d) Applicant

12. The sum for which the asset is insured by the insurer is called as

a) Value b) Premium c) Deposit d) Insurable amount

13. The annual sum payable by the insured to the insurance company for risk
protection of assets is called as

a) Premium b) Insurable amount

c) Caution deposit d) Pakadi

14. The (fair) reasonable value (True value) of the asset on the day of taking out of
insurance policy is called as

a) Over value b) Value at risk

c) Under value d) No value

15. If the insured amount is higher than the true worth of the asset (value at risk), than
it is called as

a) Fair value b) Under insured

c) Over insured d) Unfair value
111

16. If the insured amount is lower than the true worth of the asset / value at risk, then
it is called as

a) Unfair value b) Over insured

c) Fair value d) Under insured

17. Concept of insurance is based on principle of

a) Utmost good faith b) Natural justice

c) Fairness d) Sympathy

18. Fundamental principle of insurance is

a) Insured person should make b) Insured person should not make

profit out of insurance money profit out of insurance money

c) The insurance company should d) The insured person should be at

make profit loss

19. Immediately on payment of premium, the insurance company issues a ‘cover note’
and later releases the insurance policy. A risk is covered even from the

a) Date of cheque payment b) Only after the date of issuing policy

c) Date of issue of cover note d) Date of accident

20. The period of an insurance policy is normally

a) One month b) 6 months c) 3 months d) One year

21. The types of building insurance policy which are available with the insurance
company are

a) Two b) Four c) One d) Eight

22. Value at risk and insurable amount are determined on the basis of depreciated
value of building. This type policy is called

a) Reinstatement value policy b) Market value policy

c) Replacement policy d) Agreed value policy
112

23. In this type of policy, a clause is added that full reinstatement of the asset will be
done by the insured company, in case of total destruction of the building. It is called
as

a) Replacement policy b) Market value policy

c) Reinstatement policy d) Salvage value policy

24. Reinstatement policy is available for the buildings of age upto

a) 30 years b) 20 years
c) 25 years d) 15 years

25. This policy is available only for marine insurance and goods in transit through sea
way and not for building insurance

a) Agreed value basis policy b) Market value policy

c) Reinstatement policy d) Replacement policy

26. In building insurance, the normal fire policies are

a) 4 b) 3 c) 2 d) 6

27. It is an all peril policy. All types of risks are covered. Damage not only due to fire but
by flood and earthquake are also covered. In this type of policy, 15% variation in
insured amount estimate and actual value at risk are admissible. If difference is
more, average clause is made applicable. This policy is offered for non industrial
buildings like residential building, office building, hotel building, hospital, etc.

a) Fire policy C b) Fire policy B

c) Fire policy A d) Fire policy A1

28. This policy covers restricted peril viz. damage by fire. However it also covers risks
due to gas explosion and damage by lightening. In this type of policy 15% variation
in estimation is not permitted. This type of policy is also offeref for non industrial i.e.
for residential and commercial structures.

a) Fire policy A1 b) Fire policy C

c) Fire policy A d) Fire policy B
113

29. This policy is offered mainly for industrial buildings and godown type structures.
Risk covered under the policy is also mainly fire, lightening and explosion only. In
this policy also 15% variation between sum insured and value at risk is not allowed.

a) Fire policy C b) Fire policy A1

c) Fire policy A d) Fire policy B

30. In India reinstatement clause concept was first introduced from

a) 1945 b) 1935 c) 1955 d) 1965

31. The unauthorised and illegal structures are

a) Insured under special b) Insured

conditions

c) Not insured d) Insured with heavy premium

32. For the high valued properties under insurance the premium amount will be

a) More or less b) Less c) Constant d) More

33. If the insured sum is 30% less than the value at risk, then the insurance company
will pay ................. amount of the insured sum

a) 30% less b) 30% more c) 60% less d) 0%

34. The premium rates depend on the perils and

a) It is constant b) It changes from time to time

c) It does not change d) It will be compulsorily less

every year

35. Several property owners insure the flats, shops, office for full purchase price. This
is not proper, because

a) The purchase price includes b) The purchase price includes

registration charges drawing approval expenses
114

c) The purchase price mainly d) The purchase price includes

includes the land component deposits paid electricity, drainage,
and land cannot be insured etc.

36. All RCC framed and load bearing structures with brick or concrete walls, RCC slab
belong to the category of

a) Class ‘D’ building b) Class ‘B’ building

c) Class ‘C’ building d) Class ‘A’ building

37. The temporary type semi-permanent structures with AC / GI shade roof, belong to
the category of

a) Class ‘B’ building b) Class ‘A’ building

c) Class ‘C’ building d) Class ‘D’ building

38. In claiming the compensation for peril,

Sum insured
Amount payable = Assessed loss x
Risk insurable

This is called as

a) Assessing the loss b) Average clause

c) Fire policy A c) Fire policy B

39. Fire insurance is an agreement between two parties,

a) The insured and contractor b) The insurer and builder

c) The insurer and insured d) Contractor and insurance company

* * *

Answers :
1 - a 9 - a 17 - a 25 - a 33 - a
2 - b 10 - b 18 - b 26 - b 34 - b
3 - c 11 - c 19 - c 27 - c 35 - c
4 - d 12 - d 20 - d 28 - d 36 - d

5 - a 13 - a 21 - a 29 - a 37 - a
6 - b 14 - b 22 - b 30 - b 38 - b
7 - c 15 - c 23 - c 31 - c 39 - c
8 - d 16 - d 24 - d 32 - d
115

10. REPORT WRITING (TOTAL 3 MARKS)

REPORTS - QUALITY, STRUCTURE AND STYLE

1. What should be the first column of valuation report?

a) What is the purpose of valuation? b) Documents perused

c) Valuation is undertaken based d) Name of the owner
on the request from

2. Writing a valuation report requires

a) Technical and communication skill b) High imagination

c) Letter from the client d) Good typing

3. A valuation report is to be written

a) Only after the valuation is b) Before taking up the

completed valuation assignment
c) During the process of valuation d) At the time of physical
inspection

4. Formatted valuation reports tend to be arbitrary and are not

a) Exhaustive b) Detailed
c) Brief d) Sufficient sometimes

5. Writing a report on valuation is the result of instruction from the

a) Client b) Advocate c) Auditor d) Engineer

6. While preparing a valuation report, the valuer must satisfy himself that whatever
he writes is

a) True b) False c) Notional d) Approximate

7. The valuer himself must verify and get satisfied that the evidence and facts stated
in the report are

a) True and correct b) Notional c) False d) Approximate

* * *
Answers :

1 to 7 - a
116

REPORT WRITING - QUALITY, STRUCTURE AND STYLE, REPORT WRITING

FOR VARIOUS PURPOSES OF VALUATION, CONTENTS OF THE REPORT.

1. Non technical reports are

a) News paper or media reports b) Valuation reports

c) Structural design reports d) Structural stability reports

2. Reports for income tax valuation should be furnished in

a) FORM 0-2 b) FORM 0-1

c) FORM 0-3 d) FORM 0-4

3. IVS 103 deals with

a) General concepts and principles b) Scope of work

c) Reporting d) Investigation & compliance

4. Valuation date is defined in IVS as

a) Date of inspection b) Date of issuing report

c) Date of valuation report d) Date on which the estimate of
value applies

5. Valuer may not be required to give evidence as expert in the court for the following:

a) Drawing b) Acquisition of land

c) Fair rent d) Insurance

6. Supporting materials to valuation report are not the following:

a) Building plans b) Photographs

c) Pay slip of owner d) Statement of floor areas

* * *
Answers :

1 - a 5 - a
2 - b 6 - c
3 - c
4 - d
117

Pages 117 - 236

PART - III

TWELVE MARKS CASE STUDIES

Sl.no. of 11 of syllabus - 20 marks
118

This page is kept vacant intentionally.

119

Part - III

CASE STUDIES ON VALUATION

CONTENTS

1. Valuation of Building - 121 - 135

2. Valuation by Land & Building method - 136 - 154

3. Written down value & Book value - 155 - 158

4. Insurance - 159 - 170

5. Valuation by Cost index method - 171 - 174

6. Valuation by Belting method - 175 - 179

7. Valuation of Petrol bunk - 180 - 183

8. Valuation of Leasehold properties - 184 - 194

9. Valuation by Profit method - 195 - 197

10. Bank valuation - 198 - 199

11. Ground rent - 200 - 201

12. Valuation of Tenanted properties - 202 - 207

13. Residual value method - 208 - 209

14. Capital gain - 210 - 223

15. Apartments & J.V. ratio - 224 - 235

16. Miscellaneous topics - 236 - 236

120

DISCLAIMER

While every effort is taken to avoid errors or omissions in this publication, any
mistake or omission that might have crept in is not intentional. It may be taken note
of that neither the publisher nor the author will be responsible for any damage or
loss of any kind arising to any one in any manner of account of such errors and
omissions. A few case studies have been taken from the book of Mr. R.K. Gandhi.
121

1. VALUATION OF BUILDING

Exercise 1 :

It is a load bearing structure. Age is 8 years. Life is 60 years.

i) What is the percentage depreciation by straight line method assuming a salvage

value of 10%.

ii) What is the depreciation by constant percentage method if the depreciation rate is
1.5%.

i) Age = 8 years
Life = 60 years
Salvage = 10%
8
Depreciation = x (100 - 10) = 12%
60

r n
ii) Depreciation = 1 - (1 - )
r 100
Formula A = P (1 - 100 )n
1.5 8
= 1 - (1 - )
A = depreciated value 100
P = replacement value
n = age = 1 - (0.985)8
r = rate of depreciation
Depreciation factor = 1 - (0.886) = 0.1138 or
Depreciation percentage = 0.1138 x 100 = 11.38%

Exercise 2 :

It is a load bearing structure of 20 years old. Plinth area : 1275 sq.ft.. Replacement rate =
Rs. 1,650/sq.ft. What is the depreciated value of the building (Life : 60 years, salvage
value = 10%) by adopting straight line method (SLM)?

Plinth area = 1,275 sq.ft.

Replacement rate = Rs. 1,650/sq.ft.
Replacement value = Rs. 21,03,750/-
Age of the building = 20 Years
Life of the building = 60 years
Salvage value = 10%
122

20
Depreciation percentage = x (100 - 10) = 30%
60
Depreciated value or = 0.7 x 21,03,720
Net Present Value or = Rs. 14,72,625/-
Depreciated Replacement cost
or NCRC

Exercise 3 :

The built up area of a GF building is 5,000 sq.ft. and the carpet area is 4,000 sq.ft. Plot area
is 10,000 sq.ft. What is the FSI? What is plot coverage?

Builtup area
FSI =
Plot area
5,000
= = 0.5
10,000

GF area
Plot coverage = x 100
Plot area
5,000
= x 100 = 50%
10,000

Exercise 4 :

A building of 8,000 sq.ft (GF & FF - 4,000 sq.ft each) is existing in a plot of 8,000 sq.ft.
What is the plot coverage?

Plinth area of GF
Plot coverage = x 100
Plot area

4,000
= x 100 = 50%
8,000

Exercise 5 :

20 years factory building of 5,000 sq.ft. is situated in 1 acre of industrial land. The unit
replacement rate of building is Rs. 1,000/-. Assuming the life as 40 years and a salvage
value of 30%, find the depreciated value and salvage value of the building.

Plinth area = 5,000 sq.ft.

Replacement rate = Rs. 1,000/sq.ft.
123

Replacement value = Rs. 50,00,000

Age of the building = 20 years
Life assumed = 40 years
Salvage value assumed = 30%
20
Depreciation percentage = x (100 - 30) = 35%
40
Depreciated value = 0.65 x 50,00,000 = Rs. 32,50,000
Salvage value = 0.30 x 50,00,000 = Rs. 15,00,000

Exercise 6 : (IBBI)

Building area = 1,200 m2 ; Age = 25 years ; Life = 50 years ; Salvage value = Nil ; Plot area
= 2,000 m2 ; Land rate = Rs. 8,000/m2 ; Replacement cost of building = Rs. 25,000/m2.
What is the value?

Land value = 2,000 x 8,000 = Rs. 1,60,00,000

25
Depreciation percentage = x 100 = 50% (salvage value is nil)
50
Depreciated value of the building = 1,200x25,000x0.5 = Rs. 1,50,00,000

Total value (Land + building) = Rs. 3,10,00,000

Exercise 7 :

The plinth area of a RCC roofed load bearing residential building (16 years old) is
1,000 sq.ft. The life of the building as 60 years and a salvage value of 10%,

Questions :

1) Calculate the depreciated value if the unit replacement cost is Rs. 1,800/-.

2) For the above building, if the age of the first floor is 10 years, what will be the
depreciated value of first floor of built up area 1,200 sq.ft. assuming the unit rate of
construction as Rs. 1,400/-.

Data :

Type of structure = Load bearing

Plinth area = 1,000 sq.ft.
Life = 60 years
124

Age of the building = 16 years

Salvage value = 10%

Calculations :

GF
Plinth area = 1,000 sq.ft.
Replacement rate = Rs. 1,800/sq.ft.
Replacement value = Rs. 18,00,000
Age = 16 years
Life = 60 years
Salvage value = 10%
16
Depreciation percentage = x 90 = 24%
60
Depreciated value = 0.76 x 18,00,000
= Rs. 13,68,000/- (1)

FF
Plinth area = 1,200 sq.ft.
Age = 10 years
Life = 60 Years
Depreciation (as of GF) = 24%
Replacement rate = Rs. 1,400/sq.ft.
Replacement value = 1,200 x 1,400 = 16,80,000
Depreciated value = 0.76 x 16,80,000
= Rs. 12,76,800/- (2)

Answers :

1) Rs. 13,68,000/- 2) Rs. 12,76,800/-

Exercise 8 :

A RCC framed structure building consists of front portion (1,500 sq.ft. - 24 years age) and
rear portion (1,200 sq.ft. - 16 years). The replacement unit rate of construction is
Rs. 1,600 per sq.ft. Life - 80 years. Salvage value - 10%.

Questions :

1) What is the depreciated value of rear portion?

125

2) What is the depreciated value of the front portion?

Data :

Number of portions = 2
Type of structure = RCC framed
Area of front portion = 1,500 sq.ft.
Age of front portion = 24 years
Area of rear portion = 1,200 sq.ft.
Age of rear portion = 16 years
Replacement rate of construction = Rs. 1,600/sq.ft. (average)
Life = 80 years
Salvage value = 10%

Calculations :

Rear portion :
Plinth area of rear portion = 1,200 sq.ft.
Replacement rate = Rs. 1,600/sq.ft.
Replacement value = 1,200 x 1,600
= Rs. 19,20,000
Age of the building = 16 years
Life of the building = 80 years
Salvage value = 10%
16
Depreciation percentage = x 90 = 18%
80
Depreciation value = 0.18 x 19,20,000
= Rs. 3,45,600
Depreciated value = 19,20,000 - 3,45,600
= Rs. 15,74,400/- (1)

Front portion :
Plinth area of front portion = 1,500 sq.ft.
Replacement rate = Rs. 1,600/sq.ft.
Replacement value = 1,500 x 1,600
= Rs. 24,00,000
Age = 24 years
Life = 80 years
Salvage value = 10%
126

24
Depreciation percentage = x 90 = 27%
80
Depreciation value = 0.27 x 24,00,000
= Rs. 6,48,000
Depreciated value = 24,00,000 - 6,48,000
= Rs. 17,52,000/- (2)

Answers :

1) Rs. 15,74,400/- 2) Rs. 17,52,000/-

Exercise 9 :

It is a residential building of GF & FF. The age of GF is 16 years and FF is 8 years. Plinth
area of each floor is 1,200 sq.ft. Replacement unit rate of GF & FF is Rs. 1,600 & 1,200
respectively. Assume life as 60 years and salvage value as 10%.

Questions :

1. What is the depreciated value of GF?

2. What is the depreciated value of FF?

Data :

Number of floors = GF & FF

Plinth area of ground floor = 1,200 sq.ft.
Age of ground floor = 16 years
Replacement rate of ground floor = Rs. 1,600/-
Plinth area of first floor = 1,200 sq.ft.
Age of first floor = 8 years
Replacement rate of first floor = Rs. 1,200/-
Life = 60 years
Salvage value = 10%

Calculations :

GF FF
Plinth area = 1,200 sq.ft. 1,200 sq.ft.
Replacement rate = Rs.1,600/sq.ft. Rs.1,200/sq.ft.
Replacement value = Rs.19,20,000 Rs.14,40,000
127

Age = 16 years 8 years

Life = 60 years 60 years
Salvage vlaue = 10% 10%
16 8
Depreciation = x 90 = 24% x 90 = 12%
60 60
But, 24% is adopted
(as of GF)
Depreciation value = 19,20,000 x 0.24 14,40,000 x 0.24
Rs. 4,60,800 Rs. 3,45,600
Depreciated value = Rs. 14,59,200/- Rs. 10,94,400/-
(1) (2)

Answers :

1) Rs. 14,59,200/- 2) Rs. 10,94,400/-

Exercise 10 :

A load bearing building (1,500 sq.ft.) of 20 years old is existing in a plot of 2,400 sq.ft. The
unit land rate of plot is Rs. 2,000 and replacement unit rate of construction is
Rs. 1,700 sq.ft. It is a collateral security. Salvage value = 10%.

Questions :

1) Determine the market value assuming it is a marketable property?

2) Determine the forced value (assuming a reduction factor as 15%)?

Data :

Type of structure = Load bearing

Plinth area = 1,500 sq.ft.
Age = 20 years
Plot area = 2,400 sq.ft.
Land rate = Rs. 2,000/-
Replacement rate of construction = Rs. 1,700/sq.ft.
Salvage value = 10%
Purpose = Collateral security to bank
128

Calculations :

Land value = 2,400 x 2,000 = Rs. 48,00,000

Building area = 1,500 sq.ft.

Replacement rate = Rs. 1,700/sq.ft.
Age of the building = 20 years
Life of the building = 60 years
Salvage value = 10%
20
Depreciation percentage = x 90 = 30%
60

Depreciated value of building = 0.7 x 1,500 x 1,700

= Rs. 17,85,000
Total value = Rs. 65,85,000/- (1)
48,00,000 + 17,85,000

Forced sale value 0.85x65,85,000= Rs. 55,97,250/- (2)

Answers :

1) Rs. 65,85,000/- 2) Rs. 55,97,250/-

Exercise 11 :

Plinth area is 1,000 sq.ft. Replacement rate of construction is Rs. 2,000/sq.ft. Age is
20 years. Life is 60 years. Salvage value is 10%.

Questions :

1) What is replacement value?

2) What is depreciation percentage by adopting straight line method?
3) What is the net present value?
4) What is the depreciation percentage by constant percentage method assuming a
rate of depreciation as 1.5%.
5) What is the balance economic life?

Data :

Plinth area = 1,000 sq.ft.

Replacement rate of construction = Rs. 2,000/sq.ft.
129

Age of the building = 20 years

Life of the building = 60 years
Salvage value = 10%

Calculations :

Plinth area = 1,000 sq.ft.

Replacement rate = Rs. 2,000/sq.ft.
Replacement value = Rs. 20,00,000/- (1)

Age of the building = 20 Years

Life of the building = 60 Years
Salvage value = 10%
Depreciation = (20/60) x 90 = 30% (2)

Depreciation value = 0.3 x 20,00,000 = Rs. 6,00,000

Net present value = 20,00,000 - 6,00,000
= Rs. 14,00,000/- (3)

r n
Depreciation percentage = 1-(1 - )
100
by constant %age method
r
Formula A = P (1 - 100 )n 1.5 20
= 1-(1 - )
A = depreciated value 100
P = replacement value
= 1 - (0.985)20
Depreciation factor = 0.26087
Depreciation percentage = 0.26087 x 100 = 26.09% (4)

Balance economic life = 60 - 20 = 40 Years (5)

Answers :

1) Rs. 20,00,000/- 4) 26.09%

2) 30% 5) 40 Years
3) Rs. 14,00,000/-

Exercise 12 :

Ground floor of a residential bungalow was constructed in 1985 at a (historic) cost of

130

Rs. 3,50,000. First floor was constructed in 1990 at a cost of Rs. 6,00,000/-. Work out
replacement cost of bungalow for the year 2003 by Book value method. The building cost
multiplier factor with 1960 as base year for year 1985, 1990 and 2003 were 14.16, 27.08
and 87.50 respectively. (Courtesy : Mr. R.K. Gandhi).

Questions :

1. What is the replacement cost of ground floor by book value method?

2. What is the replacement cost of first floor by book value method?
3. What is the total replacement cost of the building by book value method?

Data :

Year of construction of GF = 1985

Cost invested for GF = Rs. 3,50,000/-
Year of construction of FF = 1990
Cost invested for FF = Rs. 6,00,000/-
Cost multiplier factor (1960 as base = 14.16
year) for the year 1985
Cost multiplier factor (1960 as base = 27.08
year) for the year 1990
Cost multiplier factor (1960 as base = 87.50
year) for the year 2003

Calculations :

1. Ground floor cost in 1985 = Rs. 3,50,000/-

Cost factor for 1985 = 14.16
Cost factor for 2003 = 87.50
Replacement cost of GFin 2003 3,50,000
= x 87.50
by Book value method 14.16
= Rs. 21,62,782/- (1)

2. First floor cost in 1990 = Rs. 6,00,000/-

Cost factor for 1990 = 27.08
Cost factor for 2003 = 87.50
Replacement cost of FF by 6,00,000
= x 87.50
Book value method 27.08
= Rs. 19,38,700/- (2)
131

3. Total replacement cost = 21,62,782 + 19,38,700

= Rs. 41,01,482/- (3)

Answers :

1. Rs. 21,62,782/- 3. Rs. 41,01,482/-

2. Rs. 19,38,700/-

Exercise 13 : (IBBI)

The ground floor of an RCC framed residential building was constructed in 1978. The first
floor of the building was constructed in 1992 and second floor was in 2010. A major structural
renovation took place in 2015. The areas of ground floor, first floor and second floor are
1200 sq ft., 1200 sq. ft and 800 sq ft respectively. The cost of construction of similar type
of building in 2015 as per CPWD Plinth Area Rate method is INR 1600 per sq ft. The Cost
Index in 2018 is 114. The remaining economic life of the building in 2018 is another
65 years.

Questions :
2010 800
1) What is the physical age of first floor as on date?
2) What is the effective age of the building? 1992 1200
3) What is the replacement value of the building in 2018?
4) What is the depreciation percentage of the first floor in 2018? 1978 1200
5) What is the depreciated value of the building in 2018?

Data :

Year of construction of GF = 1978

Year of construction of FF = 1992
Year of construction of SF = 2010
Year of major renovation = 2015
Plinth area of GF = 1,200 sq.ft.
Plinth area of FF = 1,200 sq.ft.
Plinth area of SF = 800 sq.ft.
Replacement rate of construction = Rs. 1,600/sq.ft.
in 2015
Cost index in 2018 = 114/-
Remaining economic life as on = 65 years
2018
132

Calculations :

1) Year of construction of FF = 1992

Age of FF = 2018 - 1992 = 26 years
Year of construction of GF = 1978
Age of the GF = 2018 - 1978 = 40 years

For the purpose of calculating the

depreciation of upper floors, the
age of GF is mainly considered.
.
. . the physical age of FF = 2018 - 1978 = 40 years (1)

2) Age of GF = 40 years
Remaining economic life = 65 years
Effective life of the building = 65 + 40 = 105 years

3) Replacement rate of construction = Rs. 1,600/sq.ft. (2)

in 2015
Cost index in 2018 = 114
1,600
Replacement rate in 2018 = x 114 = Rs. 1,824/-
100
Plinth area of GF = 1,200 sq.ft.
Plinth area of FF = 1,200 sq.ft.
Plinth area of SF = 800 sq.ft.
Total plinth area of the building = 3,200 sq.ft.
Replacement value of the building= 1,824 x 3,200
in 2018
= Rs. 58,36,800/- (3)

4) Age of GF =
40 years
Life of GF =
105 years
Salvage value assumed as =
10%
40
Depreciation percentage = x 90 = 34.29% (4)
105
This %age is assumed as %age of depreciation for FF also.

5) Replacement value of building = Rs. 58,36,800/-

Depreciation value = 0.3429 x 58,36,800

= Rs. 20,01,439/-
133

Depreciated value = 58,36,800 - 20,01,439

= Rs. 38,35,361/- (5)

Answers :

1) 40 years 4) 34.29%
2) 105 years 5) Rs. 38,35,361/-
3) Rs. 58,36,800/-

Exercise 14 :

There is a commercial building of GF + 2 in a busy commercial locality. GF (2,000 sq.ft.) is

a load bearing structure of age 40 years. The economic life can be assumed as 60 years
with a salvage value of 10%. The FF (2,200 sq.ft.) & SF (2,200 sq.ft.) is a framed structure
of age 20 years which rest on independent separate foundation. The economic life of this
new structure can be assumed as 80 years. The replacement cost of load bearing
structure is Rs. 1,600/sq.ft. and the average replacement cost of FF & SF is Rs. 1,800/
sq.ft. The external services is 10% for all the floors. The plot area is 4,000 sq.ft. and the
prevalent rate of land is Rs. 5,000/sq.ft. Salvage value for FF is 10%.

SF
20Y
2,200
Questions :
FF
20Y
2,200
1) What is the value of the plot?
2) What is the depreciated value of GF? GF
40Y
2,000
3) What is the depreciated value of FF & SF?
4) What is the value of the entire building?
5) What is the value of the building for the purpose of fire insurance assuming 20%
as the value of foundation?
6) What is the value of property?

Data :

• Plot area = 4,000 sq.ft.

Rate for land = Rs. 5,000/sq.ft.

• Plinth area of GF = 2,000 sq.ft.

Age of GF = 40 years
Type of structure = Load bearing
Economic life = 60 years
134

Replacement cost = Rs. 1,600/-

External service = 10%

• Plinth area of FF & SF = 2,200 sq.ft. & 2,200 sq.ft.

Age of FF & SF = 20 years
Economic life of FF & SF = 80 years
Type of structure = RCC framed with independent
foundation
Replacement rate = Rs. 1,800/-
External services = 10%

Calculations :

Plot area = 4,000 sq.ft.

Rate of plot = Rs. 5,000/sq.ft.
Value of plot = 4,000 x 5,000
= Rs. 2,00,00,000/- (1)

GF
Plinth area = 2,000 sq.ft.
Replacement rate = Rs. 1,600/-
Replacement value = 2,000 x 1,600
= Rs. 32,00,000
Add 10% for external services = Rs. 3,20,000
Total = Rs. 35,20,000/-
Age of ground floor = 40 years
Life of ground floor = 60 years
Salvage value = 10%
40
Depreciation percentage = x 90 = 60%
60
Depreciation value = 0.6 x 35,20,000
= Rs. 21,12,000/-
Depreciated value of GF = 35,20,000 - 21,12,000
= Rs. 14,08,000/- (2)

FF & SF
Built up area of first floor = 2,200 sq.ft.
Built up area of second floor = 2,200 sq.ft.
Total built up area = 4,400 sq.ft.
Replacement rate = Rs. 1,800
135

Add 10% for external services = Rs. 180

Rate + Service = Rs. 1,980/-
Replacement value = 4,400 x 1,980
= Rs. 87,12,000/-
Age of FF & SF = 20 years
Life of FF & SF = 80 years
Salvage value = 10%
20
Depreciation percentage = x 90 = 22.5%
80
Depreciation value = 0.225 x 87,12,000
= Rs. 19,60,200/-
Depreciated value of FF & SF = 87,12,000 - 19,60,200
= Rs. 67,51,800/- (3)

Total value of building

GF - load bearing - 2,000 sq.ft. = Rs. 14,08,000
FF & SF - framed structure - 4,400 sq.ft.= Rs. 67,51,800
Value of building = Rs. 81,59,800/- (4)

Depreciated value of building = Rs. 81,59,800

Less value of foundation (-20%) = (-) Rs. 16,31,960
Value for the purpose of insurance= Rs. 65,27,840 (5)

Value of plot = Rs. 2,00,00,000

Value of building = Rs. 81,59,800
Total value of the property = Rs. 2,81,59,800/- (6)

Answers :

1) Rs. 2,00,00,000/- 4) Rs. 81,59,800/-

2) Rs. 14,08,000/- 5) Rs. 65,27,840/-
3) Rs. 67,51,800/- 6) Rs. 2,81,59,800/-

* * *
136

2. VALUATION BY LAND & BUILDING METHOD

Exercise 1 :

In 2008, Mr. X purchased a residential plot of 3,000 sq.ft. for Rs. 15,00,000/-. In the year
2010, he constructed a residential building of GF for 1,500 sq.ft. and in the year 2012, he
constructed FF for 1,200 sq.ft. In 2018, a valuation report is required. Replacement cost of
GF is Rs. 2,000/sq.ft. and FF is 1,600/sq.ft. Prevailing market rate of plot is Rs. 2,000/sq.ft.
and the guide line rate is Rs. 2,500/sq.ft. Assume the life as 60 years and salvage value is
10%.

Questions :

1. What is the total replacement value of the building?

2. What is the total depreciation value of the entire building?
3. What is the total depreciated value of the entire building?
4. What is the prevailing market value of the plot?
5. What is the total value of the property as on date that can be certified?
6. What is the book value of the plot as on 2018?

Data :

Plot area = 3,000 sq.ft.

Purchased cost of plot (2008) = Rs. 15,00,000/-
Area of building GF (2010) = 1,500 sq.ft.
Area of building FF (2012) = 1,200 sq.ft.
Replacement cost of building GF (2018) = Rs. 2,000/sq.ft.
Replacement cost of building FF (2018) = Rs. 1,600/sq.ft.
Prevailing market rate of plot = Rs. 2,000/sq.ft.
Guideline rate = Rs. 2,500/sq.ft.
Life of the building = 60 years
Salvage value = 10%
Date of valuation = 2018

Calculations :

Value of GF

Plinth up area of Ground floor = 1,500 sq.ft.

137

Replacement rate of GF = Rs. 2,000/sq.ft.

Replacement value 1,500 x 2,000 = Rs. 30,00,000
Age 2018 - 2010 = 8 years
Life = 60 years
Salvage value = 10%
Depreciation percentage (8/60) x 90 = 12%
Depreciation value of GF = 0.12 x 30,00,000
= Rs. 3,60,000
Depreciated value of GF = 30,00,000 - 3,60,000
= Rs. 26,40,000/-

Value of FF

Built up area of First floor = 1,200 sq.ft.

Replacement rate of FF = Rs. 1,600/sq.ft.
Replacement value 1,200 x 1,600 = Rs. 19,20,000
Age 2018 - 2012 = 6 years
6
Depreciation percentage = x 90 = 9%
60
Depreciation of GF is adopted (i.e. 12%)
Depreciation value 0.12 x 19,20,000 = Rs. 2,30,400
Depreciated value 19,20,000 - 2,30,400 = Rs. 16,89,600/-

Value of GF + FF

Total replacement value 30,00,000 + 19,20,000 = Rs. 49,20,000/- (1)

Total depreciation value 3,60,000 + 2,30,400= Rs. 5,90,400/- (2)
Total depreciated value 26,40,000 + 16,89,600= Rs. 43,29,600/- (3)

Value of Plot

Extent of plot = 3,000 sq.ft.

Prevailing market rate = Rs. 2,000/sq.ft.
Value - 3,000 x 2,000 = Rs. 60,00,000/- (4)

Total value of property

Value of plot = Rs. 60,00,000

Value of building = Rs. 43,29,600
Total value = Rs. 1,03,29,600/- (5)
138

Book value

Book value of plot = Rs. 15,00,000/- (6)

Answers :

1) Rs. 49,20,000/- 4) Rs. 60,00,000/-

2) Rs. 5,90,400/- 5) Rs. 1,03,29,600/-
3) Rs. 43,29,600/- 6) Rs. 15,00,000/-

Exercise 2 : (IBBI)

A doctor purchased a plot of 2,000 Sq.m. in a posh locality in a city in the year 1997 for a
price of Rs. 50,00,000/-. In the year 1998, he constructed a hospital having 500 Sq.m. built up
floor area at ground level and 200 Sq.m. built up area at first floor level at the cost of Rs.
20,00,000/-. Prevalent replacement cost of similar hospital as on 2018 is
Rs. 35,000 per Sq.m. Prevalent land price in the locality at present is Rs.80,000 per Sq.m.
Age of building is 20 years and the total life of the building is 60 years.

Questions :

1. What will be the depreciation amount of the hospital building by adopting straight
line method of depreciation and considering scrap value at 10% ?

2. What will be the depreciation amount of the hospital building by adopting constant
percentage method of depreciation?

3. What will be the total market value of the plot at present?

4. What will be the total market value of the hospital property for bank loan purpose?

5. What is the balance economic life of the building?

6 Which of the following will not be considered for the estimation of present value of
building?

a) Age b) Area of the building

c) Replacement cost d) Land rate
139

Data :

Extent of plot = 2,000 sq.m.

Year of purchase of plot = 1997
Purchased amount = Rs. 50,00,000/-
Year of construction = 1998
Plinth area of the building GF = 500 sq.m.
Built up area of the building FF = 200 sq.m.
Cost of building GF + FF (500 + 200) = Rs. 20,00,000/-
Replacement rate of the building = Rs. 35,000/sq.m.
Prevalent land rate = Rs. 80,000/sq.m.
Age of the building = 20 years
Life of the building = 60 years
Salvage value assumed = 10%

Calculations :

1. Total built up area = 700 sq.m.

Replacement rate / sq.m. = Rs. 35,000
Replacement value - 700 x 35,000 = Rs. 2,45,00,000
Age = 20 years
Life = 60 years
Salvage value = 10%
20
Depreciation percentage = x 90 = 30%
60
Depreciation amount : 0.3x2,45,00,000= Rs. 73,50,000/- (1)

2. Life = 60 years
100
Rate of depreciation = = 1.66 %
60
1.66 20
Depreciation amount = [
P 1-(1-
100
) ]
r n = 2,45,00,000 [1 - 0.7155]
[
P 1-(1-
100
) ] = 2,45,00,000 x 0.2845
= Rs. 69,70,250/- (2)

3. Extent of plot = 2,000 m2

Prevalent market rate = Rs. 80,000/m2
Market value of land - 2,000 x 80,000= Rs. 16,00,00,000/- (3)
140

4. Land value - 2,000 x 80,000 = Rs. 16,00,00,000

Depreciated value of the building = 0.7 x 2,45,00,000
= Rs. 1,71,50,000
Total value - Land + building= Rs.17,71,50,000/- (4)

5. Total economic life of building = 60 years

Age of the building = 20 years
Balance economic life : 60 - 20 = 40 years (5)

6. While estimating the present market value of the building,

1. Age is to be considered.
2. Area is to be considered.
3. Replacement cost is to be considered.

Land rate need not be considered. (6)

Answers :

1) Rs. 73,50,000/- 4) Rs. 17,71,50,000/-

2) Rs. 69,70,250/- 5) 40 years
3) Rs. 16,00,00,000/- 6) Land rate need not be
considered.

Exercise 3 :

In the year 2000, a plot of 4,800 sq.ft. was purchased by Mr. X for Rs. 4,80,000/-. In 2008, he
constructed GF for an area of 1,400 sq.ft. In 2015, he constructed FF for an area of 1,200
sq.ft. It is a load bearing structure. The replacement rate of construction of GF & FF is Rs.
1,800 & Rs. 1,500 respectively. The guideline (circle) rate of plot is Rs. 1,540/sq.ft. and the
prevailing market rate is Rs. 1,000/sq.ft. Assume a salvage value 10%, Date of valuation is
2018.

The questions are :

1. What is the land value in 2018?

2. What is the depreciated value of GF?
3. What is the depreciated value of FF?
4. What is the market value of the property assuming it is a marketable property?
5. What is the forced sale value of the property assuming a reduction factor of 15%?
6. What is the book value of the plot in 2018?
141

Data :

Plot area = 4,800 sq.ft.

Purchased cost (2000) = Rs. 4,80,000/-
Area of GF (2008) = 1,400 sq.ft.
Area of FF (2015) = 1,200 sq.ft.
Type of structure = Load bearing
Replacement rate of GF = Rs. 1,800/sq.ft.
Replacement rate of FF = Rs. 1,500/sq.ft.
Circle rate of plot = Rs. 1,540/sq.ft.
Market rate of plot = Rs. 1,000/-
Salvage value assumed = 10%
Date of valuation = 2018

Calculations :

Value of land in 2018 - (4,800 x 1,000) = Rs. 48,00,000/- (1)

Plinth area of GF = 1,400 sq.ft.

Age of GF - (2018 - 2008) = 10 years
Economic life of load bearing structure = 60 years
Salvage value = 10%
Depreciation percentage - (10/60) x 90 = 15%
Replacement rate of GF = Rs. 1,800/-
Replacement value - 1,400 x 1,800 = Rs. 25,20,000/-
Depreciated value - 25,20,000 x 0.85 = Rs. 21,42,000/- (2)

Age of FF - (2018 - 2015) = 3 years

3
Depreciation percentage = x 90 = 4.5%
60
Depreciation percentage adopted = 15% (as of GF)
Replacement rate of FF = Rs. 1,500/-
Replacement value - 1,200 x 1,500 = Rs. 18,00,000/-
Depreciated value - 18,00,000 x 0.85 = Rs. 15,30,000/- (3)

Market value of the property (assuming it is marketable) :

Plot value = Rs. 48,00,000

Building - GF = Rs. 21,42,000
Building - FF = Rs. 15,30,000
Total value = Rs. 84,72,000/- (4)
142

Forced sale value 0.85 x 84,72,000 = Rs. 72,01,200/- (5)

Book value of the plot in 2018 = Rs. 4,80,000/- (6)

Answers :

1. Rs. 48,00,000/- 4. Rs. 84,72,000/-

2. Rs. 21,42,000/- 5. Rs. 72,01,200/-
3. Rs. 15,30,000/- 6. Rs. 4,80,000/-

Exercise 4 : (IBBI)

A business man purchased a plot of 1000 sq.mt. in a posh locality of a city in the year 1987
for a price of Rs. 30,00,000. In the year 1988, he constructed a residential bungalow having
300 sq.mt. built up floor area at ground level and 100 sq.mt. built up area at first floor level at
the cost of Rs. 14,00,000. Prevalent replacement cost of similar bungalow as on today is Rs.
30,000 per sq.mt. Prevalent land price in the locality at present is
Rs. 60,000 per sq.mt. Age of building is 30 years and the total life of the building is
60 years.

Questions :

1. What will be the depreciation amount of the bungalow by adopting straight line
method of depreciation and considering scrap value at 10 % ?

2. What will be the depreciation amount of the bungalow by adopting constant

percentage method of depreciation?

3. What will be the market value of the land at present?

4. What will be the total market value of the bungalow property for the bank loan
purpose?

5. What is the balance economic life of the building?

6. Which of the following will not be considered for the estimation of present market
value of above property?
a) Depreciation b) Replacement cost
c) Current land rate d) Economic obsolescence

Data :

Extent of plot = 1,000 sq.m.

143

Year of purchase of plot = 1987

Purchased amount = Rs. 30,00,000/-
Year of new construction = 1988
Plinth area of the building GF = 300 sq.m.
Built up area of the building FF = 100 sq.m.
Cost of building GF + FF (300 + 100) = Rs. 14,00,000/-
Replacement cost = Rs. 30,000/sq.m.
Prevalent land rate = Rs. 60,000/sq.m.
Age of the building = 30 years
Life of the building = 60 years
Salvage value assumed = 10%

Calculations :

1. Total built up area = 400 sq.m.

Replacement rate / sq.m. = Rs. 30,000
Replacement value - 400 x 30,000 = Rs. 1,20,00,000
Age of the building = 30 years
Life of the building = 60 years
Salvage value = 10%
30
Depreciation percentage = x 90 = 45%
60
Depreciation amount : 0.45x1,20,00,000= Rs. 54,00,000/- (1)

2. Life = 60 years
100
Rate of depreciation = = 1.66 %
60
1.66 30
Depreciation amount = [
P 1-(1-
100
) ]
r n
[
P 1-(1-
100
) ] = 1,20,00,000 x 0.3948
= Rs. 47,37,600/- (2)

3. Extent of plot = 1,000 m2

Prevalent market rate = Rs. 60,000/m2
Market value of land - 1,000 x 60,000= Rs. 6,00,00,000/- (3)

4. Land value - 1,000 x 60,000 = 6,00,00,000

Depreciated value of the building = 0.55 x 1,20,00,000
(SLM) = Rs. 66,00,000
144

Total value - Land + building= Rs. 6,66,00,000/- (4)

5. Total economic life of building = 60 years

Age of the building = 30 years
Balance economic life 60 - 30 = 30 years (5)

6. While estimating the present market value of the property,

1. Depreciation is to be considered.
2. Replacement cost is to be considered.
3. Current land rate is to be considered.

Economic obsolescence need not be considered. (6)

Answers :

1) Rs. 54,00,000/- 4) Rs. 6,66,00,000/-

2) Rs. 47,37,600/- 5) 30 years
3) Rs, 6,00,00,000/- 6) Economic obsolescence
need not be considered.

Exercise 5 :

Twenty years back, Mr. X purchased a plot of 3,000 sq.ft. for 4 lakhs. In this plot, he con-
structed a residential building of 1,000 sq.ft. 16 years back. The replacement rate of con-
struction including services today is 1,800/sq.ft. Assume the life as 80 years and
salvage value as 10%. The prevalent rate of plot as Rs. 1,500/sq.ft.

1) What is the value of the property (Land + building) as on date?

2) What is the depreciation amount for the building as on date? (by adopting straight
line method)
3) What is the forced sale value of the property assuming 15% as the reduction
factor?
4) What is the auction value of the property assuming 30% as the reduction factor?
5) What will be the upset price if the bank fixes 10% as the reduction factor?
6) What is the cost of the plot for balance sheet purpose?

Data :

Plot (3,000) purchased cost= Rs. 4,00,000

Plinth area of building = 1,000 sq.ft.
145

Age of the building = 16 years

Replacement rate of building = Rs. 1,800/sq.ft.
Life = 80 years
Salvage value = 10%
Prevalent land rate = Rs. 1,500/sq.ft.

Calculations :

a. Extent of plot = 3,000 sq.ft.

Prevalent market rate = Rs. 1,500/sq.ft.
Value of plot = Rs. 45,00,000/-

b. Plinth area of building = 1,000 sq.ft.

Replacement rate = Rs. 1,800/sq.ft.
Replacement value = Rs. 18,00,000
Age of the building = 16 years
Life of the building = 80 years
Salvage value = 10%
Depreciation percentage = (16/80) x 90 = 18%
Depreciation value = Rs. 3,24,000
0.18 x 18,00,000
Depreciated value = Rs. 14,76,000/-
(18,00,000 - 3,24,000)

c. Value of the property = Rs. 59,76,000/- (1)

45,00,000 + 14,76,000

The depreciation amount of the building = Rs. 3,24,000/- (2)

Value of the property = Rs. 59,76,000

Forced sale value = 0.85 x 59,76,000
= Rs. 50,79,600/- (3)

Value of the property = Rs. 59,76,000

Auction value = 0.7 x 59,76,000
= Rs. 41,83,200/- (4)

Auction value certified by the valuer = Rs. 41,83,200

Less 10% = (-) 4,18,320
Upset price fixed by the bank = Rs. 37,64,880/- (5)
146

The purchased amount of plot will be the cost for balance sheet purpose.
Cost is Rs. 4,00,000/-.

Answers :

1) Rs. 59,76,000/- 4) Rs. 41,83,200/-

2) Rs. 3,24,000/- 5) Rs. 37,64,880/-
3) Rs. 50,79,600/- 6) Rs. 4,00,000/-

Exercise 6 :

A load bearing building having 1,000 sq.m. built-up floor area is constructed in the year 1992.
Total area of the plot is 5,000 sq.m. Replacement cost of building in March 2012 is Rs. 7,500/
sq.m. Prevalent Land rate is Rs. 1,200/sq.m. in the locality.

Questions :

1. What is the value of the plot?

2. What is the replacement value of building?
3. What is the depreciation percentage by adopting straight line method assuming
the life as 60 years and salvage value as 10%?
4. What is the depreciation value?
5. What is the depreciated value?
6. What is the total value?

Data :

Building type = RCC roofed load bearing

Builtup area of the building = 1,000 sq.m.
Year of construction = 1992
Replacement cost of building 2012= Rs. 7,500/sq.m.
Plot area = 5,000 sq.m.
Prevalent land rate = Rs. 1,200/sq.m.
Value to be calculated as on = 2012

Calculations :

Plot area = 5,000 sq.m.

Prevalent land rate = Rs. 1,200/sq.m.
Land value = 5,000 x 1,200
= Rs. 60,00,000/- (1)
147

Building area = 1,000 sq.m.

Replacement rate = Rs. 7,500
Replacement value = 1,000 x 7,500
= Rs. 75,00,000/- (2)

Age of the building = 2012 - 1992 = 20 years

Life assumed = 60 years
Depreciation percentage = (20 / 60) x 90 = 30% (3)

Depreciation value = 0.3 x 75,00,000

= Rs. 22,50,000/- (4)

Net present value (NPV) or = 75,00,000 - 22,50,000

Depreciated value
= Rs. 52,50,000/- (5)

Total value of the property = 60,00,000 + 52,50,000

= Rs. 1,12,50,000/- (6)

Answers :

1. Rs. 60,00,000/- 4. Rs. 22,50,000/-

2. Rs. 75,00,000/- 5. Rs. 52,50,000/-
3. 30% 6. Rs. 1,12,50,000/-

Exercise 7 :

A residential load bearing structure having 280 sq.m. built-up floor area is constructed in
1961 at Delhi. Area of plot is 650 sq.m. Calculate value of property as on 01.04.1981, if
prevalent land rate in 1981 in that locality was Rs. 800 per sq.m. Cost index for Delhi in 1981
was 176 with base year 01.10.1976 as 100. Rate for bungalow in 1976 was Rs. 325/sq.m.
Plumbing cost/unit was Rs. 6,000 and electrification cost was Rs. 5,700/unit as per C.P.W.D.
memorandum of 01.10.1976. Life is 60 years & salvage value is 10%.
(Courtesy : Mr. R.K. Gandhi)

Questions :

1. What is the value of the plot as on 1981?

2. What is the replacement value of the building as on 1981?
3. What is the depreciation percentage by adopting straight line method assuming life
as 60 years & salvage value as 10%?
148

4. What is the depreciation value as on 1981?

5. What is the Net present value of the building?
6. What is the total value of the property as on 1981?

Data :

Structure = Load bearing

Builtup area = 280 sq.m.
Year of construction = 1961
Place = Delhi
Area of plot = 650 sq.m.
Land rate prevailing (1981) = Rs. 800/sq.m.
Cost index for Delhi with base = 100
year 01.10.1976
Cost index for Delhi (1981) = 176
Rate of bungalow 1976 = Rs. 325/sq.m.
Plumbing cost/unit = Rs. 6,000/unit
Electrification = Rs. 5,700/unit

Calculations :

Area of plot = 650 sq.m.

Rate in 1981 = Rs. 800/sq.m.
Value of plot in 1981 = 650 x 800
= Rs. 5,20,000/- (1)

Building replacement cost in 1976

Basic rate = Rs. 325/sq.m.
Builtup area = 280 sq.m.
Building cost = 280 x 325
= Rs. 91,000
Add for plumbing = Rs. 6,000
Add for electrification = Rs. 5,700
Total replacement cost in 1976 = Rs. 1,02,700
This is for cost index of = 100
Cost index in Delhi in 1981 = 176
... Replacement cost of building 1,02,700
= x 176
in 1981 100
= Rs. 1,80,752/- (2)
149

Age of the building = 1981 - 1961 = 20 years

Life assumed = 60 years
Salvage value = 10%
20
Depreciation percentage = x (100 - 10) = 30% (3)
60
Depreciation value = 0.3 x 1,80,752
= Rs. 54,225/- (4)

Net present value or = 1,80,752 - 54,225

Depreciated value
= Rs. 1,26,527/- (5)

Total value of the property = 5,20,000 + 1,26,527

as on 1981
= Rs. 6,46,527/- (6)

Answers :

1. Rs. 5,20,000/- 4. Rs. 54,225/-

2. Rs. 1,80,752/- 5. Rs. 1,26,527/-
3. 30% 6. Rs. 6,46,527/-

Exercise 8 :

A bungalow having G + 2 upper floor is for sale. Area of plot is 500 sq.m. Ground floor having
200 sq.m. built-up area was built in 1975. 1st and 2nd floor having total 300 sq.m. built-up
area were raised in 1995. Prevalent land rate in locality, in 2012, is Rs. 46,000/sq.m. and
replacement cost is Rs. 18,000/- per sq.m. Date of valuation is 2012.

Questions :

1. What is the value of the plot as on 2012?

2. What is the replacement value of the building?
3. What is the depreciation percentage that can be adopted for entire building by
adopting straight line method assuming life as 60 years and salvage value as 10%?
4. What is the depreciation value of the building?
5. What is the Net present value of the building?
6. What is the total value that can be certified for the entire property?
150

Data :

Area of plot = 500 sq.m.

Area of GF = 200 sq.m.
Year of construction of GF = 1975
Area of FF & SF = 300 sq.m.
Year of construction of FF & SF = 1995
Land rate in 2012 = Rs. 46,000/sq.m.
Replacement cost of building = Rs. 18,00,000/sq.m.

Calculations :

Area of plot = 500 sq.m.

Land rate = Rs. 46,000/sq.m.
Value of plot = 500 x 46,000
= Rs. 2,30,00,000/- (1)

Area of GF = 200 sq.m.

Area of FF & SF = 300 sq.m.
Total area = 500 sq.m.
Replacement rate = Rs. 18,000/sq.m.
Replacement value = 500 x 18,000
= Rs. 90,00,000/- (2)

Year of construction of GF = 1975

Valuation as on = 2012
Age as on 2012 = 2012 - 1975 = 37 years
Life assumed = 60 years
Salvage value assumed = 10%
37
Depreciation of GF = x (100 - 10) = 55.5% (3)
60

Depreciation of FF & SF = Adopted same as GF

Depreciation value = 0.555 x 90,00,000
= Rs. 49,95,000/- (4)

Depreciated value or = 90,00,000 - 49,95,000

Net present value of the building
= Rs. 40,05,000/- (5)
151

Present value of the property = Land value + Building value

= 2,30,00,000 + 40,05,000
= Rs. 2,70,05,000/- (6)

Answers :

1. Rs. 2,30,00,000/- 4. Rs. 49,95,000/-

2. Rs. 90,00,000/- 5. Rs. 40,05,000/-
3. 55.5% 6. Rs. 2,70,05,000/-

Exercise 9 :

An existing two storeyed framed structure stands on land measuring 2 grounds (1 ground
= 2,400 sq.ft.). The ground floor and first floor each has an area of 1,000 sq.ft. The ground
floor was constructed 20 years ago and the first floor 12 years ago. The prevailing land mar-
ket value of a similar adjacent vacant plot was Rs. 90,000 per ground. The
replacement cost of new similar construction (including foundation) is Rs. 300 per sq.ft. for
ground floor and Rs. 250 per sq.ft. for the first floor. External services, amenities, boundary
wall, etc. provided can be taken at 15% of the depreciated cost of the structure. Value the
property. Assume life as 80 years & salvage value as 10%.
(Courtesy : Mr. R.K. Gandhi)

Questions :

1. What is the value of plot?

2. What is the net present value of ground floor?
3. What is the depreciation percentage of first floor?
4. What is the net present value of first floor?
5. What is the value of services?
6. What is the total value of property?

Data :

Structure = Framed structure

Plot area = 2 grounds
Plinth area of GF = 1,000 sq.ft.
Age of GF = 20 years
Plinth area of FF = 1,000 sq.ft.
Age of FF = 12 years
Replacement cost of GF = Rs. 300/sq.ft.
Replacement cost of FF = Rs. 250/sq.ft.
152

Prevailing market rate of plot = Rs. 90,000/sq.ft.

Services = 15%

Calculations :

Area of plot = 2 grounds

Prevailing market rate of plot = Rs. 90,000/ground
Value of plot = 2 x 90,000
= Rs. 1,80,000/- (1)

GF : Plinth area of GF = 1,000 sq.ft.

Replacement rate = Rs. 300/sq.ft.
Replacement value = 1,000 x 300
= Rs. 3,00,000
Age of the building = 20 years
Life assumed = 80 years
Salvage value = 10%
20
Depreciation percentage = x 90 = 22.5%
80
Depreciation value = 0.225 x 3,00,000 = 67,500
Depreciated value or = 3,00,000 - 67,500
Net Present Value
= Rs. 2,32,500/- (2)

FF : Plinth area of FF = 1,000 sq.ft.

Replacement rate = Rs. 250/sq.ft.
Replacement value = 1,000 x 250
= Rs. 2,50,000
Depreciation percentage of FF = Same as GF (i.e. 22.5%) (3)

Depreciation value = 0.225 x 2,50,000 = 56,250

Depreciated value or = 2,50,000 - 56,250
Net Present Value = Rs. 1,93,750/- (4)

Total value of building (GF + FF) = 2,32,500 + 1,93,750

= Rs. 4,26,250/-
External services 15% = 0.15 x 4,26,250
= Rs. 63,938/- (5)
153

Total value of property = 1,80,000 + 4,26,250 + 63,938

(Plot + Building + Services)
= Rs. 6,70,188/- (6)

Answers :

1) Rs. 1,80,000/- 4) Rs. 1,93,750/-

2) Rs. 2,32,500/- 5) Rs. 63,938/-
3) 22.5% 6) Rs. 6,70,188/-

Exercise 10 :

Land extent is 500 sq.m. in which a building of 300 sq.m. is existing. Year of construction is
2002. Present replacement cost is Rs. 20,000/sq.m. Prevailing market rate of land is Rs.
22,000/sq.m. What is the selling price as on today (omit salvage value)?

Data :

Extent of land = 500 sq.m.

Market rate = Rs. 22,000/sq.m.
Building area = 300 sq.m.
Replacement rate of building = Rs. 20,000/sq.m.
Year of construction = 2002
Salvage value = Nil

Calculation :

Plot

Extent of land = 500 sq.m.

Market rate = Rs. 22,000/sq.m.
Value : 500 x 22,000 = Rs. 1,10,00,000/-

Building

Area of building = 300 sq.m.

Replacement rate = Rs. 20,000/sq.m.
Replacement value = 300 x 20,000
= Rs. 60,00,000/-
154

Age : 2018 - 2002 = 16 years

Life assumed = 60 years
Salvage value = Nil
16
Percentage of depreciation = x 100
60
= 26.67%
Depreciation value = 0.2667 x 60,00,000
= Rs. 16,00,200/-
Depreciated value = Rs. 43,99,800/-

3.0. Total value

Value of plot = Rs. 1,10,00,000

Value of building = Rs. 43,99,800
= Rs. 1,53,99,800/-

* * *
155

3. WRITTEN DOWN VALUE & BOOK VALUE

Exercise 1 :

An assessee has spent Rs. 1,20,00,000 in his new building in the year March 2014. What will
be the written down value (WDV) of the above building as on 31.03.2018 assuming a rate of
depreciation as 10%. This is required for preparing balance sheet for Income Tax
purpose.

Book value as on 31.03 2014 = Rs. 1,20,00,000

Less 10% depreciation = (-) Rs. 12,00,000
WDV as on 31.03.2015 = Rs. 1,08,00,000
Less 10% depreciation = (-) Rs. 10,80,000
WDV as on 31.03.2016 = Rs. 97,20,000
Less 10% depreciation = (-) Rs. 9,72,000
WDV as on 31.03.2017 = Rs. 87,48,000
Less 10% depreciation = (-) Rs. 8,74,800
WDV as on 31.03.2018 = Rs. 78,73,200/-

r n
Formula A = P(1- )
100
10 4
= 1,20,00,000 ( 1 - )
100

= 0.661 x 1,20,00,000
= Rs. 78,73,200/-

Exercise 2 :

In the year 2015, Mr. ‘X’ has spent Rs. 87,00,000/- in purchasing a vacant site of
10,000 sq.ft. which includes registration charges, stamp duty, brokerage, etc. What will be
the book value of the plot as on 2017?

Book value is the amount spent originally in procuring the site.

... Book value = Rs. 87,00,000/-

156

Exercise 3 :

A factory building with 30’ roof height was constructed in 1974 at the cost of Rs. 6,40,000.
Calculate the replacement cost (by book value method) in the year 1995 if prevalent
building construction cost in 1974 and 1995 were Rs. 530/sq.m. and Rs. 5,800/sq.m.
respectively.

Historical cost 1974 = Rs. 6,40,000

Historical cost in 1974

Replacement cost = x cost factor in 1995
Cost factor in 1974

5,800
= 6,40,000 x
530

= Rs. 70,03,774/-

Exercise 4 :

A machine was purchased in year 1993 at the cost of Rs. 2,20,000/-. Cost Index factor for
year 1993 was 37.50 with base year 1960 as 1.00. Calculate replacement cost of machine
in year 2003 if Cost Index factor for year 2003 is 87.50 with same base year.

Book value as on 1993

Replacement cost (2003) = x Cost Index factor for 2003
Cost index factor for 1993

87.50
= 2,20,000 x
37.50

= Rs. 5,13,333/-

Exercise 5 :

In April 2012, Mr. ‘X’ has purchased a residential plot of 3,000 sq.ft. for an amount of
Rs. 9,00,000/- and has paid Rs. 1,22,000 for the registration charges, stamp paper,
brokerage expenses, etc. In this plot, he constructed a commercial building of 2,200 sq.ft.
for an amount of Rs. 25,25,000. The construction was completed in February 2013.
Calculation of book value is required for the purpose of income tax. Assume a
depreciation of, say, 10%.
157

Questions :

1. What is the book value of the property as on 31.03.2013?

2. What is the book value of the property as on 31.03.2014?
3. What is the book value of the property as on 31.03.2015?
4. What is the book value of the property as on 31.03.2016?
5. What is the book value of the property as on 31.03.2017?
6. What is the book value of the property as on 31.03.2018?

Data :

Purchased cost of plot 3,000 sq.ft. = Rs. 9,00,000

in April 2012
Registration expenses stamp duty = Rs. 1,22,000
and brokerage
Commercial building - 2,200 sq.ft. = Rs. 25,25,000
Depreciation percentage = 10%
Purpose of valuation = Income tax

Calculations :

Cost of the plot in April 2012 (i.e. 2012 - 13) = Rs. 10,22,000/-
9,00,000 + 1,22,000

Historic cost of the building in February 2013 = Rs. 25,25,000/-

(i.e. 2012 - 13)

S.no. As on Land Rs. Building Rs. Book value Rs.

1. 31.03.2013 10,22,000 25,25,000 35,47,000 (1)

2. 31.03.2014 10,22,000 25,25,000 x 0.9 32,94,500 (2)

= 22,72,500

3. 31.03.2015 10,22,000 22,72,500 x 0.9 30,67,250 (3)

= 20,45,250
158

4. 31.03.2016 10,22,000 20,45,250 x 0.9 28,62,725 (4)

= 18,40,725

5. 31.03.2017 10,22,000 18,40,725 x 0.9 26,78,653 (5)

= 16,56,653

6. 31.03.2018 10,22,000 16,56,653 x 0.9 25,12,988 (6)

= 14,90,988

Answers :

1. Rs. 35,47,000/- 4. Rs. 28,62,725/-

2. Rs. 32,94,500/- 5. Rs. 26,78,653/-
3. Rs. 30,67,250/- 6. Rs. 25,12,988/-

* * *
159

4. INSURANCE

Exercise 1 :

The value of a building on completion in 2015 is 25 lakhs excluding foundation and the owner
has insured for Rs. 25 lakhs. The value of the building in 2018 is 30 lakhs exclusive of the
value of foundation. In 2018, there is a damage to the building to the extent of
Rs. 3,00,000. How much the owner will get compensation from the insurance company?

Sum insured in 2015

Compensation = x Damage
Value as on 2018

25,00,000
Compensation = x 3,00,000 = Rs. 2,50,000/-
30,00,000

Exercise 2 :

There is a property with the following specification.

a) Plinth area = 1,100 m2

b) Age of the building = 15 years
c) Life of the building = 60 years
d) Replacement rate = Rs 10,500/m2
e) Assume cost of foundation = 15%
f) Salvage value = Nil

Question :

Calculate the insurable value of this property.

Calculations :

Value of building as if new = 1,100 x 10,500

= Rs. 1,15,50,000/-

15
Depreciation = = 25%
60
160

Deduct value of foundation = 15%

= 1,15,50,000 - 17,32,500
= Rs. 98,17,500/-
Deduct depreciation 25% = Rs. 24,54,375/-
Insurable value = Rs. 73,63,125/-
say Rs. 73.63 lakhs.

Answers :

Rs. 73,63,000/-

Exercise 3 :

A standard fire policy is there for 50 lakhs for a factory building 700 Sq.m. of 20 years old.
Replacement rate is Rs 20,000 / sq.m. Fire loss is Rs 10 lakhs.

Questions :

1. Claim payable is how much?

2. If policy excess of Rs.10,000/- is to be considered, then, what is the claim payable?
3. What is the present market worth less foundation before fire damage?
4. What is the replacement cost of new building today deducting 10% for foundation?
5. What is the depreciation of bldg excl. foundation on straight line method?
Life : 60 years; Salvage = Nil

Data :

Sum insured = Rs. 50,00,000/-

Area of the building = 700 sq.m.
Age of the building = 20 years
Replacement rate = Rs. 20,000/sq.m.
Fire loss = Rs. 10,00,000/-

Calculation :

Area of the building = 700 sq.m.

Replacement rate = Rs. 20,000/sq.m.
Replacement value = 700 x 20,000 = Rs. 1,40,00,000/-
Age of the building = 20 years
Life of the building assumed = 60 years
161

Salvage value assumed = Nil

20
Depreciation percentage = x 100 = 33.33%
60
Depreciation value = 0.3333 x 1,40,00,000
= Rs. 46,66,200/-

Depreciated value = 1,40,00,000 - 46,66,200

= Rs. 93,33,800/-
Less foundation 10% = 0.1 x 93,33,800
= Rs. 9,33,380

Depreciated value of the = Rs. 84,00,420/-

building less foundation
93,33,800 - 9,33,380

Answers :

1) Fire loss = Rs. 10,00,000

Sum insured = Rs. 50,00,000
Depreciated value of the = Rs. 84,00,420
building
50,00,000
Under insurance factor = = 59.52%
84,00,420
... Claim payable = 0.5952 x 10,00,000
= Rs. 5,95,200/- (1)

2) Claim = Rs. 5,95,200

Less policy excess = Rs. 10,000
Net claim payable = Rs. 5,85,200/- (2)

3) Present worth less = Rs. 84,00,420/- (3)

foundation

4) Replacement cost of new

building today deducting = 0.9 x 1,40,00,000
10% for foundation
= Rs. 1,26,00,000/- (4)

5) Depreciation of building excluding foundation on straight line method :

162

Replacement value = Rs. 1,40,00,000

Value excluding foundation = 0.9 x 1,40,00,000
= Rs. 1,26,00,000/-
Depreciation percentage
20
assuming the life as = x 100 = 33.33%
60
60 years & salvage value
as NIL

Depreciation of building = 0.3333 x 1,26,00,000

excluding foundation
= Rs. 41,99,500/- (5)

Exercise 4 :

A standard fire policy was taken for Rs. 161 lakhs for a factory building (RCC roof) 1,400
sq.m. of 15 years old. Replacement cost is Rs. 18,000 / sq.m. Fire loss is Rs. 30 lakhs.
Assume life as 60 years. Salvage value : NIL.

Questions :

1. Claim payable is how much?

2. If policy excess of Rs. 10,000/- is to be considered, then what is the claim payable?
3. What is the present worth less foundation before fire damage?
4. What is the replacement cost of new building today deducting 15% for foundation?
5. What is the depreciation of building excluding foundation on straight line method?
6. What will be the depreciation percentage if the salvage value is 20%?

Data :

Sum insured = Rs. 1,61,00,000/-

Area of the building = 1,400 sq.m.
Age of the building = 15 years
Replacement cost = Rs. 18,000/sq.m.
Fire loss = Rs. 30,00,000/-
Life = 60 years

Calculation :

Area of the building = 1,400 sq.m.

163

Replacement rate = Rs. 18,000/sq.m.

Replacement value = 1,400 x 18,000 = Rs. 2,52,00,000
Age of the building = 15 years
Life of the building = 60 years
Salvage value = Nil
15
Depreciation percentage = x 100 = 25%
60
Depreciation value = 0.25 x 2,52,00,000
= Rs. 63,00,000/-
Depreciated value = 2,52,00,000 - 63,00,000
= Rs. 1,89,00,000/-
Less foundation 15% = 0.15 x 1,89,00,000
= Rs. 28,35,000
Depreciated value of the = Rs. 1,60,65,000/-
building less foundation
1,89,00,000 - 28,35,000

Answers :

1) Fire loss = Rs. 30,00,000

Sum insured = Rs. 1,61,00,000
Depreciated value of the = Rs. 1,60,65,000
building
.
. . Sum insured = Adequate (There is no under
insurance)
... Claim payable = 100% of Rs. 30,00,000/-
= Rs. 30,00,000/- (1)

2) Claim = Rs. 30,00,000

Less policy excess = Rs. 10,000
Net claim payable = Rs. 29,90,000/- (2)

3) Present worth less = Rs. 1,60,65,000/- (3)

foundation

4) Replacement cost of new

building today deducting = 0.85 x 2,52,00,000
15% for foundation
= Rs. 2,14,20,000/- (4)
164

5) Depreciation of building excluding foundation on straight line method :

Replacement value = Rs. 2,52,00,000

Value excluding foundation = 0.85 x 2,52,00,000
= Rs. 2,14,20,000/-
Depreciation percentage
assuming the life as 15
= x 100 = 25%
60 years & salvage value 60
as NIL

Depreciation of building = 0.25 x 2,14,20,000

excluding foundation
= Rs. 53,55,000/- (5)

6) Age of the building = 15 years

Life of the building = 60 years
Salvage value = 20%
15
Depreciation percentage = (100 - 20) = 20% (6)
60

Exercise 5 :

A standard fire policy with reinstatement clause was taken for Rs. 161 lakhs for a factory
building (RCC roof) 1,400 sq.m of 15 years old. Replacement cost is Rs. 18,000/sq.m. Fire
loss is Rs. 30 lakhs. Assume life as 60 years. Salvage value : Nil. Plinth & foundation : 15%.

Questions :

1) Claim payable is how much?

2) If policy excess of Rs. 10,000/- is to be considered, then, what is the claim payable?

Data :

Sum insured = Rs. 1,61,00,000

Area of the building = 1,400 sq.m.
Age of the building = 15 Years
Replacement rate = Rs. 18,000 /sq.m.
Fire loss = Rs. 30,00,000
165

Life = 60 Years
Salvage value = Nil
Plinth & foundation = 15%
Special clause = Reinstatement value clause
included
Calculation :

Area of the building = 1,400 sq.m.

Replacement rate = Rs. 18,000/sq.m.
Replacement value = 1,400 x 1,800
= Rs. 2,52,00,000/-
Age of the building = 15 Years
Life of the building = 60 Years
Salvage value = Nil

Reinstated Value of the building

Less foundation 15% = Less 15% of 2,52,00,000
= 2,52,00,000 x (100-15)%
= Rs. 2,14,20,000/-

Answers :

1) Fire loss = Rs. 30,00,000

Sum insured = Rs. 1,61,00,000
Reinstated value of the
building less plinth & = Rs. 2,14,20,000/-
foundation
Sum insured = Inadequate (There is under
insurance)
Under Insurance Quotient = Sum insured/Value of the asset
1,61,00,000
= x 100 = 75%
2,14,20,000
Claim payable = Value assessed as loss x
Under Insurance Quotient
= Rs. 30,00,000 x 0.75
= Rs. 22,50,000/- (1)

2) It is a fire policy and the peril for the loss is fire. Hence there is a policy
excess of Rs. 10,000/-
166

Policy excess = Rs. 10,000

Claim payable = 22,50,000 - 10,000
= Rs. 22,40,000/- (2)

Exercise 6 :

One factory got damaged. The sum insured is Rs. 50,00,000/-. Claim made by the owner -
Rs. 10,00,000/-. The property is 20 years old. Present replacement rate of a similar new
building is Rs. 7,000/- per sq.m. Builtup area - 2,000 sq.ft.

1) What is replacement value of the building?

2) What would be the claim approved by insurance company?.

Opinion :

Data :

Sum insured = Rs. 50,00,000/-

Claim made by the owner = Rs. 10,00,000/-
Age of the building = 20 years
Built up area = 2,000 sq.ft.
Replacement cost = Rs. 7,000/sq.m.

Solution :

Builtup area = 2,000 sq.ft. or 185.87 sq.m.

Replacement rate = Rs. 7,000/sq.m.
Replacement value = 185.87 x 7,000
= Rs. 13,01,090/- (1)

Age = 20 years
Life assumed = 40 years (since it is a factory)
Salvage value = Nil (assumed)
20
Depreciation percentage = x 100 = 50%
40
Depreciation value = 0.5 x 13,01,090
= Rs. 6,50,545/-
Depreciated value = 13,01,090 - 6,50,545
= Rs. 6,50,545/- (2)
167

Answers : 1) The replacement value is Rs. 13,01,090/-.

2) • The depreciated value (including the foundation is Rs. 6,50,545/-.

The owner has insured the building for Rs. 50,00,000/-. The sum
insured in adequate. These is no under insurance.

• Though the owner has claimed Rs. 10,00,000/-, the actual

depreciated value is only Rs. 6,50,545/-. Therefore the sum payable
is Rs. 6,50,545/- (minus the policy excess).

• (Note : If policy is made only for the super structure only, value of the
superstructure (assuming 15% for foundation) = 0.85 x 6,50,545 =
Rs. 5,52,963/-. Sum payable is Rs. 5,52,963/- (less policy excess)).

Exercise 7 : (IBBI)

Factory building of built-up area 700 sq.m. 20 years old, total life of the building 40 years with
a specification equivalent to the current replacement cost of Rs. 20,000/sq.m. is insured for
Rs. 50,00,000/- in a standard fire policy. There is a partial damage to the building to a total
loss of Rs. 10,00,000/- due to peril. 10% cost of foundation. (Courtesy : Mr. S. Pichaiya)

Questions :

1. What is the amount payable by the insurer to the insure for the loss due to fire?

a) Rs. 2,00,000/- b) Rs. 5,00,000/-

c) Rs. 7,70,000/- d) Rs. 10,00,000/-

2. What is the present market worth of the building before fire damage (excluding
foundation)?

3. Reinstatement value of building excluding foundation?

4. What is the depreciation of the building excluding foundation? (Neglecting scrap

value).

5. Which peril is not covered under standard fire policy?

a) Impact damage b) STFI

c) Earthquake d) Fire
168

Data :
Sum insured = Rs. 50,00,000/-
Area of the building = 700 sq.m.
Age of the building = 20 years
Replacement rate = Rs. 20,000/sq.m.
Fire loss = Rs. 10,00,000/-
Life = 40 years

Calculation :

Area of the building = 700 sq.m.

Replacement rate = Rs. 20,000/sq.m.
Replacement value = 700 x 20,000 = Rs. 1,40,00,000/-
Age of the building = 20 years
Life of the building assumed = 40 years
Salvage value assumed = Nil
20
Depreciation percentage = x 100 = 50%
40
Depreciation value = 0.5 x 1,40,00,000
= Rs. 70,00,000/-

Depreciated value = 1,40,00,000 - 70,00,000

= Rs. 70,00,000/-
Less foundation 10% = 0.1 x 70,00,000
= Rs. 7,00,000/-

Depreciated value of the = Rs. 63,00,000/-

building less foundation
70,00,000 - 7,00,000

Answers :

1) Fire loss = Rs. 10,00,000

Sum insured = Rs. 50,00,000
Depreciated value of the = Rs. 63,00,000
building
50,00,000
Under insurance factor = x 100 = 79.37%
63,00,000
... Claim payable = 0.7937 x 10,00,000
= Rs. 7,93,700/-
= say Rs. 7,70,000/- (1)
169

2) Present worth less = Rs. 63,00,000/- (2)

foundation

3) Replacement cost of new

building today deducting = 0.9 x 1,40,00,000
10% for foundation
= Rs. 1,26,00,000/- (3)

4) Depreciation of building excluding foundation on straight line method :

Replacement value = Rs. 1,40,00,000

Value excluding foundation = 0.9 x 1,40,00,000
= Rs. 1,26,00,000/-
Depreciation percentage
20
assuming the life as = x 100 = 50%
40
40 years & salvage value
as NIL

Depreciation of building = 0.5 x 1,26,00,000

excluding foundation
= Rs. 63,00,000/- (4)

5. Earthquake (5)

Exercise 8 :

RCC roofed building of a 30 years is required to be insured under standard fire policy.
Advise on fair ‘Insurable value’ of the factory building on depreciated cost basis from the
following data. Calculate depreciation by SLM. (Courtesy Mr. R.K. Gandhi)

Plinth area of factory : Ground floor = 500 sq.m.

First floor = 300 sq.m.
Replacement cost today = Rs. 7,500/sq.m.
Age of building = 30 years
Total life of building = 60 years
Foundation = 10%

Solution :

Total builtup area : 500 + 300 = 800 sq.m.

170

Total replacement value = Rs. 60,00,000/- (a)

800 sq.m. x Rs. 7,500/sq.m.
Less 10% towards cost of = Rs. 6,00,000/- (b)
foundation & plinth
Net value of the super structure = Rs. 54,00,000/- (c)

Age = 30 years
Life = 60 years
Salvage = Nil
30
Depreciation percentage = x 100 = 50%
60
Depreciated value = 0.5 x 54,00,000
= Rs. 27,00,000/-
Insurable value = Rs. 27,00,000/-

Advise factory owner to insure the building for Rs. 27,00,000/-

* * *
171

5. VALUATION BY COST INDEX METHOD

(Courtesy : Mr. R.K. Gandhi)

Exercise 1 :

A factory building was constructed in the year 1985 at the total cost of Rs. 25,50,000/-. Work
out replacement cost of said factory building in year 2011 if Building Cost index in year 1985
and 2011 were 14.16 and 142 respectively with base year 1960 at 1.00.

Replacement cost of Book value cost

= x Cost Index factor for 2011
factory in year 2011 Cost index for 1985

25,50,000
= x 142
14.16

= Rs. 2,55,72,033/-

Exercise 2 :

A boeing repair shop hanger (Area 10,648 sq.m.) was constructed at Mumbai in year 1999
at the total cost of Rs. 68.00 crores. Find out its replacement cost in year 2011, if cost of
construction of normal residential building was Rs. 8,600/sq.m. in 1999 and Rs.18,300/sq.m.
in year 2011.

Historic cost = Rs. 68,00,00,000

68,00,00,000
Present day replacement cost = x 18,300
8,600

= Rs. 1,44,69,76,744

Exercise 3 :

Building cost for the residential building in Delhi, as per 01.01.1992 cost index as 100, was
Rs. 2,810/sq.m. Now if Cost Index of Mumbai in 2005 is 250 as compared to 1992 base
index 100, work out replacement cost for a residential building at Mumbai for the year 2005.

Flat rate for building cost for residential house in Mumbai for the year 2005 as per
CPWD memorandum of 1992 will be :
172

2,810
= x 250
100
= Rs. 7,025/sq.m.

Exercise 4 :

A residential building was built in the year 1978 at an actual cost of Rs. 5,00,000/-. If Building
Cost Index for year 1978 and 1998 were 125 and 1442 respectively, with 01.10.1976 as
base index 100, work out replacement cost of the building for the year 1998.

5,00,000
Replacement cost in 1998 = x 1,442
125

= Rs. 57,68,000/-
Exercise 5 :

An R.C.C. framed building at Delhi, in 01.01.1992 would cost Rs. 2,810/sq.m. If Cost Index of
V.V. Nagar is 139 in 1997, calculate rate of cost of construction for similar R.C.C.
building at V.V. Nagar for the year 1997.

Rate of cost of construction in 2,810

= x 139
1997 at V.V. Nagar : 100

= say Rs. 3,906/- per sq.m.

Exercise 6 :

A load bearing residential family house was built in year 1969 at Nagpur. Built-up floor area is
200 sq.m. on ground floor and 100 sq.m./floor on each of 1st and 2nd floor. Total plot area is
1,200 sq.m. Calculate sale value of property as in March 1989 if Building Cost Index of Nagpur
was 394 in 1989 with Delhi base year 01.10.1976 as 100. Building cost for base year was
Rs. 385/sq.m. and plumbing and electrification costs were Rs. 6,000/unit and Rs. 5,700/unit
respectively. Prevalent land rate in 1989 was Rs. 800/sq.m. Building is wholly provided with
marble floor. Marble cost was Rs. 250/sq.m. and mosaic tile cost was Rs. 60/sq.m. in 1989.

Questions :

1. What is the value of land as on 1989?

2. What is the replacement cost of the building?
173

3. What is the depreciation percentage by adopting straight line method assuming

economic life as 60 years and salvage value as 10%?
4. What is the depreciation value of the building?
5. What is the depreciated value of the building?
6. What is the total value of the property?

Data :

Place = Nagpur
Year of construction = 1969
GF area = 200 sq.m.
FF area = 100 sq.m.
SF area = 100 sq.m.
Plot area = 1,200 sq.m.
Cost index in Delhi for base year = 100
01.10.1976
Building cost index for Nagpur = 394
in 1989
Building cost for base year (1976) = Rs. 385/sq.m.
Plumbing cost for base year (1976)= Rs. 6,000/unit
Electrification cost for base year = Rs. 5,700/unit
Flooring cost in 1989 = While marble Rs. 250/sq.m.
Mosaic tile cost in 1989 = Rs. 60/sq.m.
Prevalent land rate in 1989 = Rs. 800/sq.m.

Calculations :

Area of plot = 1,200 sq.m.

Unit rate of plot (1989) = Rs. 800/sq.m.
Value of plot in 1989 = 1,200 x 800
= Rs. 9,60,000/- (1)

Area of ground floor = 200 sq.m.

Area of first floor = 100 sq.m.
Area of second floor = 100 sq.m.
Total area of all floors = 400 sq.m.
Unit rate of building (1976) = Rs. 385/sq.m.
Civil work cost (1976) = 400 x 385
= Rs. 1,54,000
Plumbing 3 floors x 6,000 = Rs. 18,000
Electrification 3 floors x 5,700 = Rs. 17,100
174

Replacement cost at Delhi (1976) = Rs. 1,89,100

This is for cost index for = 100
Cost index at Nagpur (1989) = 394
1,89,100
Replacement cost in Nagpur = x 394
100
= Rs. 7,45,054/-

Add for difference of marble & Mosaic

Rs. 250 - 60 = 190/sq.m.

Carpet area = 85% of built up area

= 0.85 x 400 =340 sq.m.

Extra cost of marble = 340 x 190

= Rs. 64,600

Total building cost = 7,45,054 + 64,600

= Rs. 8,09,654/- (2)

Age = 1989 - 1969 = 20 years

Life assumed = 60 Years
Salvage assumed = 10%
20
Depreciation percentage = x 90 = 30% (3)
60

Depreciation value = 0.3 x 8,09,654

= Rs. 2,42,896/- (4)

Net present value or = 8,09,654 - 2,42,896

depreciated value = Rs. 5,66,758/- (5)

Total value of the property = 9,60,000 + 5,66,758

= Rs. 15,26,758/- (6)

Answers :

1. Rs. 9,60,000/- 4. Rs. 2,42,896/-

2. Rs. 7,45,054/- 5. Rs. 5,66,758/-
3. 30% 6. Rs. 15,26,758/-

* * *
175

6. VALUATION BY BELTING METHOD &

Hypothetical plotting scheme method

Exercise 1 :

Estimate the value of plot 40’ x 150’ by belting method. The prevailing market rate for one
ground plot in the nearby locality is Rs. 600/sq.ft. Standard depth is 60’.
40’
II
90’
400/-
150’
I
60’
600/-
Road

Extent Basic rate Unit rate Estimated

Belts Size sq.ft. for standard adopted value
depth. (Rs.) Rs. Rs.

I Belt 40’ x 60’ 2,400 600 600 14,40,000

II Belt 40’ x 90’ 3,600 600 400 14,40,000
40’ x 150’ 6,000 --- --- 28,80,000

Exercise 2 :

Find out the value of the plot 50’ x 200’ by belting method. The prevailing market rate of the
neighbouring plot 40’ x 60’ located on the main road is Rs. 600/-.
50’
Questions : III 300/- 50’

1. What is the area of I belt? II 400/- 90’

Rs. 600
2. What is the area of II belt?
3. What is the area of III belt? 60’ I 600/- 60’
40’
4. What is the value of I belt?
50’
5. What is the total value of 50’ x 200’?
6. While certifying market value for collateral security to bank, which factor is most
important?
a) Unit rate of land b) Age of the building
c) Location d) Marketability
176

Data :

Size of plot = 50’ x 200’

Market rate of 40’ x 60’ plot = Rs. 600/-
Standard depth assumed as = 60’

Calculations :

Standard depth is assumed as 60’

Size of I belt = 50’ x 60’

Area of I belt = 3,000 sq.ft. (1)
Unit rate 100%of 600 = Rs. 600/sq.ft.
Value of I belt - 3,000 x 600 = Rs. 18,00,000/- (4)
Size of II belt = 50’ x 90’
Area of II belt = 4,500 sq.ft. (2)
Unit rate (2/3) x 600 = Rs. 400/sq.ft.
Value of II belt- 4,500 x 400 = Rs. 18,00,000/-

Size of III belt = 50’ x 50’

Area of III belt = 2,500 sq.ft. (3)
Unit rate 50% of 600 = Rs. 300/sq.ft.
Value of III belt- 2,500 x 300 = Rs. 7,50,000/-

Total value of plot 50’ x 200’ = Rs. 43,50,000/- (5)

18,00,000 + 18,00,000 + 7,50,000

Marketability is the most important factor while certifying the (6)

market value for collateral security to bank purposes.

Answers :

1. 3,000 sq.ft 4. Rs.18,00,000/-

2. 4,500 sq.ft. 5. Rs. 43,50,000/-
3. 2,500 sq.ft. 6. Marketability

Exercise 3 : (IBBI)

Value the plot of 150 m x 350 m by belting method. The depth of first belt X is 50 m. The depth
of second belt is 2X. The depth of third belt is 4X.
177

Land rate for I belt = Rs. 300/m2 150 m

2 x (2X)

200 m
Rate for II belt = 40% less from I belt

4X
III belt
Rate for III belt = 40% less from II belt

350 m

100 m
2X

2X
II belt
Questions :
I belt

50 m
X
X
150 m
1. What is the value of I belt?
Road
2. What is the value of II belt?
3. What is the value of III belt?
4. What is the total value of the plot 150 m x 350 m?
5. What is the name of the method?

Answers :

1. I belt : 150 x 50 x Rs. 300/sq.m. = Rs. 22,50,000/-

2. II belt : 150 x 100 x (300 x 0.6) = Rs. 27,00,000/-

3. III belt : 150 x 200 x (180 x 0.6) = Rs. 32,40,000/-

4. Value of the entire plot

22,50,000 + 27,00,000 + 32,40,000 = Rs. 81,90,000/-

5. Hypothetical Plotting Scheme.

Exercise 4 : (IBBI)

In a situation, subject land is located in such a place where, instances of sale of large size
plots in the locality are not available. Small sized road side developed plots are available at
the rate of Rs. 300 per sq.m. Plot is located in developing area of town where demand for
housing site exists. The subject land is not surrounded by agricultural lands. The subject plot
is of sufficiently large size which can be divided into several small size plots. The depth of the
plot is 450 meters considerably more as compared to the road frontage of 150 meters.

Questions :

1. What is value of 1st portion from road side if the plot is considered as 50 metres in
depth in Rs.?

a) Rs. 22,50,000/- b) Rs. 20,50,000/-

c) Rs. 15,00,000/- d) Rs. 18,75,000/-
178

2. What is value of 2nd portion from road side if the plot is considered as 100 metres
in depth and rate considered for 40 per cent lesser than the 1st one in Rs.?

a) Rs. 27,00,000/- b) Rs. 8,00,000/-

c) Rs. 30,00,000/- d) Rs. 45,00,000/-

3. What is value of 3rd portion from road side if the plot is considered as rest of the
plot and rate considered for 40 per cent lesser than the 2nd one in Rs.?

a) Rs. 32,40,000/- b) Rs. 14,40,000/-

c) Rs. 21,60,000/- d) Rs. 54,00,000/-

4. What is the value of entire land?

a) Rs. 98,10,000/- b) Rs. 88,10,000/-

c) Rs. 78,10,000/- d) Rs. 68,10,000/-

5. As Gujarat HC said this method of valuation is arbitrary & artificial, instead of that
which method of valuation is accepted in case of huge plot area to be valued?

a) Plotting scheme method b) Sales comparison method

c) Net present value method d) Transfer of development
right method

Solution :
300 III Portion

Hypothetical plotting scheme :

450 100 II Portion
Unit rate = Rs. 300/sq.m.

50 I Portion
150’
Road

1. Area of I portion = 50 x 150 = 7,500 sq.m.

Unit rate = Rs. 300/m2
Value of I portion = 7,500 x 300
= Rs. 22,50,000/-

Ans : “a”
179

2. Area of II portion = 100 x 150 = 15,000 sq.m.

Unit rate = 40% less then I portion
(0.6 x 300 = 180/sq.m.)
Value of II portion = 15,000 x 180
= Rs. 27,00,000/-

Ans : “a”

3. Area of III portion = 300 x 150 = 45,000 sq.m.

Unit rate = 40% less than II portion
(0.6 x 180 = Rs. 108/sq.m.)
Value of III portion = 45,000 x 108
= Rs. 48,60,000/-

Answer not tallying.

4. Value of I portion = Rs. 22,50,000

Value of II portion = Rs. 27,00,000
Value of III portion = Rs. 48,60,000
Value of all portions = Rs. 98,10,000/-

Ans : “a”

5. Ans “a” - Plotting scheme method.

* * *
180

7. VALUATION OF PETROL BUNK

Exercise 1 :

1,500 m2 of plot abutting a Highways is proposed to be taken on lease by a firm. Fix the
lease rent of the plot, if yield rate is 6% & land rate is Rs. 4,000/m2.

Solution :
Value of land = 1,500 x 4,000
= Rs. 60,00,000/-

6 1
Lease rent = 60,00,000 x x
100 12

= Rs. 30,000 / month

Exercise 2 : (IBBI)

A client wants to purchase a petrol bunk outlet situated on the main road in the center of town.
The main road has traffic of 300 PCU. For the land, the company pays the rent
Rs. 4,00,000/ per annum. Total annual income from sale of petrol and diesel and other items
is Rs. 2,00,00,000/-. Property tax Rs. 50,000/6 months. Staff salary and other out goings are
Rs. 60,000/ per month. Other expenses for running the business is Rs. 1,70,00,000/-. Rate of
capitalisation is 12%.

Question :

1. What is the total income for the owner?

2. What is the total expense for the owner?
3. What is the net profit?
4. What is the method to be used?
5. What is Y.P.?
6. What is the amount the client can pay to purchase the bunk?

Answers :

Given data :

Ground rent = Rs. 4,00,000 / annum

181

Income from sale of petrol = Rs. 2,00,00,000 / annum

Property tax = Rs. 50,000 / 6 months
Staff salary & other out goings = Rs. 60,000 / month
Other expenses = Rs. 1,70,00,000 / yearly
Rate of capitalisation = 12%

Solution :

1.0. Income to the owner of the bunk

Ground rent = Rs. 4,00,000

Income from sale of petrol&diesel = Rs. 2,00,00,000
Total income for the owner = Rs. 2,04,00,000 (1)

2.0. Expenses for the owner

Property tax (50,000 x 2) = Rs. 1,00,000

Staff salary & other out goings = Rs. 7,20,000
(60,000 x 12)
Other expenses for running the = Rs. 1,70,00,000
business
Total expenses = Rs. 1,78,20,000 (2)

3.0. Net profit

Net income / Net profit = 2,04,00,000 - 1,78,20,000

Net profit = Rs. 25,80,000 (3)

100
4.0. Years purchase = = 8.33 (4)
12

5.0. Method = Profit method (5)

6.0. Value

Value of the bunk by capitalising = 25,80,000 x (100 / 12)

@ 12%

Capitalised value = Rs. 2,15,00,000/-

182

... The amount that can be paid for the = Rs. 2.15 crores (6)
purchase of the bunk

Exercise 3 :

A petrol bunk is situated on the main road. Mr. ‘X’ is the dealer of the bunk and he gets a lease
rent (ground rent) from the petroleum company. Other details are :
(Courtesy : Mr. R.K. Gandhi)

Sale of Petrol = 2,42,000 litres @ Rs. 76/lit

Sale of Diesel = 3,75,000 litres @ Rs. 47/lit
Lease rent paid to the dealer = Rs. 4,00,000 /year
by company for the land

Sale of car parts, oil and lubricants= Rs. 6,00,000/year

Profit of sale of goods = 15%
Cars to be serviced/year = 1,600 nos.
Charge for servicing the car = Rs. 700/car

Cost of petrol = Rs. 71/lit

Cost of diesel = Rs. 42/lit
Staff salary = Rs. 50,000/month
Property taxes = Rs. 35,000/half yearly
Electricity charges = Rs. 41,000/year
Telephone, postage & stationery = Rs. 26,000/year
Travelling & maintenance = Rs. 21,000/year
Insurance premium = Rs. 8,000/year
Grease & Oil for car service = Rs. 40 /car
Miscellaneous expenses = Rs. 36,000/year
Rate of return = 12%

Questions :

1. What is the net profit for the dealer?

2. What is the years’ purchase, If the rate of capitalisation is 12%?
3. What is the value of the property for the purpose of purchasing assuming a rate of
return as 12%?
183

1.0. Income

Petrol sale amount : 2,42,000 lit x 76/lit = Rs. 1,83,92,000

Diesel sale amount : 3,75,000 lit x 47/lit = Rs. 1,76,25,000
Ground rent for land received from the petrol = Rs. 4,00,000
company
Sale of oil & lubricants of car parts = Rs. 6,00,000
Income from car services : 1,600 x Rs. 700 = Rs. 11,20,000
Gross income = Rs. 3,81,37,000

2.0. Expenses

Cost of petrol : 2,42,000 x 71 = Rs. 1,71,82,000

Cost of diesel : 3,75,000 x 42 = Rs. 1,57,50,000
Staff salary : 50,000 x 12 = Rs. 6,00,000
Property tax : 35,000 x 2 = Rs. 70,000
Electricity & water charges = Rs. 41,000
Telephone, postage & stationery = Rs. 26,000
Travelling & Maintenance expenses = Rs. 21,000
Insurance premium = Rs. 8,000
Car service - grease / oil (1,600 x 40) = Rs. 64,000
Misecellaneous expenses = Rs. 36,000
Expenses for sale of oil & lubricants = Rs. 5,10,000
85% of 6,00,000
Gross expenses total = Rs. 3,43,08,000

3.0. Net profit = 3,81,37,000 - 3,43,08,000

= Rs. 38,29,000/year (1)

4.0. Years’ purchase

Rate of capitalisation = 12
Years purchase (100 / 12) = 8.33 (2)

5.0. Capitalising at 12% yield, value of business = Rs. 38,29,000 x (100/12)

= Rs. 3,19,08,333
say Rs. 3,19,00,000/- (3)

... Purchase price for the outlet is Rs. 3,19,00,000/-.

* * *
184

8. VALUATION OF LEASEHOLD PROPERTIES

Exercise 1 :

A freehold site is rented out for 99 years to a developer at a ground rent of Rs. 1,00,000 per
annum, net of outgoings. It is renewable. The lessee developer has constructed a building
fetching an annual rent of Rs. 5,00,000/-. Value the freeholder ’s interest
assuming an yield of 6%.

Value in the hands of lessor :

Net income from ground rent = Rs. 1,00,000
Yield = 6%
100
Years purchase = = 16.67
6
Value in the hands of lessor = 1,00,000 x 16.67
= Rs. 16,67,000/-

Exercise 2 :

Value the freehold interest of a shop which has been let out for a rent of Rs. 1,00,000 (Net)
per month. The rent is renewable. Yield is 5%.

Yearly rent = 1,00,000 x 12 = Rs. 12,00,000

Net income = Rs. 12,00,000
100
Y.P. for a yield of 5% = = 20
5
Capitalised value = 12,00,000 x 20
= Rs. 2,40,00,000/-

Exercise 3 :

An industrial corporation has decided to lease 40,000 sq.ft. plot for an user for 60 years
period. The land rate is 2,000 per sq.ft. Assuming an yield of 6%, what will be the monthly
lease?

Extent of land = 40,000 sq.ft.

Market rate = Rs. 2,000/sq.ft.
Value of land = Rs. 8,00,00,0000
185

Lease rent yield = 6%

6
Annual rent = 8,00,00,000 x
100
= Rs. 48,00,000
48,00,000
Monthly rent = = Rs. 4,00,000/-
12

Exercise 4 :

A private trust had leased 10,000 sq.ft. plot for 99 years lease which can be renewed for
further period. Fix lease rent if the land rate is Rs. 1,500/sq.ft. Assume lease rent as 8%.

Extent of land = 10,000 sq.ft.

Land rate = Rs. 1,500/sq.ft.
Land value = Rs. 1,50,00,000
Lease rent yield assumed = 8%
8
Annual lease rent = 1,50,00,000 x
100
= 12,00,000
Monthly lease rent = Rs. 1,00,000/-

Exercise 5 :

A lessor leased his 3,000 sq.ft. of land to a lessee for 99 years on a monthly rent of
Rs. 1,000 per month. Lease is renewable.

In this land, the lessee has constructed a residential building and rented out on a total rent of
Rs. 5,500 / month. All outgoings are 40% of rental income excluding ground rent.

Questions :

1. What is the value of lessor’s interest? Rate of return (yield) is 7%.

2. What is the lessee’s interest assuming a rate of return as 8%.

Data :

Period of lease = 99 years - renewable

Monthly rent = Rs. 1,000
Rate of return = 7%
Lessor’s interest = ?
186

Calculations :

Lessor :
Monthly rent = Rs. 1,000
Yearly rent = 1,000 x 12 = Rs. 12,000
Type of lease = Perpetual. can be treated as free
hold
Rate of return / yield = 7%
100
Value of lessor’s right = 12,000 x
7
= Rs. 1,71,428/- (1)

Lessee :
Monthly rent = Rs. 5,500
Yearly rent = 5,500 x 12 = Rs. 66,000
Less outgoings 40% = (-) Rs. 26,400
Less ground rent 1,000 x 12 = (-) Rs. 12,000
Net annual income = Rs. 27,600
Rate of return = 8%
100
Value of lessee’s interest = 27,600 x
8
= Rs. 3,45,000/- (2)

Answers :

1) 1,71,428/- 2) Rs. 3,45,000/-

Exercise 6 : (IBBI)

State government industrial development corporation leased industrial plot to the

industrialist in the year 1998 for a period of 99 years by charging one time premium of
Rs. 450/sq.mt. for a total land area of 4,000 sq.mt. Lease rent was fixed at Rs.1 per year.
Lessee built a factory (total built up area 2,000 sq.mts) on the plot in 1998 at the cost of Rs.
60,000/-. Land rate as on 2018 is Rs. 1,250/sq.mt and replacement cost of building for 2018
is Rs. 25,000/sq.mt.. Total life of the factory building is 40 years. Lease provides that the
lessor is entitled to charge 50 percent unearned increase in land value as transfer/assign-
ment charges in case of sale/tranfer of the property.

Questions :

1. What is the lessor’s interest in the property in 2018?

187

a) Rs. 32,00,000/- b) Rs. 16,00,000/-

c) Rs. 50,00,000/- d) Nil

2. What is the market value of the property in 2018 if land was not of leasehold tenure
and it was a free hold land? Salvage value - 10%.

a) Rs. 7,75,00,000/- b) Rs. 10,00,00,000/-

c) Rs. 7,50,00,000/- d) Rs. 5,00,00,000/-

3. What is the lessee’s interest in property in 2018?

a) Rs. 5,00,00,000/- b) Rs. 7,75,00,000/-

c) Rs. 2,75,00,000/- d) Rs. 7,59,00,000/-

4. Depreciation amount of the factory value in 2018 on striaght line method of

depreciation and assuming 10% scrap value?

a) Rs. 2,50,00,000/- b) Rs. 2,25,00,000/-

c) Rs. 2,75,00,000/- d) Rs. 50,00,000/-

5. Which of the following statement is correct?

a) Lessor’s interest in the property is right to receive 50% unearned increase in

land value only.

b) Lessor’s interest in the property is value of right to receive lease rent in

property plus right to receive 50% unearned unearned increase in land value.

c) Lessee’s interest is estimated by estimating capitalised value of profit rent

receivable for 20 years.

d) Lessee’s interest in the property is to be increased by amount of 50%

unearned increase in land value payable to lessor as per P. N. Sikand’s
case.

6. Which of the following statement is true?

a) Lessor is entilted to take income tax of the depreciation of the building.

b) Lessor' s interest in the property is nil.
c) Lessee is virtually having a right to use property for life time only.
d) Balance economical life is 20 years.
188

Data :

Year of lease = 1998

Period of lease = 99 years
One time premium = Rs.450/sq.m. for land extent
Land area = 4,000 sq.m.
Lease rent = Re. 1/year
Lessee built a factory of builtup area = 2,000 sq.m.
Year of construction of factory by the = 1998
lessee
Cost of factory (Lessee) = Rs. 60,000/-
Land rate as on 2018 (date of valuation) = Rs. 1,250/sq.m.
Replacement cost of building in 2018 = Rs. 25,000/sq.m.
Total life of the building = 40 years

Condition : Lessor is entitled to charge 50% unearned increase in land

value in case of sale / transfer.

Opinion :

1. Lessor’s interest :

This case of lease of land is by state government. It is assumed as a perpetual

lease and reversionary value of land is negligible. The lease rent is only Re. 1/year
and hence its capitalised value will be negligible. Lessor’s interest in land value
would be therefore is restricted to claim 50% of unearned increase in land value in
case of sale.

Land area = 4,000 sq.m.

Prevailing land rate 2018 = Rs. 1,250/sq.m.
One time premium charged in 1998 = Rs. 450/sq.m.
Unearned increase 1,250 - 450 = Rs. 800/sq.m.
The percentage the lessor is entitled to = 50%
charge in case of transfer
Unearned increase the lessor can enjoy = 0.5 x 800 = Rs. 400/sq.m.
The lessor’s value 4,000 x 400 = Rs. 16,00,000/- (1)

.
. . The answer is ‘a’.
189

2. Value of property assuming it is a freehold :

(i) Land :

Land area = 4,000 sq.m.

Unit rate of land = Rs. 1,250/sq.m.
Land value - 4,000 x 1,250 = Rs. 50,00,000/-

(ii) Building :

Building area = 2,000 sq.m.

Replacement cost = Rs. 25,000/sq.m.
Replacement value = 2,000 x 25,000
= Rs. 5,00,00,000/-
Age of the building : 2018 - 1998 = 20 years
Life of the factory = 40 years
Salvage value assumed = 10%
20
Depreciation percentage = x 90 = 45%
40
Depreciation value = 0.45 x 5,00,00,000
= Rs. 2,25,00,000/-
Depreciated value = Rs. 2,75,00,000/-
5,00,00,000 - 2,25,00,000

(iii) Total value :

Value of land = Rs. 50,00,000/-

Depreciated value of building = Rs. 2,75,00,000/-
Total value = Rs. 3,25,00,000/- (2)

(Note : The options given in the question is not tallying with this answer).

3. Value of lessee’s interest :

Total value of land : 4,000 x 1,250= Rs. 50,00,000/-

Value of lessee’s interest = Total value of land - Value of
lessor’s interest
= 50,00,000 - 16,00,000
= Rs. 34,00,000/-
190

Lessee also holds in the building value.

Depreciated value of building = Rs. 2,75,00,000/-

Total value :
Land = Rs. 34,00,000
Depreciated value of building = Rs. 2,75,00,000/-
= Rs. 3,09,00,000/-

(Note : The options given in the question is not tallying with this answer).

4. Depreciation amount by straight line method

20
= 2,000 x 25,000 x ( x 90)
40

= 0.45 x 5,00,00,000
= Rs. 2,25,00,000/-

.
. . The answer is ‘b’.

5. Lessor’s interest in the property is right to receive 50% unearned increase in land
value only.

.
. . The answer is ‘a’.

6. Total life = 40 years

Age 2018 - 1998 = 20 years
Balance economic life = 40 - 20 = 20 years

.
. . The answer is ‘d’.

Exercise 7 :

A government M.I.D.C. gives 8,000 sq.m. of land on 99 years lease @ 1/- P.A. lease rent and
charged one time premium of Rs. 450 / sq.m. in the year 1998. The lessee in the year 1998
constructed an industrial shed 4,000 sq.m. of BU area with his own expenditure. The age of
the shed is 20 years as on year 2018 and total life of the shed is 40 years. The land rate is
Rs. 2,000 / sq.m. and replacement cost is Rs. 25,000 / sq.m. Lease provides that the lessor
is entitled to charge 50% unearned increase in land value as transfer / assignment charges in
case of sale / transfer of the property. Calculate the following :
191

1. What is the lessors interest?

2. What is the total value of property considering a freehold property?
3. What is the lessee interest?
4. What is the reversionary value of the leasehold land?
5. What is the depreciated value of shed?

Data :

Year of lease = 1998

Period of lease = 99 years
One time premium = Rs.450/sq.m. for land extent
Land area = 8,000 sq.m.
Lease rent = Re. 1/year
Lessee built a factory of builtup area = 4,000 sq.m.
Year of construction of factory by the = 1998
lessee
Land rate as on 2018 (date of valuation) = Rs. 2,000/sq.m.
Replacement cost of building in 2018 = Rs. 25,000/sq.m.
Total life of the building = 40 years
Date of valuation = 2018
Age of the shed 2018 - 1998 = 20 years

Opinion :

1. Lessor’s interest :

This case of lease of land is by state government. It is assumed as a perpetual

Land area = 8,000 sq.m.

Prevailing land rate 2018 = Rs. 2,000/sq.m.
One time premium charged in 1998 = Rs. 450/sq.m.
Unearned increase 2,000 - 450 = Rs. 1,550/sq.m.
The percentage the lessor is entitled to = 50%
charge in case of transfer
Unearned increase the lessor can enjoy = 0.5 x 1,550 = Rs. 775/sq.m.
The lessor’s value - 8,000 x 775 = Rs. 62,00,000/- (1)
192

2. Value of property assuming it is a freehold :

(i) Land :

Land area = 8,000 sq.m.

Unit rate of land = Rs. 2,000/sq.m.
Land value - 4,000 x 1,250 = Rs. 1,60,00,000/-

(ii) Building :

Building area = 4,000 sq.m.

Replacement cost = Rs. 25,000/sq.m.
Replacement value = 4,000 x 25,000
= Rs. 10,00,00,000/-

Age of the building : 2018 - 1998 = 20 years

Life of the factory = 40 years
Salvage value assumed = 10%
20
Depreciation percentage = x 90 = 45%
40
Depreciation value = 0.45 x 10,00,00,000
= Rs. 4,50,00,000/-
Depreciated value = Rs. 5,50,00,000/-
10,00,00,000 - 4,50,00,000

(iii) Total value :

Value of land = Rs. 1,60,00,000/-

Depreciated value of building = Rs. 5,50,00,000/-
Total value = Rs. 7,10,00,000/- (2)

3. Value of lessee’s interest :

Total value of land : = Rs. 1,60,00,000/-

8,000 x 2,000

Value of lessee’s interest = 1,60,00,000 - 62,00,000

= Rs. 98,00,000/-

Lessee also holds in the building value.

193

Depreciated value of building = Rs. 5,50,00,000/-

Total value :

Land = Rs. 98,00,000

Building = Rs. 5,50,00,000
= Rs. 6,48,00,000/-

4. Reversionary value is negligible and hence not considered.

5. Depreciated value of shed = Rs. 5,50,00,000/-

Exercise 8 : (IBBI)

A warehouse property is situated close to a port facility in a major port twn. It is let out on a
50 years lease. The lessee is paying to the lessor an exclusive ground rent @ INR 2,000
per annum, after payment of an one time premium of INR 25,00,000. The rack rental value
on full repairing terms amounts to INR 1,20,000 per annum. The yield from freehold ware
houses in similar locations is considered to be 10% and for long term lease is 15%.
(Valuation of Real property : Page no. 69 - Mr. Symales Datta)

Questions :

1. What is the outgoing for lessor?

2. What is the net income for the lessor during the term period?
3. What is the YP during the term period?
4. What is the YP during the reversionary value calculations?
5. What is the value of freeholder’s interest?
6. What is the market rent?

Calculation :

Data :

Lease = 50 years
Ground rent to lessor = Rs. 2000/- per annum
Premium paid to lessor = Rs. 25,00,000/-
Rack Rent on full repairing terms = Rs. 1,20,000/- per annum
Yield for freehold ware houses = 10%
Yield for long term lease = 15%
194

Answers :

1. What is the outgoing for lessor?

The outgoing for lessor is nil on the assumption that the lease is on full repairing
terms, however this is not specifically mentioned in the question. But could be
inferred as such, as the rack rent mentioned is on full repairing terms.

2. What is the net income for the lessor during the term period?

Rs. 2000/- per annum

3. What is the YP during the term period?

Y.P. = 100 / 15 = 6.66

4. What is the YP during the reversionary value calculations?

The YP during reversionary value calculations is 100 / 10 = 10.

5. What is the value of freeholder’s interest?

Value of freeholder’s interest = value of term + value of reversion

i) Value of term (lessor’s interest) = 2000 x 6.66 = 13,320

ii) Value of reversion

Market value = Rs. 1,20,000/-
Y.P. @ 10% = 100 / 10 = 10
Capitalised value = 1,20,000 x 10 = 12,00,000
Y.P. in perpetuity deferred 1
= = 0.008518
50 years @ 10% (1 + 0.1)50
Value of reversion = 12,00,000 x 0.008518
= 10,222

iii) Value of freeholder’s interest = 13,320 + 10,222

= Rs. 23,542/-

6. What is the market rent?

Rs. 1,20,000/- per annum.

(Courtesy : Mr. Mahendra Kakule)

* * *
195

9. VALUATION BY PROFIT METHOD

Exercise 1 :

A hotel has 100 rooms. Room rent is Rs. 1,500/day. Occupancy ratio is 65%. Income from
restaurant is Rs. 200 lakhs/year. Conference hall rental income is Rs. 150 lakhs/year.
Corpoartion tax, Electricity, insurance and other expenses are Rs. 200 lakhs. Staff salary Rs.
125 lakhs. Food & beverage expenses are Rs. 150 lakhs. Miscellaneous expenses Rs. 50
lakhs. Ascertain the value of the hotel by profit method assuming an yield as 10%.

1. Gross income :

a. From Rooms

Number of rooms = 100

Daily rent = Rs. 1,500/day
Income from 100 rooms/day = 1,500 x 100 = Rs. 1,50,000
Income from 100 rooms/year = 1,500 x 100 x 365
Occupancy ratio = 65%
Yearly income for 65% = 1,500 x 100 x 365 x 0.65
= Rs. 3,55,87,500/-

b. Income from restaurant = Rs. 2,00,00,000/-

c. Income from conference hall = Rs. 1,50,00,000/-

Gross income = Rs. 7,05,87,500/-

2. Expenses :

Corporation tax, electricity, etc. = Rs. 2,00,00,000

Staff salary = Rs. 1,25,00,000
Food & beverage expenses = Rs. 1,50,00,000
Miscellaneous expenses = Rs. 50,00,000
Total expenses = Rs. 5,25,00,000/-
196

3. Net income :

Gross income = Rs. 7,05,87,500

Expenses = Rs. 5,25,00,000
Net income = Rs. 1,80,87,500/-

4. Value :

Net income = Rs. 1,80,87,500

Yield = 10%
100
Value = 1,80,87,500 x
10

= Rs. 18,08,75,000/-

Exercise 2 :

It is a marriage hall in a town. The daily rental charge is Rs. 25,000/-. The number of booking
per year is 50 percent. Expenses are : Property tax - Rs. 25,000/half year, Staff salary - Rs.
40,000/month, Yearly Insurance - Rs. 35,000/-, Repairs & Maintenance - Rs. 15,000/month,
Electricity - Rs. 50,000/month, Miscellaneous expenses - Rs. 25,000/month, Management
expenses : Rs. 1,00,000/month.

Determine the value by profit method assuming an yield of 12%.

1. Gross income :

Daily rental charges = Rs. 25,000

Yearly rental charge = 25,000 x 365
Occupation ratio = 50%
Gross income = 25,000 x 365 x 0.5
= Rs. 45,62,500/-

2. Expenses :

Property tax 25,000 x 2 = Rs. 50,000

Staff salary 40,000 x 12 = Rs. 4,80,000
Insurance = Rs. 35,000
Repairs & maintenance = Rs. 1,80,000
15,000 x 12
197

Electricity - 50,000 x 12 = Rs. 6,00,000

Miscellaneous expense = Rs. 3,00,000
25,000 x 12
Management expense = Rs. 12,00,000
1,00,000 x 12
Total expenses = Rs. 28,45,000/-

3. Net income :

Gross income = Rs. 45,62,500

Expenses = Rs. 28,45,000
Net income = Rs. 17,17,500

4. Value :

Net income = Rs. 17,17,500

Yield = 12%
17,17,500
Value = x 100
12

= Rs. 1,43,12,500/-

* * *
198

10. BANK VALUATION

Exercise 1 :

In a plot of 2,400 sq.ft., Mr. X has proposed to construct a building of 1,200 sq.ft. He has
obtained loan. Basement completed (25%). Land rate is Rs. 1,000/sq.ft. The unit
construction cost is Rs. 1,800/-. Determine the stage value of the property for primary secu-
rity purpose to bank.

Land value = 2,400 x 1,000 = Rs. 24,00,000

Building value = 0.25 x 1,200 x 1,800 = Rs. 5,40,000
Total value = Rs. 29,40,000/-

Exercise 2 :

The plot area is 3,000 sq.ft. The land rate is Rs. 1,500/sq.ft. The owner wishes to
construct a building of 3 floors of 1,200 sq.ft. each. The average unit rate of construction is
Rs. 1,600/-. The total estimated amount is Rs. 57.60 lakhs and the bank has sanctioned a
loan of 43.20 lakhs. The owner has completed 40% of the civil works. In order to pay the first
installment of loan, the bank directs the valuer to certify the stage cost of the building alone.

Number of floors = 3
Built up area of each floor = 1,200 sq.ft.
Total built up area 3 x 1,200 = 3,600 sq.ft.
Unit rate of construction = Rs. 1,600/-
Total value of completion = 3,600 x 1,600
= Rs. 57,60,000/-
Stage precentage completed = 40%
Stage value = 0.4 x 57,60,000
= Rs. 23,04,000/-

Exercise 3 :

In the year April 2018, Mr. X has purchased plot of 2,400 sq.ft. for Rs. 24,00,000. In the same
year (April to December) he has constructed a residential building for Rs. 18,00,000. He
wants to sell. He quoted (Jan 2019) Rs. 48,00,000/-. The borrower approached the bank and
the bank directed its panel valuer to inspect the site and give a report. The valuer certified as
Rs. 45,00,000/-as on February 2019.
199

Now,

1) What is the cost of the property for 2018 - 19?

2) What is the price?
3) What is the value?

Answers :

1) Cost = 24,00,000 + 18,00,000 = Rs. 42,00,000/-

2) Price is Rs. 48,00,000/-
3) Value is Rs. 45,00,000/-

* * *
200

11. GROUND RENT

Exercise 1 :

Mr. ‘X’ is owning a vacant site of 8,000 sq.ft. near the bus stand. He wants to let out. The
prevailing unit market rate is Rs. 1,000 and the guideline rate is Rs. 1,500/sq.ft. Mr. Y
wants this site for parking vehicles. Mr. Z also wants this site and wishes to construct a
shed. Assume rate of return of 4% for secured ground rent and 5% for unsecured ground rent.

Questions :

1. What is the market value to determine the rent for Mr. Y?

2. What is the market value to determine the rent for Mr. Z?
3. What is the yearly ground rent that can be fixed for Mr. Y?
4. What is the monthly ground rent that can be fixed for Mr. Y?
5. What is the yearly ground rent that can be fixed for Mr. Z?
6. What is the monthly ground rent that can be fixed for Mr. Z?

Data :

Extent of site = 8,000 sq.ft.

Market rate of site = Rs. 1,000/sq.ft.
Guideline rate = Rs. 1,500/sq.ft.
Rate of return for secured = 4%
ground rent
Rate of return for unsecured = 5%
ground rent

Calculations :

For Y & Z :

Extent of site = 8,000 sq.ft.

Prevailing unit rate = Rs. 1,000/sq.ft.
Market value (for Y & Z) = Rs. 80,00,000/- (1&2)
8,000 x 1,000
201

For Y :

Market value = Rs. 80,00,000

Type of rent = Unsecured
Rate of return assumed = 5%
Yearly ground rent = 80,00,000 x (5/100)
= Rs. 4,00,000/- (3)

Monthly ground rent = 4,00,000 / 12

= Rs. 33,333/- (4)

For Z :

Market value = Rs. 80,00,000

Type of rent = Secured
Rate of return assumed = 4%
Yearly ground rent = 80,00,000 x (4/100)
= Rs. 3,20,000/- (5)

Monthly ground rent = 3,20,000 / 12

= Rs. 26,667/- (6)

Answers :

1) Rs. 80,00,000/- 4) Rs. 33,333/-

2) Rs. 80,00,000/- 5) Rs. 3,20,000/-
3) Rs. 4,00,000 /- 6) Rs. 26,667/-

* * *
202

12. VALUATION OF TENANTED PROPERTIES

Exercise 1 :

The monthly rent (Net) of a shop of 540 sq.ft. is Rs. 12,000/-. Calculate the approximate value
by rent capitalisation method by adopting a rate of return as 5%.

Monthly rent = Rs. 12,000

Yearly rent = 12,000 x 12
= Rs. 1,44,000/-
Rate of return adopted = 5%
100
Capitalised value = 1,44,000 x
5
= Rs. 28,80,000/-

Exercise 2 :

The net monthly rent of a residential building of 1,250 sq.ft. is Rs. 16,500/-. Find the approxi-
mate value of the property by rent capitalisation method by adopting a rate of return as 3%.

Monthly rent = Rs. 16,500

Yearly rent = 16,500 x 12
= Rs. 1,98,000/-
Rate of return = 3%
100
Capitalised value = 1,98,000 x
3
= Rs. 66,00,000/-

Exercise 3 :

A new shop was purchased for Rs. 10,00,000 which was rented out for Rs. 5,000 per month.
What is the yield?

Capital value = Rs. 10,00,000

Yearly rent = Rs. 5,000 x 12 = Rs. 60,000
60,000
Yield = x 100
10,00,000
= 6%
203

Exercise 4 : (IBBI)

A fully developed building in a plot has a total of 4 floors. Total plot area is 1,000 sq.m. and
total builtup for area of the building is 250 sq.m / per floor. Permissible FSI is 1.00. There are
4 tenants per floor and tenants of lower 2 floors pay a rent of
Rs. 750 / month / tenement. which includes property tax. Top 2 floors are occupied by the
owners of the property itself. Total property taxes are Rs. 25,000 / 6 months for 4 floors.

Tenant’s rent includes 50% of total tax, Non - agricultural (N.A.) tax of the plot is Rs. 800 / year
and building insurance premium is Rs. 1,000 / year.

Assume repair cost at 6% of the gross rent and collection & management charges at 3% of
the gross rent. Stamp duty paid at the time of purchase is Rs. 9,000/-. The land is of freehold
tenure. Prevalent land rate of freehold land in the locality at present is Rs. 8,000/sq.m. The
rate of ownership flats in the locality for similar construction as on today is
Rs. 30,000/sq.m.

Questions :

1. What will be the total annual rent receivable by the landlord from all the tenants?

a) Rs. 6,000/- b) Rs. 72,000/-

c) Rs. 1,44,000/- d) Rs. 12,000/-

2. What will be the total outgoings including repairs allowance & collection charges
for the tenanted portion of the building?

a) Rs. 32,380/- b) Rs. 57,380/-

c) Rs. 33,280/- d)

3. What will be the present market value of the tenanted portion of the building if
rental income is assumed to be in perpetuity & rate of capitalisation is adopted
@ 8%

a) Rs. 9,90,500/- b) Rs. 1,50,00,000/-

c) Rs. 77,50,000/- d) Rs. 4,95,250/-

4. What will be the present market value of the owner occupied portion of the
building?
204

a) Rs. 75,00,000/- b) Rs. 1,50,00,000/-

c) Rs. 10,00,000/- d) Rs. 78,00,000/-

5. Which of the following is not considered as outgoing for computing net rent
received by the landlord?

a) Property tax b) Repair cost

c) Stamp duty paid d) Management charges

6. What is the market value of the balance potential in the property?

a) Rs. 1,50,000/- b) Rs. 15,00,000/-

c) Zero d) Reversionary value of the land

Data :

Property tax for 4 floors = Rs. 25,000 / 6 months

Non Agricultural tax for Mumbai = Rs. 800 / year
Building insurance = Rs. 1,000 / year
Repair cost & maintenance = 6% Gross rent
Rent collection charge = 3% Gross rent
Market rate of land = Rs. 8,000 / sq.m.
Prevalent unit rate of flat = Rs. 30,000 / sq.m.

Opinion :

1. Rent received by the owner :

Tenants occupied portions = GF & FF

Number of tenants in each flat = 4
Total number of flats in all flats = 2x4=8
Monthly rent for each flat = Rs. 750/-
Monthly rent for all flats = 750 x 8 = Rs. 6,000
Yearly rent for all flats = 6,000 x 121 = Rs. 72,000/-

The answer is “b”.

2. Outgoings :

Property tax = Rs. 50,000

N.A. (Non-Agricultural tax) = Rs. 800
Insurance premium = Rs. 1,000
= Rs. 51,800
205

Since the tenants are bearing 50% of the

above expenses, the actual outgoings
of the owner = Rs. 25,900
Maintenance charges 6% of gross rent = Rs. 4,320
0.06 x 72,000
Rent collection charge 3% of gross rent = Rs. 2,160
0.03 x 72,000
Total outgoings = Rs. 32,380/-

The answer is “a”.

3. Capitalisation amount :

Gross income = Rs. 72,000

Outgoes = Rs. 32,380
Net income = Rs. 39,620
Yield = 8%
Capitalised amount = 39,620 x (100 / 8)
= Rs. 4,95,250/-

The answer is “d”.

4. Value of the building - free holder (land owner) :

FSI = 1
Area of the flat 2 x 250 = 500 sq.m.
Unit rate of flat = Rs. 30,000/sq.m.
Value 500 x 30,000 = Rs. 1,50,00,000/-

The answer is “b”.

5. While computing net rent received by the landlord, Stamp duty is not to be
considered.

.
. . The answer is “c”.

6. The market value of the balance potential in the property is zero.

.
. . The answer is “c”.
206

Exercise 5 : (IBBI)

An apartment carries 4 floors built on a plot of area 1,000 sq.m. Each floor area is
250 sq.m. The GF & FF have been rented and SF & TF is in possession of the owner. Each
floor carries 4 tenements, and tenants pay @ Rs. 750 / tenement as rent. The property tax
being paid is @ Rs. 25,000 / six month. Rs. 900 / year is non agri - tax. 6% per annum
towards management cost. Rs. 9,000/- stamp duty cost. 3% towards rent collection
charge. Cost of land is Rs. 2,000 / sqm and cost of construction is Rs. 25,000 / sqm, FSI is 1.
Calculate the following :

1. What is the total rent?

2. What is the total outgoes?
3. What is the valuation of owner occupied portion?
4. What is the balance potential in building?
5. What is the depreciated cost of building?
6. What is the tenanted portion value @ rate of return of 8% PA?
Data :

Property tax = Rs. 25,000 / 6 months

Non Agricultural tax (for Mumbai) = Rs. 900 / year
Management cost = 6%
Stamp duty = Rs. 9,000/-
Cost of land = Rs. 2,000/sq.m.
Cost of construction = Rs. 25,000/sq.m.
Rent collection charge = 3%

Opinion :

1. Rent received by the owner :

Tenants occupied portions = GF & FF

2. Outgoings :

Note : (It is assumed that the tenents are bearing 50% of the property tax, N.A.
tax). It is the practice in Maharashtra.
207

Property tax = Rs. 50,000

N.A. (Non-Agricultural tax) = Rs. 900
= Rs. 50,900

Since the tenants are bearing 50% of the

above expenses, the actual outgoings
for the owner = Rs. 25,450

Management charges 6% of gross rent = Rs. 4,320

0.06 x 72,000

Rent collection charge 3% of gross rent = Rs. 2,160

0.03 x 72,000

Total outgoings = Rs. 31,930/-

3. Value of the building - free holder (land owner) :

FSI = 1
Area of the flat 2 x 250 (SF & TF) = 500 sq.m.
Unit rate of flat = Rs. 25,000/sq.m.
Value - 500 x 25,000 = Rs. 1,25,00,000/-

4. The market value of the balance potential in the property is zero.

5. Data is not adequate to calculate the depreciated cost of the building.

6. Capitalisation amount :

Gross income = Rs. 72,000

Outgoes = Rs. 31,930
Net income = Rs. 40,070
Yield = 8%
Capitalised amount = 40,070 x (100 / 8)
= Rs. 5,00,875/-

* * *
208

13. RESIDUAL VALUE METHOD

Exercise 1 :

Plot area = 3,000 sq.ft. Building area = 2,400 sq.ft. The age of the building = 20 years (Life
can be assumed as 60 years & salvage value as 10%). Replacement cost including services
is Rs. 1,800/sq.ft. This property was sold for Rs. 60,24,000. Calculate the land rate by
residual technique.

Building area = 2,400 sq.ft.

Replacement rate = 1,800/sq.ft.

Replacement value 2,400 x 1,800 = Rs. 43,20,000/-

Age of the building = 20 years

Life assumed = 60 years

Salvage value = 10%

Depreciation percentage = (20 / 60) x 90 = 30%

Depreciation value 0.3x43,20,000 = Rs. 12,96,000/-

Depreciated value of building = Rs. 30,24,000

Sale value (land + building) = Rs. 60,24,000

Value of land alone = Rs. 30,00,000

60,24,000 - 30,24,000

Extent of land = 3,000 sq.ft.

Rate of land 30,00,000 / 3,000 = Rs. 1,000/sq.ft.

209

Exercise 2 :

In a plot of 4,000 sq.ft., a flat promoter constructed 8 flats of 1,000 sq.ft. each. Building rate
including all services is Rs. 2,500/sq.ft. He sold one flat for Rs. 66,00,000/-. Assuming his
profit margin as 20%, calculate the land rate by residual technique.

Area of 8 flats 8 x 1,000 = 8,000 sq.ft.

Area of plot = 4,000 sq.ft.

FSI : 8,000 / 4,000 = 2

Selling price [(Land + Building) + = Rs. 66,00,000

+ Profit]

Unit rate of flat 66,00,000/1,000 = Rs. 6,600 (This is composite rate)

Promoter’s profit = 20%

Land & building excluding profit = 6,600 / 1.2

= Rs. 5,500/-

Deduct building unit rate = (-) Rs. 2,500

Land component alone = Rs. 3,000

FSI = 2

Land rate - 3,000 x 2 = Rs. 6,000/-

* * *
210

14. CAPITAL GAIN

Exercise 1 :

On 07.12.1989, a property was acquired by Mr. X for 8.08 lakhs. In June 1992,
improvements were made for 12.06 lakhs. On 10.12.2014, the property was sold to
1.93 crores. (172, 223, 1024 are the cost inflation index for 1989 - 90, 1992 - 93, 2014 - 15
respectively).

Questions :

1. What is the Indexed cost of acquisition?

2. What is the indexed cost of improvement?
3. What is the total cost of acquisition & improvement?
4. What is the taxable capital gain?
5. What is the tax to be paid by Mr. ‘X’?
6. If the property is owned by a company, what is the capital gain tax?

Calculations :

Date of acquisition = 07.12.1989 (1989 - 90)

Cost of acquisition (12/1989) = Rs. 8,08,000
Cost of improvements (6/1992) = Rs. 12,06,000 (1992 - 93)
Date of transfer = 10.12.2014 (2014 - 15)
Sale consideration = Rs. 1,93,00,000
Cost inflation index 1989 - 90 = 172
Cost inflation index 1992 - 93 = 223
Cost inflation index 2014 - 15 = 1,024

1. Indexed cost of acquisition = 8,08,000 x (1,024/172)

= Rs. 48,10,419/- (1)

2. Indexed cost of improvement = 12,06,000 x (1,024/223)

= Rs. 55,37,865/- (2)

3. Total indexed cost of acquisition = 48,10,419 + 55,37,865

& indexed cost improvement
= Rs. 1,03,48,284/- (3)
211

4. Taxable capital gain = 1,93,00,000 - 1,03,48,284

= Rs. 89,51,716/- (4)

5. Tax in the hand of Mr. ‘X’ - 20% = 0.2 x 89,51,716

= Rs. 17,90,343/- (5)

6. If it is owned by a company, = 0.4 x 89,51,716

tax - 40%
= Rs. 35,80,686/- (6)

Answers :

1) Rs. 48,10,419/- 4) Rs. 89,51,716/-

2) Rs. 55,37,865/- 5) Rs. 17,90,343/-
3) Rs. 1,03,48,284/- 6) Rs. 35,80,686/-

Exercise 2 :

On 09.01.1990, a property was acquired by Mr. X for 9.49 lakhs. In August 1992,
improvements were made for 14.76 lakhs. On 17.12.2014, the property was sold to
1.97 crores. 172, 223, 1024 are the cost inflation index for 1989 - 90, 1992 - 93, 2014 - 15
respectively.

Questions :

1. What is the indexed cost of acquisition?

2. What is the indexed cost of improvement?
3. What is the total indexed cost of acquistions & improvement?
4. What is the taxable capital gain?

Calculations :

Date of acquisition = 09.01.1990 (1989 - 90)

Cost of acquisition (12/1989) = Rs. 9,49,000/-
Cost of improvements (6/1992) = Rs. 14,76,000 (1992 - 93)
Date of transfer = 17.12.2014 (2014 - 15)
Sale consideration = Rs. 1,97,00,000
Cost inflation index 1989 - 90 = 172
Cost inflation index 1992 - 93 = 223
Cost inflation index 2014 - 15 = 1,024
212

1,024
Indexed cost of acquisition = 9,49,000 x
172
= Rs. 56,49,860/- (1)

Indexed cost of improvement 1,024

= 14,76,000 x
223
= Rs. 67,77,686/- (2)

Total indexed cost of acquisition

= 56,49,860 + 67,77,686
& improvement
= Rs. 1,24,27,546/- (3)

Taxable capital gain = 1,97,00,000 - 1,24,27,546

= Rs. 72,72,454/- (4)

Answers :

1) Rs. 56,49,860/- 3) Rs. 1,24,27,546/-

2) Rs. 67,77,686/- 4) Rs. 72,72,454/-

Exercise 3 :

On 10.10.1982, Mr. X acquired a property consisting of 3,000 sq.ft. of plot and 4,500 sq.ft. of
building in Chennai for a cost of Rs. 10,00,000/-. On 06.02.2017, he sold his property for a
sale consideration of Rs. 2,00,00,000/-. 109 & 1125 are the cost inflation index for 1982 - 83
& 2016 - 17 respectively.

Questions :

1. What will be the indexed cost of acquisition?

2. What is the capital gain?

Calculations:

Date of acquisition = 10.10.1982 (1982 - 83)

Cost of acquisition = Rs. 10,00,000
C.I.I. for 1982 - 83 = 109
Date of transfer = 06.02.2017 (2016 - 17)
C.I.I. for 2016 - 17 = 1,125
213

10,00,000
1) Indexed cost of acquisition = x 1,125
109
= Rs. 1,03,21,100/- (1)

2) Capital gain = 2,00,00,000 - 1,03,21,100

= Rs. 96,78,900/- (2)

Answers :

1) Rs. 1,03,21,100/- 2) Rs. 96,78,900/-

Exercise 4 :

Mr. ‘X’ acquired a property in June 1990 for 12.05 lakhs. On 10.12.2014, this property was
sold for a sale consideration of 85.14 lakhs. 182, 1024 are the cost inflation index for
1990 - 91 & 2014 - 15.

Questions :

1. What is the cost of acquistion?

2. What is the taxable capital gain?

Calculations :

Date of acquisition = June 1990 (1990 - 91)

Cost of acquisition = Rs. 12,05,000
Fair market value as on 1.4.81 = Not applicable here
Date of transfer = 10.12.2014 (2014 -15)
Sale consideration = Rs. 85,14,000
Cost inflation index 1990 - 91 = 182
Cost inflation index 2014 - 15 = 1,024
1,024
Indexed cost of acquisition = 12,05,000 x
182
= Rs. 67,79,780/- (1)

Taxable capital gain = 85,14,000 - 67,79,780

= Rs. 17,34,220/- (2)
214

Answers :

1) Rs. 67,79,780/- 2) Rs. 17,34,220/-

Exercise 5 :

An individual owned property was originally acquired in 01.10.1972 for 1.02 lakhs. The fair
market value of the property as on 01.04.1981 is 5.25 lakhs. On 10.12.2014, this property
was sold for a sale consideration of 75.05 lakhs. 100, 1024 are the cost inflation index for
1981 - 82 & 2014 - 15.

Questions :

1. What is the indexed cost of acquisition?

2. What is the taxable capital gain?

Calculations :

Date of acquisition = 01.10.1972

Cost of acquisition = Rs. 1,02,000
Fair market value as on 1.4.81
= Rs. 5,25,000 (1981 - 82)
as worked out
Date of transfer = 10.12.2014 (2014 - 15)
Sale consideration = Rs. 75,05,000
Cost inflation index 1981 - 82 = 100
Cost inflation index 2014 - 15 = 1,024
1,024
Indexed cost of acquisition = 5,25,000 x
100
= Rs. 53,76,000/- (1)

Taxable capital gain = 75,05,000 - 53,76,000

= Rs. 21,29,000/- (2)

Answers :

1) Rs. 53,76,000/- 2) Rs. 21,29,000/-

Exercise 6 :

On 12.12.2010, a property was acquired by Mr. Y for 75.28 lakhs. On 10.12.2014, the same
215

was sold for 1.03 crores. 711, 1024 are the cost inflation index for 2010 - 11
& 2014 - 15.

Questions :

1. What is the indexed cost of acquisition?

2. What is the taxable capital gain?

Calculations :

Date of acquisition = 12.12.2010 (2010 - 11)

Cost of acquisition = Rs. 75,28,000
Date of transfer = 10.12.2014 (2014 -15)
Sale consideration = Rs. 1,03,00,000
Cost inflation index 2010 - 11 = 711
Cost inflation index 2014 - 15 = 1,024
1,024
Indexed cost of acquisition = 75,28,000 x
711
= Rs. 1,08,42,014/- (1)

Taxable capital gain = 1,03,00,000 - 1,08,42,014

= (-) Rs.5,42,014 (2)
It is a loss, there is no taxable gain
(Capital loss)

Answers :

1) Rs. 1,08,42,014/- 2) (-) Rs. 5,42,014

It is a loss, there is no taxable gain.

Exercise 7 : (IBBI)

A flat was purchased in 1981 for Rs. 2,40,000/-. As a gift from his uncle, the assessee re-
ceived this flat having an area of 80 sq.m. in June 2001.The assessee has made
improvements in the flat in August 2005 at a cost of Rs. 15,00,000/-. He sold this flat in 2018
for Rs. 2,40,00,000/-. Society transfer charges was Rs. 50,000/- and the brokerage charges
were Rs. 1,00,000/-. Prevailing rate of flat as on 2001 is Rs. 40,000/m2.

Cost inflation index as on 2001 is 100. Cost inflation index on 2005 is 117 and cost
inflation index on 2018 is 272.
216

Questions :

1) What is the indexed cost of improvement?

2) What is the indexed cost of acquisition?
3) Compute capital gain at 20%?
4) What are the deductions as per Section 48(i)?
5) Whether the assessee is liable for paying capital gains?

Solution :

1. Indexed cost of improvements :

Cost of improvement made in 2005 = Rs. 15,00,000

Cost inflation index in 2005 = 117
Cost inflation index in 2018 = 272

. 15,00,000
. . Indexed cost of improvements in 2018 = x 272
117

= Rs. 34,87,179/- (1)

2. Indexed cost of acquisition :

Flat was purchased in = 1981 - Rs. 2,40,000/-

Flat was gifted in = 2001 - 80 sq.m.
Flat was sold in = 2018 - Rs. 2,40,00,000/-

For the purpose of computing capital gain, the FMV as on 01.04.2001 is to be

determined.

Area of the flat = 80 sq.m.

Rate prevailing in 2001 as given = Rs. 40,000/sq.m.
.
. . Value of the flat as on 2001 = 80 x 40,000
= Rs. 32,00,000/-
Cost inflation index in 2001 = 100
Cost inflation index in 2018 = 272

. 32,00,000
. . Indexed cost of Acquisition = x 272
100

= Rs. 87,04,000/- (2)

217

3. Computation of capital gain :

Indexed cost of acquisition = Rs. 87,04,000

Indexed cost of improvements = Rs. 34,87,179
Total indexed cost of acquisition = Rs. 1,21,91,179/-
& improvements
Sale consideration = Rs. 2,40,00,000
Less expenses : = (-) Rs. 1,50,000
Society transfer charges = Rs. 50,000
Brokerage = Rs. 1,00,000
Total expenses = Rs. 1,50,000

Net income from sale = Rs. 2,38,50,000/-

(2,40,00,000 - 1,50,000)

Less indexed cost of acquistion & = Rs. 1,21,91,179

improvements
Capital gains = Rs. 1,16,58,821
Capital gain tax percentage = 20%
Capital gain tax 0.2 x 1,16,58,821 = Rs. 23,31,764/- (3)

4. Deductions :

Brokerage = Rs. 1,00,000

Society transfer for charges = Rs. 50,000
Total = Rs. 1,50,000/- (4)

5. The assessee is liable for paying capital gains. (5)

Exercise 8 : (IBBI)

Gift from the year 2000 a flat of carpet area of 80 sq.m. purchased by his uncle in 1981 for a
price of Rs. 2,40,000/-. Flat was transferred in the name of A in the year June 2001.

Assessee started using the flat in 2000 only.

In 2005, he carried out substantial improvement works inside the flat by spending a total sum
of Rs. 15,00,000/-. (Courtesy : Mr. S. Pichaiya)
218

Flat was sold by A in the month of February 2018 for a total price of Rs. 2,40,00,000/-. Prevailing
rate of similar ownership flats in the locality in April 2001 was Rs. 40,000/sq.m.

Questions :

1. Which of the following statement is false?

a) Cost of acquisition to the assessee is Rs. 2,40,000/-

b) Capital gain tax would be levied at the rate of 20%
c) The assessee is entitled to deduct index cost of improvement
d) The assessee is liable to pay capital gain tax in the matter

Ans : (a)

2. Which of the following statement is true?

a) Cost of acquisition to the assessee is Rs. 32,00,000/-

b) Cost of acquisition to the assessee is Rs. 2,40,000/-
c) The assessee is entitled to deduct indexed cost of improvement only
d) The assessee is not liable to pay in the matter since it was received by his
as gift

80 sq.m. x Rs. 40,000 / sq.m. = Rs. 32,00,000/-

Ans : (a)

3. What will be the indexed cost of flat sold in 2018 for the purpose of calculating gain
tax by the assessee A if cost of inflation index for the financial year 2017 / 2018 is
272 for the years 2001 / 2002 it was 100

a) Rs. 32,00,000/- b) Rs. 87,04,000/-

c) Rs. 6,52,800/- d) Rs. 62,00,000/-

Indexed cost of flat = 32,00,000 x (272 / 100)

= Rs. 87,04,000/-

Ans : (b)

4. What will be the indexed cost of improvement works carried out in the flat for cost
inflation index for the year 2005 / 2006 was 117 and 2018 is 272
219

a) Rs. 34,87,179/- b) Rs. 40,87,179/-

c) Rs. 15,00,000/- d) Rs. 30,00,000/-

Indexed cost of improvement = 15,00,000 x (272 / 117)

carried out in 2005
= Rs. 34,87,179/-

Ans : (a)

5. What will be the deduction permissible to the assessee while computing capital
gain from the sale price of flat under capital gain tax provision if assessee has
spent Rs. 1,20,000/- for the brokerage charges and Rs. 25,000/- paid to the society
for transfer charges

a) Rs. 87,04,000/- b) Rs. 1,23,36,179/-

c) Rs. 1,21,91,179/- d) Rs. 1,45,000/-

34,87,179 + 87,04,000 + 1,20,000 + 25,000 = Rs. 1,23,36,179/-

Ans : (b)

6. What was the total capital gain tax 20% rate if assessee has not invested sales
proceeds anywhere

a) Rs. 48,00,000/- b) Rs. 30,60,000/-

c) Rs. 23,32,764/- d) Rs. 40,00,000/-

2,40,00,000 - 1,23,36,179 = Rs. 1,16,63,821/-

Capital gain tax @ 20% is = Rs. 23,32,764/-

Ans : (c)

Exercise 9 :

On 04.01.2005, a property was acquired by Mr. X for 8.08 lakhs. In June 2010,
improvements were made for 12.06 lakhs. On 28.08.2018, the property was sold to
83 lakhs. (113, 167, 280 are the cost inflation index for 2004 - 05, 2010 - 11, 2018 - 19
respectively).
220

Questions :

1. What is the Indexed cost of acquisition?

2. What is the indexed cost of improvement?
3. What is the total indexed cost of acquisition & improvement?
4. What is the taxable capital gain?
5. What is the tax to be paid by Mr. ‘X’?
6. If the property is owned by a company, what is the capital gain tax?

Calculations :

Date of acquisition = 04.01.2005 (2004 - 05)

Cost of acquisition (01/2005) = Rs. 8,08,000
Cost of improvements (6/2010) = Rs. 12,06,000 (2010 - 11)
Date of transfer = 28.08.2018 (2018 - 19)
Sale consideration = Rs. 83,00,000
Cost inflation index 2004 - 05 = 113
Cost inflation index 2010 - 11 = 167
Cost inflation index 2018 - 19 = 280

1. Indexed cost of acquisition = 8,08,000 x (280/113)

= Rs. 20,02,124/- (1)

2. Indexed cost of improvement = 12,06,000 x (280/167)

= Rs. 20,22,036/- (2)

3. Total indexed cost of acquisition = 20,02,124 + 20,22,036

& indexed cost improvement
= Rs. 40,24,160/- (3)

4. Taxable capital gain = 83,00,000 - 40,24,160

= Rs. 42,75,840/- (4)

5. Tax in the hand of Mr. ‘X’ - 20% = 0.2 x 42,75,840

= Rs. 8,55,168/- (5)

6. If it is owned by a company, = 0.4 x 42,75,840

tax - 40%
= Rs. 17,10,336/- (6)
221

Answers :

1) Rs. 20,02,124/- 4) Rs. 42,75,840/-

2) Rs. 20,22,036/- 5) Rs. 8,55,168/-
3) Rs. 40,24,160/- 6) Rs.17,10,336/-

Exercise 10 :

On 11.06.2004, a property was acquired by Mr. X for 9.49 lakhs. In August 2012,
improvements were made for 14.76 lakhs. On 01.04.2017, the property was sold to
67 lakhs. 113, 200, 272 are the cost inflation index for 2004 - 05, 2012 - 13, 2017 - 18
respectively.

Questions :

1. What is the indexed cost of acquisition?

2. What is the indexed cost of improvement?
3. What is the total indexed cost of acquistions & improvement?
4. What is the taxable capital gain?

Calculations :

Date of acquisition = 11.06.2004 (2004 - 05)

Cost of acquisition = Rs. 9,49,000/-
Cost of improvements (08/2012) = Rs. 14,76,000 (2012 - 13)
Date of transfer = 01.04.2017 (2017 - 18)
Sale consideration = Rs. 67,00,000
Cost inflation index 2004 - 05 = 113
Cost inflation index 2012 - 13 = 200
Cost inflation index 2017 - 18 = 272
272
Indexed cost of acquisition = 9,49,000 x
113
= Rs. 22,84,319/- (1)

Indexed cost of improvement 272

= 14,76,000 x
200
= Rs. 20,07,360/- (2)

Total indexed cost of acquisition

= 22,84,319 + 20,07,360
& improvement
= Rs. 42,91,679/- (3)
222

Taxable capital gain = 67,00,000 - 42,91,679

= Rs. 24,08,321/- (4)

Answers :

1) Rs. 22,84,319/- 3) Rs. 42,91,679/-

2) Rs. 20,07,360/- 4) Rs. 24,08,321/-

Exercise 11 :

On 10.10.1982, Mr. X acquired a property consisting of 3,000 sq.ft. of plot and 4,500 sq.ft. of
building in Chennai for a cost of Rs. 10,00,000/-. On 31.03.2017, he sold his property for a
sale consideration of Rs. 2,00,00,000/-. 109 & 1125 are the cost inflation index for 1982 - 83
& 2016 - 17 respectively.

Questions :

1. What will be the indexed cost of acquisition?

2. What is the capital gain?

Calculations:

Date of acquisition = 10.10.1982 (1982 - 83)

Cost of acquisition = Rs. 10,00,000
C.I.I. for 1982 - 83 = 109
Date of transfer = 31.03.2017 (2016 - 17)
C.I.I. for 2016 - 17 = 1,125

10,00,000
1) Indexed cost of acquisition = x 1,125
109
= Rs. 1,03,21,100/- (1)

2) Capital gain = 2,00,00,000 - 1,03,21,100

= Rs. 96,78,900/- (2)

Answers :

1) Rs. 1,03,21,100/- 2) Rs. 96,78,900/-

223

Exercise 12 :

An individual owned property was originally acquired in 01.10.1972 for Rs. 45,000/-. The fair
market value of the property as on 01.04.2001 is 5.25 lakhs. On 01.04.2017, this property
was sold for a sale consideration of Rs. 25,05,000/-. 100, 272 are the cost
inflation index for 2001 - 02 & 2017 - 18.

Questions :

1. What is the indexed cost of acquisition?

2. What is the taxable capital gain?

Calculations :

Date of acquisition = 01.10.1972

Cost of acquisition = Rs. 45,000
Fair market value as on 1.4.2001
= Rs. 5,25,000 (2001 - 02)
as worked out
Date of transfer = 01.04.2017 (2017 - 18)
Sale consideration = Rs. 25,05,000
Cost inflation index 2001 - 02 = 100
Cost inflation index 2017 - 18 = 272
272
Indexed cost of acquisition = 5,25,000 x
100
= Rs. 14,28,000/- (1)

Taxable capital gain = 25,05,000 - 14,28,000

= Rs. 10,77,000/- (2)

Answers :

1) Rs. 14,28,000/- 2) Rs. 10,77,000/-

* * *
224

15. APARTMENTS & J V RATIO

Exercise 1 :

i) In a plot of 3,000 sq.ft., 3 flats of same built up area 1,500 sq.ft each are
constructed. What is the Undivided share (UDS) of land for each flat?

ii) If 3 flats of 1,500, 800, 700 are constructed in the plot of 3,000 sq.ft., what is the
UDS of land for 1,500 sq.ft. of flat?

i) Built up area = 3 x 1,500 = 4,500 sq.ft.

Plot area = 3,000 sq.ft.
FSI = 4,500/3,000 = 1.5
UDS = 1,500 / 1.5 = 1,000 sq.ft.

ii) Built up area = 1,500 + 800 + 700= 3,000 sq.ft.

Plot area = 3,000 sq.ft.
FSI = 3,000/ 3,000 = 1
UDS for = 1,500 / 1 = 1,500 sq.ft.
1,500 sq.ft. flat

Exercise 2 :

Land rate = Rs. 5,500 / sq.ft. FSI is 2. Building unit rate is Rs. 2,000/sq.ft. Assuming the
promoter’s profit as 20%, what is the composite rate?

Prevailing land rate = Rs. 5,500 / sq.ft.

FSI = 2
Land component = 5,500 / 2 = Rs. 2,750
Building rate = Rs. 2,000
Land + building component = Rs. 4,750
Add promoter’s profit, 20% = Rs. 950
Composite rate = Rs. 5,700/-

Exercise 3 :

In an apartment building, the sum of the plinth area of all the flats is 5,000 sq.ft. Common
225

area is 500 sq.ft. The super plinth area is 5,500 sq.ft. What is percentage of common area in
the apartment building?

Sum of plinth area of all flats = 5,000 sq.ft.

Common area = 500 sq.ft.

500
Percentage of common area = x 100 = 10%
5,000

Exercise 4 :

An apartment building consists of 12 flats of super built up area 1,050 sq.ft. The net monthly
rent of a flat is Rs. 9,000. The prevailing rate of return is 2.5%. Find the
approximate value of one flat by rent capitalisation method.

Net monthly rent = Rs. 9,000

Yearly rent = Rs. 1,08,000
Rate of return = 2.5%
100
Value = 1,08,000 x
2.5
= Rs. 43,20,000/-

Exercise 5 :

In a plot of 3,600 sq.ft., an apartment building of GF + 2 is existing. 3 flats of 600, 800, 1000
are existing in one floor. What is the UDS of land for i) flat 600 sq.ft & ii) flat
1,000 sq.ft.?

Built up area = (600 + 800 + 1000) x 3 = 7,200 sq.ft.

Plot area = 3,600 sq.ft.
FSI = 7,200 / 3,600 = 2
UDS = 600 / 2 = 300 sq.ft.
= 1,000 / 2 = 500 sq.ft.

Exercise 6 :

In a plot of 8,608 sq.ft., the landlord Mr. ‘X’ intends to construct an apartment through joint
venture for a total built up area of 17,216 sq.ft. There will be 16 flats of super built up area of
1,076 sq.ft. The prevailing market rate for plot is Rs. 10,000 per sq.ft. and the guideline rate
226

is Rs. 20,000 per sq.ft. The building construction rate is Rs. 2,500/-. Assume the promoter’s
profit as 20%.

Questions :

1. What is FSI?
2. What is the undivided share (UDS) for each flat?
3. What is the composite rate?
4. What is the selling price of each flat?
5. What is Joint venture Ratio? (Promoter : Landlord)
6. Whether there is any impact of Guideline rate while fixing the composite rate and
joint venture ratio?

Data :

Extent of plot = 8,608 sq.ft.

Proposed builtup area = 17,216 sq.ft.
No. of flats proposed = 16
Built up area of each flat = 1,076 sq.ft.
Market rate of plot = Rs. 10,000/sq.ft.
Guideline rate = Rs. 20,000/sq.ft.
Building construction rate = Rs. 2,500/sq.ft.
Promoter’s profit = 20%

Calcluations :

1. Total built up area = 17,216 sq.ft.

Extent of plot = 8,608 sq.ft.
FSI 17,216 / 8,608 = 2 (1)

2. Super built up area of one flat = 1,076 sq.ft.

FSI = 2
UDS of a flat 1,076 / 2 = 538 sq.ft. (2)

3. Land component 10,000 / 2 = Rs. 5,000

Building rate = Rs. 2,500
Land rate + Building rate = Rs. 7,500
Add 20% for promoter’s profit = Rs. 1,500
Composite rate = Rs. 9,000 / sq.ft. (3)
227

4. Super built up area of one flat = 1,076 sq.ft.

Composite rate = Rs. 9,000/sq.ft.
Selling price 1,076 x 9,000 = Rs. 96,84,000/- (4)

5. Landlord’s share 10,000/2 = Rs. 5,000

Promoter’s share = Rs. 2,500
Total - Land lord + developer = Rs. 7,500
Landlord’s percentage share
5,000/7,500 = 67%
Promoter’s percentage share
2,500/7,500 = 33%
.
. . Joint venture Ratio is = 33 : 67 (5)

6. Guideline rate is meant for fixing stamp duty only and hence plays no role
while fixing the composite rate and joint venture ratio. (6)

Answers :

1) 2 4) Rs. 96,84,000/-
2) 538 sq.ft. 5) 33 : 67
3) Rs. 9,000/sq.ft. 6) Guideline rate plays no role while
fixing the composite rate and joint
venture ratio

Exercise 7 :

In a plot of 8,000 sq.ft., the promoter has constructed an apartment building of super built up
area 20,000 sq.ft. It consists of 16 flats of super plinth area 1,000 sq.ft. and 8 flats of super
plinth area of 500 sq.ft. The market rate of plot is Rs. 6,000/sq.ft. and the guideline rate is Rs.
7,500/sq.ft. The building rate is Rs. 2,500/sq.ft. The promoter’s profit is 15%.

Questions :

1. What is FSI?
2. What is UDS for 1,000 sq.ft. of flat?
3. What is UDS for 500 sq.ft. of flat?
4. What is the composite rate for the flat?
5. Assuming a common area of 4,000 sq.ft., what is the common area percentage?
6. What is the joint venture ratio?
228

Data :

Extent of plot = 8,000 sq.ft.

Total built up area = 20,000 sq.ft.
Number of flats = 16 + 8
Builtup area of each flat = 1,000 sq.ft + 500 sq.ft.
Market rate of plot = Rs. 6,000/sq.ft.

Guideline rate = Rs. 7,500/-

Building rate = Rs. 2,500/-
Promoter’s profit = 15%

Calculations :

1. Total built up area = 20,000 sq.ft.

Plot area = 8,000 sq.ft.
FSI - 20,000 / 8,000 = 2.5 (1)

1,000
2. UDS for 1,000 sq.ft. of flat = = 400 sq.ft. (2)
2.5

500
3. UDS for 500 sq.ft. of flat = = 200 sq.ft. (3)
2.5

4. Land component = 6,000/2.5 = Rs. 2,400

Building component = Rs. 2,500
Land & Building component = Rs. 4,900
Promoter’s profit 15% = Rs. 735
Composite rate = Rs. 5,635/- (4)

5. Total super built up area of all flats= 20,000 sq.ft.

Common area = 4,000 sq.ft.
Plinth area of all flats = 16,000 sq.ft.
4,000
Common area percentage =
16,000
= 25% (5)

6. Joint venture ratio

Land rate = Rs. 6,000
FSI = 2.5
229

Land component = 6,000/2.5 = 2,400

Building component = 2,500
Land & Building = 4,900
Promoter’s ratio = 2,500/4,900 = 0.51 (51%)
Landlord’s share = 2,400/4,900 = 0.49 (49%)

Joint venture Ratio - (Promoter : Lordlord) = 51 : 49 (6)

Answers :

1. 2.5 4. Rs. 5,635/-

2. 400 sq.ft. 5. 25%
3. 200 sq.ft. 6. 51 : 49

Exercise 8 :

It is an apartment building with GF + 2 floors. Mr. ‘X’ has booked a flat (1,320 sq.ft.). UDS
(Undivided share) of land is 660 sq.ft. The composite rate is Rs. 6,000/sq.ft. The land rate is
Rs. 5,000/sq.ft. Sale deed for UDS of land has been executed (Rs. 33,00,000/-) and the
builder’s agreement has been signed. Total value of the flat on completion is
1,320 x 6,000 = Rs.79,20,000/-. Mr. X has applied loan from a bank. The bank directs the
valuer to certify the value in stages (break up for Rs. 77,20,000 : Land UDS (660) =
Rs. 33,00,000/- and Building (1,320) = Rs. 46,20,000/-).

Questions :

1) Before commencement of the building construction, what is the stage value?

2) Mr. X has booked a flat (1,320 sq.ft.) in first floor. Basement completed (18%). UDS
sale deed executed. What is the stage value?

3) Mr. X has booked a flat in first floor (1,320 sq.ft.). Frame works of all floors
completed. RCC roof for all the floors has been cast. For the concerned flat in FF,
brick work has been completed, doors & windows frames have been fixed, inside
plastering of walls and ceiling finish have been completed. Percentage of works
completed is 75%. What is the stage value?

4) Construction is fully completed in all respects. Flat is fit for use. What is the value to
be certified?
230

5) Mr. Y has booked a flat in 3rd floor. RCC columns have been raised upto second
floor. What is the stage value?

6) What is the cost to be certified on completion for the purpose of income tax?

Data :

Number of floors = 3
UDS = 660 sq.ft.
Composite rate = Rs. 6,000/sq.ft.
Land rate = Rs. 5,000/sq.ft.
Sale deed for 660 sq.ft. of UDS = Rs. 33,00,000/-
Value of flat on completion = Rs. 79,20,000/-

Calculations :

1) UDS of land has been executed.

.
. . the value = 660 x 5,000 = Rs. 33,00,000/- (1)

2) UDS 660 x 5,000 = Rs. 33,00,000

Building - 0.18 x 46,20,000 = Rs. 8,31,600
Total stage value = Rs. 41,31,600/- (2)

3) UDS of land = 660 x 5,000 = Rs. 33,00,000

Building = 0.75 x 46,20,000 = Rs. 34,65,000
Total stage value = Rs. 67,65,000/- (3)

4) Composite rate = Rs. 6,000 / sq.ft.

Built up area = 1,320 sq.ft.
Value on completion = 1,320 x 6,000
Value to be certified = Rs. 79,20,000/- (4)

5) UDS of land = 660 x 5,000 = Rs. 33,00,000

Value upto basement (18%) = Rs. 8,31,600
Total stage value = Rs. 41,31,600/- (5)

6) The cost to be certified for the = Rs. 79,20,000/- (6)

purpose of income tax
231

Answers :

1) Rs. 33,00,000/- 4) Rs. 79,20,000/-

2) Rs. 41,31,600/- 5) Rs. 41,31,600/-
3) Rs,. 67,65,000/- 6) Rs. 79,20,000/-

Exercise 9 :

It is a joint venture proposal. The landlord is having a plot of 8,250 sq.ft. and he wishes to
construct an apartment for an FSI of 2. The land rate is Rs. 5,000/sq.ft. A promoter has
approached the landlord for developing an apartment for which the unit rate of
construction is Rs. 2,500/-.

Questions:

1. What will be the promoter’s share?

2. What will be the landlord’s share?

Data :

Proposal for = Joint venture

Plot area owned by landlord = 8,250 sq.ft.
FSI proposed = 2
Land rate = Rs. 5,000/sq.ft.
Unit rate of construction = Rs. 2,500/-

Calculations :

Land rate = Rs. 5,000 / sq.ft.

FSI = 2
Land component = 5,000 / 2 = Rs. 2,500
Building rate = Rs. 2,500
Land + building = Rs. 5,000

2,500
Promoter’s share = x 100 = 50% (1)
5,000

2,500
Landlord’s share = x 100 = 50% (2)
5,000
232

Answers :

1) 50% 2) 50%

Exercise 10 :

An apartment building consisting of 70 flats of equal super built up area of 1,000 sq.ft. each is
proposed to be constructed on a land of 35,000 sq.ft. 10% of the area of land has to be left as
OSR (Open Space Reservation) and separate deed has to be executed in favour of the
corporation.

Question :

1) What is the UDS for each flat?

Data :

Number of flats proposed = 70 Nos.

Built up area of each flat = 1,000 sq.ft.
Land area = 35,000 sq.ft.
OSR = 10%

Calculations :

Super built up area of one flat = 1,000 sq.ft.

Super built up area of seventy flats = 70,000 sq.ft.
Extent of land = 35,000 sq.ft.
FSI : 70,000 / 35,000 = 2
Percentage to be left for OSR = 10%
Area of land to be left for OSR = 3,500 sq.ft.
Net extent of land left with the
= 31,500 sq.ft.
Promoter 35,000 - 3,500
FSI now : 70,000 / 31,500 = 2.22
UDS for 1,000 sq.ft. of flat (31,500/70) = 1,000 / 2.22
= 450 sq.ft.

Answer :

1. 450 sq.ft.
233

Exercise 11 :

Mr. ‘X’ is having a commercial building of 20,000 sq.ft. situated in a plot of 10,000 sq.ft. He
wants to sell one shop of plinth area 1,000 sq.ft. to Mr. ‘Y’. He approaches a valuer to suggest
him the UDS of land of the shop for the purpose of executing a sale deed in favour of ‘Y’. The
common area percentage is 10%.

Question :

1. What is the UDS of land?

Data :

Plot area = 10,000 sq.ft.

Built up area of building = 20,000 sq.ft.
Plinth area of 1 shop = 1,000 sq.ft.
Common area of 1 shop = 10%

Calculations :

Building area = 20,000 sq.ft.

Plot area = 10,000 sq.ft.
FSI = 20,000 / 10,000 = 2
Plinth area of shop = 1,000
Common area percentage = 10%
Super builtup area = 1,000 x 1.1 = 1,100 sq.ft.
Super builtup area
UDS =
FSI
1,100
= = 550 sq.ft.
2

Answer :

1. 550 sq.ft.

Exercise 12 :

An apartment of built up area of 25,000 sq.ft. is proposed to be constructed in a land of

12,500 sq.ft. Prevailing market rate of land is Rs. 10,000/sq.ft. Unit rate of construction is Rs.
3,000/sq.ft. Assume the profit of the promoter as 25%.
234

Question :

1. What is the composite rate of the flat?

Data :

Total built up area = 25,000 sq.ft.

Land area = 12,500 sq.ft.
Land rate = Rs. 10,000/-
Rate of construction = Rs. 3,000/sq.ft.
Promoter’s profit = 25%

Calculations :

Built up area = 25,000 sq.ft.

Plot area = 12,500 sq.ft.
25,000
FSI = = 2
12,500
Prevailing market rate of plot = Rs. 10,000
Land rate 10,000
Land component = =
FSI 2

= Rs. 5,000

Building rate = Rs. 3,000 / sq.ft.

Land & Building (5,000 + 3,000) = Rs. 8,000
Add promoter’s profit 25% = Rs. 2,000
Composite rate = Rs. 10,000/-

Answer :

1. Rs. 10,000/-

Exercise 13 :

A landlord has a plot of 15,000 sq.ft. A promoter has approached the landlord for a joint
venture stating that he wishes to construct an apartment building for 30,000 sq.ft. The prevail-
ing market rate of land is Rs. 14,000/sq.ft. and the guideline rate is
Rs. 24,000/sq.ft. The construction cost is Rs. 3,000/sq.ft.
235

Question :

1. What is the Joint Venture ratio (Promoter : Landlord)?

Data :

Plot area = 15,000 sq.ft.

Proposed building area = 30,000 sq.ft.
Land rate = Rs. 14,000/-
Guideline rate = Rs. 24,000/-
Construction cost = Rs. 3,000/-

Calculations :

Plot area = 15,000

Building area = 30,000
30,000
FSI = = 2
15,000
Land rate = Rs. 14,000
FSI = 2
Proportionate land rate for the
purpose of joint venture 14,000
= = Rs. 7,000
(landlord) 2

Building rate (Promoter) = Rs. 3,000

Landlord + Promoter = Rs.10,000
3,000
Promoter’s share = x 100 = 30%
10,000
7,000
Landlord’s share = x 100 = 70%
10,000

... Ratio - Promoter : Landlord = 30 : 70

Answer :

1. 30 : 70

* * *
236

16. MISCELLANEOUS TOPICS & SOME MORE EXERCISES

Exercise 1 :

What is the amount of Rs. 5,000 at the end of 5 years @ 5% compound interest per annum?

r n
Amount A = P (1+ )
100
5 5
= 5,000 ( 1 + )
100

= 5,000 x (1.05)5
= 5,000 x 1.276
= Rs. 6,380/-

Exercise 2 :

In 2013, a valuer valued a residential property in a mofusil town for Rs. 68.56 lakhs. Assuming
an annual escalation of 10% per year, what will be the value of the property as on 2018 by
applying the formula?

P = Rs. 68.56 lakhs

r = 10%
n = 2018 - 2013 = 5 years

r n
Amount A = P (1+ )
100
10 5
= 68.56 ( 1 + )
100

= 68.56 x (1.1)5
= 68.56 x 1.6105
= Rs. 110.42 lakhs

Exercise 3 :

Mr. X is selling 2,400 sq.ft. of plot to Mr. Y for a mutually agreed amount of Rs. 24,00,000. But
in sale deed, they mention as Rs. 12,00,000/-. Guideline rate is Rs. 510/-. What is the
intrinsic value?, What is the agreement value? & What is stamp duty value?

a. Intrinsic value = Rs. 24,00,000/-

b. Agreement value = Rs. 12,00,000/-
c. Stamp duty value = 2,400 x 510
= Rs. 12,24,000/-

* * *
237

Pages 237 - 264

PART - IV

ONE MARK CASE STUDIES - 52 Nos.

238

This page is kept vacant intentionally.

239

Part - IV

ONE MARK CASE STUDIES

Exercise 1 : (IBBI)

A machine was purchased for Rs. 1,00,000/- @ 15% depreciation of SLM. What is the writ-
ten down value after 2 years?

a) Rs. 70,000/- b) Rs. 80,000/-

c) Rs. 60,000/- d) Rs. 90,000/-

Depreciation for 1 year by = 1,00,000 x 0.15

Straight line method
Depreciation amount = Rs. 15,000/year

Depreciated value after 1 year = 1,00,000 - 15,000

= Rs. 85,000/-

Depreciated value after the = 85,000 - 15,000

second year
= Rs. 70,000/-

Written down value after 2 years = Rs. 70,000/-

Ans ‘a’

Exercise 2 : (IBBI)

A property has a net income of Rs. 30,000/-. One appraiser decides to use a 12 percent
capitalisation rate, while a second appraiser uses a 10 percent rate. What is the
difference in appraisal value of the two valuers?

a) Rs. 50,000/- b) Rs. 60,000/-

c) Rs. 40,000/- d) Rs. 70,000/-
240

First appraiser :

100
Capitalised value = 30,000 x = Rs. 2,50,000/-
12

Second appraiser :

100
Capitalised value = 30,000 x = Rs. 3,00,000/-
10

By using a higher rate of return, the value is decreased by Rs. 50,000/-.

Ans ‘a’

Exercise 3 : (IBBI)

The net income was reported at Rs. 21,000/- and the property was sold for Rs. 3,00,000.
What capitalisation rate is applied to this sale?

a) 5% b) 8%
c) 6% d) 7%

Capitalised value = Rs. 3,00,000/-

Net income = Rs. 21,000/-
Net income
Capitalised value = x 100
X
21,000
3,00,000 = x 100
X
21,000 x 100
X =
3,00,000
= 7%

Ans ‘d’

Exercise 4 : (IBBI)

A mobile phone was purchased for Rs.50,000/-. Its salvage value is Rs. 10,000. Total life
time used 60,000 hours. Used time 20,000 hours. What is the depreciation of the cell phone?
241

a) Rs. 20,000/- b) Rs. 3,333/-

c) Rs. 13,333/- d) Rs. 23,333/-

Phone purchased for = Rs. 50,000/-

Salvage value = Rs. 10,000/-
Net value = Rs. 40,000/-
Used time = 20,000 hours
Total life = 60,000 hours
20,000 1
Depreciation = =
60,000 3
40,000
Depreciation value =
3
= Rs. 13,333/-.

Ans ‘c’

Exercise 5 :

A Contractor took a loan of Rs. 36,00,000/- from a bank for construction of modern building 2
years back. He has to repay the loan at the Interest of 10%. If the sale of the property is yet to
take one year, calculate the amount to be paid by the contractor?

a) Rs. 46,00,000 b) Rs. 48,91,600

c) Rs. 49,00,000 d) Rs. 47,91,600

Amount borrowed = Rs. 36,00,000

Amount to which Re. 1/- will = (1 + i)n
accumulate @ 10% in 3 years
= (1 + 0.1)3
= 1.331

Amount to be repaid by the = (1.331 x 36,00,000)

contractor
= Rs. 47,91,600/-

Ans ‘d’

Exercise 6 :

A promoter purchased a residential property for Rs. 60,00,000/- and immediately carried out
certain interior decorations works for Rs. 20,00,000/-.
242

He intends to dispose of the property at the end of 4 years. Calculate the cost for Purchaser
if he expects a return of 12% on his investment.

a) Rs. 1,25,92,000 b) Rs. 1,35,92,000

c) Rs. 1,20,00,000 d) Rs. 1,55,63,000

Initial investment = 60,00,000 + 20,00,000

= 80,00,000

Amount to which Re. 1/- will = (1 + 0.12)n

accumulate @ 12% in 4 years
= (1 + 0.12)4
= 1.574

Cost for the purchaser = 1.574 x 80,00,000

= Rs. 1,25,92,000/-

Ans ‘a’

Exercise 7 :

An Investor has the right to receive Rs. 25,00,000/- from a property after a period of
9 years. Assuming the rate of interest of 8% Find out the amount for which the investor will be
ready to relieve his future right over the property.

a) Rs. 13,50,000 b) Rs. 12,50,000

c) Rs. 14,00,000 d) Rs. 15,00,000

Amount receivable in 9 years time = Rs. 25,00,000/-

1
P.V. of Re. 1/- in 9 years @ 8% =
(1 + i)n
1
=
(1 + 0.08)9
= 0.5
P.V. (Present value) = 25,00,000 x 0.5
= Rs. 12,50,000/-

Ans ‘b’
243

Exercise 8 :

A property owner is able to save Rs 50,000/-per year from the net income of his property and
he invest this amount each year to earn interest at 7%. Find out the amount which will be
available at the end of 18 years.

a) Rs. 18,00,000 b) Rs. 16,00,000

c) Rs. 17,00,000 d) Rs. 20,00,000

Annual saving = Rs. 50,000/-

Amount Re. 1/- P.A. at 7% for 18 years
Formula (1 + i)n - 1 (1 + 0.07 )18 - 1
APA = =
i 0.07
2.3799
=
0.07
= 34

Total amount available after 18 years :

= 34 x 50,000
= Rs. 17,00,000/-

Ans ‘c’

Exercise 9 :

A Promoter at Chennai constructed 4 flats of 1700, 1400, 1300, 1600 Sq.ft. in a plot area of
4000 Sq.ft.

(i) What is the FSI?

a) 1.2 b) 1.3 c) 1.6 d) 1.5

(ii) What is UDS of land for the flat of 1600 Sq.ft.?

a) 1066.7 Sq.ft. b) 1055 Sq.ft.

c) 1000 Sq.ft. d) 1006 Sq.ft.

Area of the site = 4,000 sq.ft.

Built up area = 6,000 sq.ft.
(1,700 + 1,400 + 1,300 + 1.600)
244

Total built up area

FSI =
Area of the site
6,000
= = 1.5
4,000
Flat area 1,600
UDS = =
FSI 1.5
= 1066.7 sq.ft.
i) Ans ‘d’
ii) Ans ‘a’

Exercise 10 :

A Real estate promoter has approached the landlord for joint venture development of an
apartment for which the unit rate of construction is Rs. 3000. The land rate is
Rs. 6000/Sq.ft. FSI = 2, What will be the joint venture ratio of promoter & Landlord?

a) 35 : 65 b) 40 : 60 c) 50 : 50 d) 37 : 67

FSI = 2
Land rate = Rs. 6,000/sq.ft.
Land component (6,000/2) = Rs. 3,000
Building rate = Rs. 3,000
Land + Building = Rs. 6,000/sq.ft.
3,000
Landlord’s share = x 100
6,000
= 50%

Ans ‘c’

Exercise 11 :

Mr. ‘X’ acquired a property at Coimbatore on 06.09.1972 for 2.25 lakhs. Fair market value of
the property as on 1.4.81 is 9.50 lakhs. The property was sold on 25.11.2014 for a sale
consideration of 105 lakhs. What is the Taxable capital gain? C.I.I. for 1981 & 2014 are 100
& 1,024 respectively.

a) Rs. 6,62,000/- b) Rs. 5,00,000/-

c) Rs. 7,72,000/- d) Rs. 8,00,000/-

1,024
Indexed cost of acquisition= 9,50,000 x
100
245

= Rs. 97,28,000/-

Taxable capital gain = 1,05,00,000 - 97,28,000

= Rs. 7,72,000/-

Ans ‘c’

Exercise 12 :

A Businessman acquires a property at Tiruchirappalli on 24.12.2010 for Rs. 95 lakhs. The

same was sold for Rs. 130 lakhs in 2014. What is the capital gain? C.I.I. for 2010 & 2014 are
711 & 1,024 respectively.

a) 5.82 L b) 7.82 L
c) 8.50 L d) Capital Loss

1,024
Indexed cost of acquisition = 95,00,000 x
711
= Rs. 1,36,82,000/-
Taxable capital gain = 1,30,00,000 - 1,36,82,000
= Negative
= Capital loss

Ans ‘d’

Exercise 13 :

Built-up area of an apartment building at Chennai 9000 Sq.ft. is proposed to be constructed

in a site of 4500 Sq.ft. Prevailing market rate of land is Rs 6000/Sq.ft. Unit rate of construction
is Rs 2800/Sq.ft. Promoter’s profit = 20% What is the composite rate of the flat?

a) 7960 Sq.ft. b) 6500 Sq.ft.

c) 6960 Sq.ft. d) 7600 Sq.ft.

Built up area = 9,000 sq.ft.

FSI = 9,000 / 4,500 = 2
Prevailing market rate of land = Rs. 6,000/sq.ft.
Land rate 6,000
Land component = =
FSI 2
= 3,000/sq.ft.
246

Building rate = Rs. 2,800/sq.ft.

Land + Building = 3,000 + 2,800
= Rs. 5,800
Add 20% profit = Rs. 1,160
Composite rate = Rs. 6,960/sq.ft.

Ans ‘c’

Exercise 14 :

A 600 sq.ft. of shop building at T. Nagar Chennai is occupied by a tenant. The net monthly rent
is Rs. 45,000/-. Find out the value of the property by R.C.Method by adopting a rate of return
6%

a) 85,00,000/- b) 95,00,000/-
c) 90,00,000/- d) 80,00,000/-

Monthly rent = Rs. 45,000/-

Yearly rent = 12 x 45,000
= Rs. 5,40,000/-
Rate of return = 6%
100
Value of the property = 5,40,000 x
6
= Rs. 90,00,000/-

Ans ‘c’

Exercise 15 :

Total extent of a site is 0.162 Hectare. Total built-up area of the building is 26,136 sq.ft. What
is the FSI?

a) 1.2 b) 1.5 c) 2.0 d) 1.0

Total built up area

FSI =
Area of the site
26,136 x 0.0929 26,136
= or
0.162 x 10,000 0.162 x 2.47 x 43,560
= 1.5

Ans ‘b’
247

Exercise 16 :

An apartment building at Tiruchirappalli consists of 4-floor, eight flat of 1125 Sq.ft. at each
floor. Area of the site = 2230 Sq.m. What is the UDS of land for each flat?

a) 1500 Sq.ft. b) 1200 Sq.ft.

c) 600 Sq.ft. d) 750 Sq.ft.

4 x 8 x 1,125
FSI =
2,230 x 10.76
= 1.50

1,125
UDS =
1.5
= 750 sq.ft.

Ans ‘d’

Exercise 17 :

A Contractor took a loan Rs 40,00,000/-from the bank, at the rate of Interest 9%. What is the
amount to be paid by the contractor at the end of 4th year?

a) 40.8 L b) 56.48 L c) 60.8 L d) 56.8 L

Amount to which Re. 1/- will accumulate at 9% in 4 years

= (1 + r)n
= (1 + 0.9)4
= 1.412

Amount to be repaid by contractor = (1.412 x 40,00,000)

= Rs. 56,48,000/-

Ans ‘b’

Exercise 18 :

An immovable property yields a net annual income of Rs 60,000. The income is expected
to continue for next 99 years. What is the present value of the property if the rate of interest
is 6% p.a?
248

a) Rs 8,00,000 b) Rs 10,00,000
c) Rs 12,00,000 d) Rs 15,00,000

Year’s purchase (Y.P.) = 100 / R

= 100 / 6
= 16.67
Present value = Net annual income x Y.P.
= 60,000 x 16.67
= Rs. 10,00,200/-
say Rs. 10,00,000/-

Ans ‘b’

Exercise 19 :

An Investor has invested an amount of Rs 10,00,000 in purchasing an urban site on taking a

loan of 9% compound rate of interest from a bank. What amount he will have to repay to the
bank after 3 years?

a) 11,95,000 b) 13,95,000
c) 12,50,000 d) 12,95,000

i = 0.09
n = 3
So, the amount to which his loan is accumulated
= 10,00,000 x (1 + i)n
= 10,00,000 x (1 + 0.09)3
= 10,00,000 x 1.295
= Rs. 12,95,000/-

Ans ‘d’

Exercise 20 :

5 Years back Mr.Sanjay had constructed a house at an intrinsic cost of Rs 80,00,000/- and he
has incurred an expenditure 2 years back of Rs 15,00,000/- for construction of a boundary
wall around that house. What is the total accumulated cost of his investment today at a
compound interest of 15% per annum?

a) 160.75 L b) 180.75 L
c) 190.75 L d) 165.90 L
249

i = 0.15
n = 5
Accumulated cost of his house = 80,00,000 x (1.15)5
= Rs. 1,60,91,000 (A)

Accumulated cost of his = 15,00,000 x (1.15)2

boundary wall
= Rs. 19,84,000 (B)

Total cost of his investment A + B = Rs. 1,80,75,000/-

Ans ‘b’

Exercise 21 :

A framed structure building is at Coimbatore. Age is 16 years. Assume the life is 70 years.
What is the depreciation by constant percentage method, if the depreciation is 1.5%

a) 29.5% b) 31.5%
c) 24.5% d) 21.5%

r = 1.5%
n = 16
r n
Depreciation = 1 - (1 - )
100
1.5 16
= 1 - (1 - )
100
= 1 - (0.785)
= 0.215 or
= 21.5%

Ans ‘d’

Exercise 22 :

A promoter at Chennai expects 15% profit. Building unit rate = Rs 2,500/Sq.ft. FSI is 2. Land
rate is Rs 6,000/Sq.ft. What will be the composite rate?

a) Rs. 6,325 b) Rs 5,325

c) Rs 7,325 d) Rs 5,900
250

FSI = 2
Prevailing land rate = Rs. 6,000/sq.ft.
Land component = 6,000 / 2 = Rs. 3,000/-
Building rate = Rs. 2,500/sq.ft.
Land + Building = Rs. 5,500/sq.ft.
Add, profit 15% = Rs. 825/sq.ft.
Composite unit rate = Rs. 6,325/sq.ft.

Ans ‘a’

Exercise 23 :

It is a load bearing residential building at Chennai. Ground floor : 20 years old, First Floor : 10
years old, Plinth area of Ground floor : 1,000 sq.ft. First floor = 800 sq.ft. Assume salvage
value is 10% Life of the building is 60 years. What is the depreciated value of the first floor
building? Replacement cost of ground floor : 2,000/sq.ft. & first floor : 1,700/sq.ft.

a) 8.52 L b) 9.52 L
c) 4.08 L d) 13.60 L

20
Ground floor depreciation = x (100 - 10)
60
= 30%
Replacement value of first floor = 800 x 1,700
building
= Rs. 13,60,000/-
Depreciation value of FF = 13,60,000 x 0.30
= Rs. 4,08,000/-
Depreciated value of the first floor = 13,60,000 - 4,08,000
building
= Rs. 9,52,000/-

Ans ‘b‘

Exercise 24 :

A newly constructed apartment building at Chennai having block “A” & block “B”, consists of
30 flats in each block of 1200Sq .ft. equal super Built-up area of each flat. Area of the land :
48,000 sq.ft. Assume 10% land of OSR (Open space reserve). What is the UDS of the each
flat?
251

a) 820 Sq.ft. b) 620 Sq.ft.

c) 720 Sq.ft. d) 1100 Sq.ft.

Super built up area of block A & B = 2 x 30 x 1,200

= 72,000 sq.ft.
Extent of land = 48,000 sq.ft.
FSI = 72,000 / 48,000 = 1.5
OSR % = 10%
Area of the land to be left for OSR = 4,800 sq.ft.
Net extent of land = 48,000 - 4,800
= 43,200 sq.ft.
FSI now = 72,000 / 43,200 = 1.6667
UDS = 1,200 / 1.667 = 719.85,
say 720 sq.ft.

Ans ‘c’

Exercise 25 :

A businessman is having a commercial building at Coimbatore. It consists of 5 shops of

equal plinth area 1200 Sq.ft./each shop. He proposed to sell the 2 shops. What will be the
UDS of land for which he has to mention in the sale deed? Plot area is 3,000 sq.ft.

a) 1200 Sq.ft. b) 1280 Sq.ft.

c) 1480 Sq.ft. d) 1300 Sq.ft.

Total built up area = 5 x 1,200

= 6,000 sq.ft.
Plot area = 3,000 sq.ft.
FSI = 6,000 / 3,000 = 2
Plinth area of 2 shops = 2 x 1,200
= 2,400 sq.ft.
UDS = 2,400 / 2
= 1,200 sq.ft.

Ans ‘a’

Exercise 26 :

An apartment building at Chennai, consists of 4 floors, each floor built-up area is 2,400 sq.ft.
Area of the plot is 4,800 sq.ft. What is the plot coverage?
252

a) 60% b) 70%
c) 50% d) 40%

Built up area of GF
Plot coverage = x 100
Area of the site
2,400
= x 100
4,800
= 50%

Ans ‘c’

Exercise 27 :

The net monthly rent of a Ground floor residential building of 1300 Sq.ft. is Rs. 18,000, and Rs
15,000 for First floor building of same area. Find the approximate value of the property by
rent capitalization method by adopting a rate of return as 4%?

a) 89 L b) 79 L
c) 69 L d) 99 L

Monthly rent = Rs. 18,000 + 15,000

= Rs. 33,000/-
Yearly rent = 12 x 33,000
= Rs. 3,96,000
Rate of return = 4%
Value = 3,96,000 x (100 / 4)
= Rs. 99,00,000/-

Ans ‘d’

Exercise 28 :

An apartment building consists of 8 flats of super built-up area : 1,200 sq.ft. The gross monthly
rent of each flat is Rs. 9,000. Outgoing are 15% of the gross rent. The prevailing rate of return
is 3.5%. Find the approximate value of a flat by rent capitalization method?

a) 219.8 L b) 229.8 L
c) 209.8 L d) 240 L

Gross monthly rent = 8 x 9,000

= Rs. 72,000
253

Outgoings 15% (-) = Rs. 10,800

Net monthly rent = Rs. 61,200
Yearly rent = 12 x 61,200
= Rs. 7,34,400
Rate of return = 3.5%
Value = 7,34,400 x (100 / 3.5)
= Rs. 2,09,82,857/-

Ans ‘c’

Exercise 29 :

A 9,000 sq.ft. of factory building at Tiruchirappalli is situated in the 2 Acres of land. Age of the
building is 15 years. Salvage value 25%. Replacement rate of building is Rs. 900/sq.ft. Find
the salvage value & depreciated value of the building? Life - 30 years.

(i) a) 18.25 L b) 20.25 L

c) 25 L d) 23.25 L

(ii) a) 40.63 L b) 20.25 L

c) 50.63 L d) 60.63 L

Plinth area = 9,000 sq.ft.

Replacement rate = Rs. 900/sq.ft.
Replacement value = Rs. 81,00,000
Age = 15 years
Life = 30 years
Salvage value = 25%
Depreciation = (15/30) x 75 = 37.5%
Salvage value = 0.25 x 81,00,000
= Rs. 20,25,000/-
Depreciated value of the building = 0.625 x 81,00,000
= Rs. 50,63,000/-

i) Ans ‘b’ ii) Ans ‘c’

Exercise 30 :

A Commercial property at Chennai was valued by a valuer for Rs 95L during the year 2009.
What will be the value of the property as on 2017 by using the formula? Assume 12% escalation
per year.
254

a) 235 L b) 245 L
c) 225 L d) 200 L

r n
Amount = P(1+ )
100
12 8
= 95,00,000 ( 1 + )
100

= 95,00,000 (2.4759)
= Rs. 2,35,00,000/-

Ans ‘a’

Exercise 31 :

Mr. “Y” constructed a load bearing building of 232 sq.mt during the year 1999. Area of the plot
is 5,000 sq.ft. What is the depreciation value & value of the property in the year 2018 for bank
loan purpose? Assume life : 60 years, Salvage value : 10%. Land rate -
Rs. 2,300/-. Replacement rate of building is Rs. 2,000/sq.ft.

(i) Depreciation value

a) 14.23 L b) 24.23 L
c) 18.23 L d) 10.23 L

(ii) Value of the property

a) 14.71 L b) 150.71 L
c) 165 L d) 160.71 L

Extent of land = 5,000 sq.ft.

Land rate = Rs. 2,300/sq.ft.
Land value = 5,000 x 2,300
= Rs. 1,15,00,000/-
Builtup area = 232 sq.m. = 2,497 sq.ft.
Unit rate of construction = Rs. 2,000/sq.ft.
Replacement value = 2,497 x 2,000
= Rs. 49,94,000/-
Age 2018 - 1999 = 19 years
Life = 60 years
Depreciation percentage = (19/60) x 90
= 28.5%
255

Depreciation value = 0.285 x 49,94,000

= Rs. 14,23,000

Present value of the building = 49,94,000 - 14,23,000

= Rs. 35,71,000/-
Total value of the property = 1,15,00,000 + 35,71,000
= Rs. 1,50,71,000/-

i) Ans ‘a’
ii) Ans ‘b’

Exercise 32 :

An investor purchased a plot of land for Rs 6L, and spent Rs 75,000/- towards stamp duty
and brokerage charges. He started construction of house on plot after 3 years. Calculate the
amount that is blocked up in land investment after 3 years on the basis of purchase price of
land and other expenses by considering 7% compound rate of interest?

a) 9.27 L b) 7.27 L
c) 8.27 L d) 9.10 L

Principal sum = 6,00,000 + 75,000

= Rs. 6,75,000/-
Value of land (A) after 3 years = 6,75,000
7 3
= (1 + )
100
= 6,75,000 x 1.225
= Rs. 8,27,000/-

Ans ‘c’

Exercise 33 :

A residential building at Chennai yields a net rental income (Annuity) of 2.4L/year. What is the
capitalised value of the property at 7% rate of interest?

a) 39.29 L b) 34.29 L
c) 43.29 L d) 31.29 L

Y.P. = 100 / R
256

= 100 / 7 = 14.286
Present value of the building = 2,40,000 x 14.286
= Rs. 34,28,640/-
say Rs. 34,29,000/-

Ans ‘b’

Exercise 34 :

Ground floor is a load bearing structure of age 30 years. Life - 60 years. First floor is a framed
structure with independent foundation. Age is 10 years. Life is 80 years. What is the depreciation
for FF, assuming a salvage value of 10%.

a) 11.25% b) 45%
c) 33.75% d) 30%

Ground floor :

30
Depreciation = x 90 = 45%
60

First floor :

10
Depreciation = x 90 = 11.25%
80

Ans ‘a’

Exercise 35 :

Lessee receive an income of Rs. 30,000 per annum. He pays Rs. 16,000/- rent to
landlord. If the lessee receives a rent of 8% return, how much the landlord will expect his
return.

a) 0.09 b) 0.07
c) 0.01 d) 0.10

The return of lessee is (atleast) 1% more than the rate of return of lessor.

Hence the rate of return for lessor is 7%.

Ans ‘b’
257

Exercise 36 :

The lessor receives a ground rent of Rs. 50,000/- from the lessee. The lessee is going to
construct a building and let it out. If the lessor receives a rate of return of 6% from his lessee,
what will be the rate of return that can be expected by the lessee.

a) 6% b) 4%
c) 5% d) 7%

The lessee expects a rate of return of atleast 1% more than the rate of return of
lessor. Hence the rate of return is 7%.

Ans ‘d’

Exercise 37 :

Plot area is 4,800 sq.ft., building 2,400 sq.ft., age is 20 years, life is 60 years, salvage value
is 15%, land rate is Rs. 1,200/sq.ft., replacement rate of building is Rs. 2,100/sq.ft. Valuation
is for security to bank. What is the forced sale value assuming the reduction factor is 15%.

a) Rs. 78,94,800/- b) Rs. 92,88,000/-

c) Rs. 1,08,00,000/- d) Rs. 91,80,000/-

Land value = 4,800 x 1,200

= Rs. 57,60,000/-
Building depreciation = (20/60) x 90
= 30%
Depreciated value of building = 0.7 x 2,400 x 2,100
= Rs. 35,28,000/-
Value of land & building = Rs. 92,88,000/-
57,60,000 + 35,28,000
Forced sale value = 0.85 x 92,88,000
= Rs. 78,94,800/-

Ans ‘a’

Exercise 38 : (IBBI)

Total age of this building is 4 years. After four years, the depreciated value is equal to 24% of
the cost. Find out the percentage of depreciation (near to answer) by WDV method.
258

a) 24 b) 25
c) 30 d) 35

Method 1 :

r n
Formula A = P (1 - )
100

Depreciated value = Replacement cost x Depreciation

= Replacement cost x 24%

r 4 24 4
a) For 24% (1 - ) = (1 - )
100 100

76 76 76 76
= x x x
100 100 100 100
= 0.3336 = 33%

25 4
b) For 25% = (1 - )
100

75 75 75 75
= x x x
100 100 100 100
= 0.3164 = 32%

30 4
c) For 30% = (1 - )
100

70 70 70 70
= x x x
100 100 100 100
= 0.2401 = 24%

35 4
d) For 35% = (1 - )
100

65 65 65 65
= x x x
100 100 100 100
= 0.1785 = 18%

The answer is 30% - ‘c’

259

Method 2 :

24% 25% 30% 35%

Value 100 100 100 100

Less depreciation - 24 - 25 - 30 - 35

After 1 year 76 75 70 65
Less depreciation - 18.24 - 18.75 - 21 - 22.75

After 2 years 57.76 56.25 49.0 42.25

Less depreciation - 13.86 - 14.06 -14.7 -14.79

After 3 years 43.90 42.19 34.3 27.46

Less depreciation - 10.54 - 10.55 - 10.3 - 9.61

After 4 years 33.36 31.64 24 17.85

The answer is 30% - ‘c’.

Exercise 39 :

Total age of this building is 3 years. After 3 years, the depreciated value is equal to 34.30% of
the cost. Find out the percentage of depreciation by WDV method.

a) 15 b) 20 c) 25 d) 30

15% 20% 25% 30%

Value 100 100 100 100

Less depreciation - 15 - 20 - 25 - 30

After 1 year 85 80 75 70
Less depreciation - 12.75 - 16 - 18.75 - 21

After 2 years 72.25 64 56.25 49

Less depreciation - 10.84 - 12.80 - 14.06 -14.70

After 3 years 61.41 51.20 42.19 34.30

The answer is 30% - ‘d’.

260

Exercise 40 :

A building is 40 years old. It has a total life span of 80 years. Current replacement cost of the
building is INR 40,00,000. The salvage value of the materials of the building at the end of the
life is 10% of CRC. What is the depreciation in percentage today?

a) 55% b) 45%
c) 35% d) 65%

Age = 40
Life = 80
Salvage value = 10%
40
Depreciation = x 90 = 45%
80

Answer is ‘b’

Exercise 41 : (IBBI)

A machine was purchased of Rs. 18,000/- before 2 years. It is sold for Rs. 16,000/- consid-
ering 10% depreciation (of Rs. 18,000/-) per annum. The machinery was sold for

a) 2,000 less b) 1,600 less

c) 1,600 profit d) No loss and no gain

Purchased cost two years back = 18,000

Less 10% depreciation = 1,800
Value after one year = 16,200
Less 10% depreciation = 1,800
Value after two years = 14,400
Sold for = Rs. 16,000

... Profit = 16,000 - 14,400 = Rs. 1,600

Answer is ‘c’

Exercise 42 : (IBBI)

The property value is Rs. 1,00,000, expected salvage is Rs. 2,000 after 5 years, what is rate
of depreciation?
261

a) 20 b) 19.60 1,00,000 - 2,000

c) 30 d) 15 5
98%
5 = 19.6%

Ans : b

Exercise 43 : (IBBI)

A mobile phone was purchased for Rs. 60,000/-. It is salvage is Rs. 10,000/-. Total life time
use 40,000 hours. Used time 20,000/-. What is the depreciation of the cell phone?

a) Rs. 12,000/- b) Rs. 15,000/-

c) Rs. 18,000/- d) None of above

60,000 - 10,000 20,000

Ans = 1 x 40,000
= Rs. 25,000/-

Ans : d

Exercise 44 : (IBBI)

Cost of acquisition is Rs. 8,000/-. Salvage value is Rs. 1,000/-. Life of the machine is 3 years.
For WDV, what is the depreciation rate?
8,000
-50% 4,000
a) 50% b) 25% 4,000
-50% 2,000
c) 66% d) 100% 2,000
-50% 1,000
Salvage value 1,000

Ans : a

Exercise 45 : (IBBI)

The net income was reported at Rs. 24,000/- and the property sold for Rs. 3,00,000. What
capitalisation rate is applied to this sale?
24,000 x 100
Ans = 3,00,000
a) 7% b) 8%
c) 9% d) 10%

Ans : b
262

Exercise 46 : (IBBI)

The age of the building is 20 years. The life of the building is 40 years. The replacement cost
of the building as on 2018 is Rs. 5,000/-. The salvage value is Rs. 500/-. Using straight line
method, what is depreciated rate?
5,000 - 500 20
1 x 40
a) Rs. 2,250/- b) Rs. 2,500/-
c) Rs. 2,750/- d) Rs. 3,000/-

Ans : c

Exercise 47 : (IBBI)

A person seeks an income of Rs. 1,000 per annum from an investment. He wishes this is to
be an 8% return on his investment. What is the amount he has to invest?

a) Rs. 1,000/- b) Rs. 80/-

c) Rs. 12,500/- d) Rs. 10,000/-

Annual income = Rs. 1,000

Rate of return = 8%
1,000
Capital value = x 100
8
= Rs. 12,500/-

Ans : c

Exercise 48 : (IBBI)

What would be the written down value of a machine purchased at the cost of Rs. 30,000/-
after 3 years of service life at 5% rate of depreciation?

a) Rs. 26,720/- b) Rs. 25,720/-

c) Rs. 27,720/- d) Rs. 28,720/-

Cost = Rs. 30,000

Less 5% = 1,500
WDV - 1st year = 28,500
Less 5% = 1,425
WDV - 2nd year = 27,075
263

Less 5% = 1,355
WDV - 3rd year = 25,720

Ans : b

Exercise 49 : (IBBI)

A machine was purchased 2 years back at cost of Rs. 4,00,000/-. Total life is 20 years.
Salvage value = 10%. What is the depreciated present value after 2 years

a) Rs. 3,74,000/- b) Rs. 3,54,000/-

c) Rs. 3,64,000/- d) Rs. 3,44,000/-

Purchased cost = Rs. 4,00,000/-

Age = 2 years
Life = 20 years
Salvage value = 10%
2
Depreciation percentage = x 90 = 9%
20
Depreciated value = 0.91 x 4,00,000
= Rs. 3,64,000/-

Ans : c

Exercise 50 : (IBBI)

Workout N.P.V. of a building having 20 years of age and 60 years of total life. Its replacement
cost as on today is Rs. 4,30,000/-. Salvage value 10%. Adopt SLM

a) Rs. 3,11,000/- b) Rs. 4,11,000/-

c) Rs. 3,01,000/- d) Rs. 4,01,000/-

Replacement value = Rs. 4,30,000/-

Age = 20 years
Life = 60 years
Salvage value = 10%
20
Depreciation percentage = x 90 = 30%
60
Net present value = 0.7 x 4,30,000
= Rs. 3,01,000/-

Ans : c
264

Exercise 51 : (IBBI)

What is the N.P.V. by constant percentage method (linear method). Replacement cost is
Rs. 3,50,000/-. Life : 75 years. Age : 15 years.

a) Rs. 3,86,300/- b) Rs. 4,86,300/-

c) Rs. 1,86,300/- d) Rs. 2,86,300/-

100
Depreciation percentage = = 1.33
75

r n
A = P(1- )
100
1.33 15
= 3,50,000 ( 1 - )
100
= 3,50,000 ( 0.9867)15
= 3,50,000 x 0.818
= Rs. 2,86,300/-

Ans : d

Exercise 52 : (IBBI)

A single storeyed house was constructed in 1993, cost Rs. 10,00,000/-, What is the value in
the year 2000 by cost index method of CPWD? Index in 1993 - 244, Index in 2000 - 447,
Base index is 100 for 1981 .

a) Rs. 10,00,000 x (447 - 244) b) Rs. 10,00,000 x (244 / 447)

c) Rs. 10,00,000 x (244 + 447) d) Rs. 10,00,000 x (447 / 244)

Cost of the building in 1993 = Rs. 10,00,000/-

Cost index in 1993 = 244
Cost index in 2000 = 447
Value of the building in 2000 447
= 10,00,000 x
by applying CPWD cost index 244
= Rs. 18,31,967/-
Ans : d

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265

Pages 265 - 298

PART - V

A FEW MORE ONE MARK

THEORY QUESTIONS - 156 Nos.
266

This page is kept vacant intentionally.

267

Part - V

A FEW MORE ONE MARK THEORY QUESTIONS

1. A property was acquired in 01.04.1972. The property was sold on 31.03.2017. On

which date, the FMV is to be ascertained

a) 01.04.1981 b) 01.04.2001
c) 01.04.1972 d) 31.03.2017

Ans : a

2. A property was acquired on 01.04.1972. The property was sold on 01.04.2017. On

which date, the FMV is to be ascertained?

a) 01.04.1981 b) 01.04.2001
c) 01.04.1972 d) 01.04.2017

Ans : b

3. According to the recent amendment in capital gains computations, what is the base
year for which cost inflation index is 100?

a) 2001 - 02 b) 1981 - 82
c) 2016 - 17 d) 2002 - 03

Ans : a

4. According to the recent amendment in capital gains, what is the cost inflation index
for 2001 - 02?

a) 100 b) 110
c) 120 d) 130

Ans : a

5. Cost is a
268

a) Fact b) Policy
c) Opinion d) None of the above

Ans : a

6. Price is

a) Fact b) Policy
c) Opinion d) None of the above

Ans : b

7. Value is

a) Fact b) Policy
c) Opinion d) None of the above

Ans : c

8. 99 years lease with renewal clause is called as

a) Long lease b) Short lease

c) Perpetual lease d) None of the above

Ans : c

9. When valuation is required for a lease property, the main requirements are

a) Location of the property b) Lessor & lessee details

c) Encumbrance details d) Terms & conditions stipulated

in the lease deed

Ans : d

10. The types of lease are

a) Building lease b) Occupational lease

c) Life lease d) All the above

Ans : d
269

11. Annuity is defined as

a) Capitalisation b) Sinking fund

c) Deferment d) Net annual payment

Ans : d

12. A person seeks an income of Rs. 1,000 per annum from an investment. He wishes
this is to be an 8% return on his investment. What is the amount he has to invest?

a) Rs. 1,000/- b) Rs. 80/-

c) Rs. 12,500/- d) Rs. 10,000/-

Ans : c

13. If ‘A’ leases property to ‘B’ for Rs. 2,000/- and ‘B’ in turn subleases to ‘C’ for a rent
of Rs. 3,000/- monthly. Rs. 2,000/- is head rent and Rs. 3,000/- is improved rent.
What is the difference value of profit rent?

a) Rs. 2,000/- b) Rs. 1,000/-

c) Rs. 3,000/- d) Rs. 5,000/-

Ans : b

14. A flat is normally valued by the method namely,

a) Market approach b) Cost approach

c) Income approach d) Composite rate method

Ans : d

15. If any property is to be valued for mortgage purpose to bank as collateral security,
the important factor to be considered is

a) Loan amount b) Value of the property

c) Location of the property d) Marketability & enforceability

Ans : d

16. Sinking fund can be defined as an

270

a) Rate of capitalisation b) Rate of reversion

c) Net annual payment d) Annual recurring fund

Ans : d

17. While calculating depreciation value by constant percentage method, which is not
considered?

a) Age b) Depreciation percentage

c) Salvage value d) Replacement value

Ans : c

18. Which are same?

a) Straight line method b) Linear method and

and linear method constant percentage method

c) Linear method and d) Sinking fund and

sinking fund method straight line method

Ans : b

19. Which type of property enjoys absolute ownership?

a) Leasehold b) Freehold
c) Licensed holder d) Easement holder

Ans : b

20. All the land locked lands enjoy only 25% of the value?

a) Yes, only 25% b) They enjoy less than 25%

24. In an apartment, common area percentage is

a) Common area / sum of plinth area of all flats

b) Common area / sum of super plinth area of an flats
c) Common area / FSI
d) None of the above

Ans : a

25. Mere offer for sale cannot be construed as

a) Guideline value b) Market value

c) Distressed value d) Auction value

Ans : b

26. The meaning of cost of construction with reference to income tax valuation is
272

a) The value of the property purchased

b) The market value of land and depreciated value of building
c) The amount spent by the assessee in the construction of his new
building
d) The replacement value of the building

Ans : c

27. In book value method, .................. of the asset in the year of acquisition is taken as
the basis

a) Historic cost b) Intrinsic cost

c) Replacement cost d) Reinstatement cost

Ans : a

28. Temple, church, museum, school, factories can be normally valued by

a) Profit method b) Composite rate method

c) Land & building method d) Comparable sale instance method

Ans : c

29. Land and building method is also known as

a) Depreciated cost method b) Detailed estimate method

c) Book value method d) Composite rate method

Ans : a

30. If the land is situated in central business district area of town, it fetches

a) Low rental value b) High rental value

c) Normal rental value d) None of the above

Ans : b

31. The three important criteria for selection of best land in a town are

a) Availability of power, water and electricity

273

b) Width, depth and size of the plot

c) Soil condition, topography and width of the road
d) Location, location and location

Ans : d

32. The unit rate of large sized lands (say 30,000 sq.m.) is comparatively ...................
when compared to a small size plot of 500 sq.m.

a) More b) Less
c) Same d) None of the above

Ans : b

33. A virgin plot is said to be normally more by a ........ percentage when compared to a
plot with a building

a) 10 to 15% b) 15 to 20%
c) 20 to 25% d) 25 to 30%

Ans : a

34. Ideal proportion of width to depth of a plot could be

a) 1 : 1.5 or 1 : 2 b) 1:3
c) 1:4 d) 1:5

Ans : a

35. Front foot value is the norm used

a) In valuing the land b) In valuing the building

c) In valuing the machinery d) In valuing any property

Ans : a

36. A corner plot normally enjoys a higher rate by ............ percentage when compared to
the rate of single frontage plot

a) 10 to 15% b) 15 to 20%
274

c) 20 to 25% d) 25 to 30%

Ans : a

37. The plot not having any legal access is known as

a) Recess land b) Tandem plot

c) Land locked land d) None of the above

Ans : c

38. The open unobstructed view in front of the building is known as

a) Vista b) Elevation
c) Clear view d) Excellent

Ans : a

39. Fee simple is called as

a) Freeholder land b) Leasehold land

c) Tenanted property d) None of the above

Ans : a

40. Tenure means condition of holding land. It is a

a) Greek word b) English word

57. Rental value of a premises in a particular locality falls severely due to bad
neighbourhood - this is called as

a) Physical depreciation b) Economic obsolescence

278

c) Functional obsolescence d) Technological obsolescence

Ans : b

58. The assets are outdated and their planning and designing are contrary to the present
day requirements - this is called as

a) Physical depreciation b) Economic obsolescence

c) Functional obsolescence d) Technological obsolescence

Ans : c

59. An old palace is a glaring example for

a) Physical depreciation b) Economic obsolescence

c) Functional obsolescence d) Technological obsolescence

Ans : c

60. A single screen theatre is obsolete - this is called as

a) Physical depreciation b) Economic obsolescence

c) Functional obsolescence d) Technological obsolescence

Ans : c

61. A computer may suffer from ..................... hardly within 2 or 3 years if more
advanced computers are there in the market

a) Physical depreciation b) Economic obsolescence

c) Functional obsolescence d) Technological obsolescence

Ans : c

62. A new machine may become obsolete, if product manufactured by said machine
do not have any demand whatsoever in the market - this obsolescence is called as

a) Physical depreciation b) Economic obsolescence

c) Functional obsolescence d) Technological obsolescence

Ans : c
279

63. Load bearing structures are replaced by framed structure. Timber structures are
replaced by steel framed structure. Wooden windows are replaced by aluminium
windows. These are due to the modern technologies - this obsolescence is called
as

a) Physical depreciation b) Economic obsolescence

c) Functional obsolescence d) Technological obsolescence

Ans : d

64. In this method of estimating depreciation, the valuer decides lumpsum

depreciation for the asset by physical inspection. This is called

a) Direct appraisal method b) Written down value method

c) Straight line method d) Constant percentage method

c) Rs. 1,86,300/- d) Rs. 2,86,300/-

Ans : d

74. In this method, rate of depreciation is adopted as prescribed in Income tax Act -
This is called as

a) Statuatory depreciation method b) Linear method

Ans : a

83. As per belting theory, rate of land under 3rd belt is adopted as .....% of the front belt
land rate.
283

a) Symbolic possession b) Physical possession

extinguished

c) Pending decision d) None of the above

Ans : a

114. Any servient easement to a property makes it automatically less attractive and
hence tends to diminish its ................

a) Value b) Right
c) Cost d) None of the above

Ans : a

115. According to this concept, the ownership of a particular property or a flat is held for
a specified period of time during a year. This is called as

a) Time share b) Short lease

c) Temporary accommodation d) Service apartment

Ans : a

116. The most commonly used method for valuing mineral lands is

a) Cost approach b) Market approach

c) Income approach d) Composite method

Ans : c

117. The purpose of imposing stamp duty when a transaction on an immovable property
takes place is

a) To legalise the transaction b) To augment the revenue of

State government

c) The government must know any d) To augment the revenue of

transaction between any parties Central government

Ans : b
290

118. When a land is under sale, the value of land (for the purpose of stamp duty) is fixed
by the Registrar’s office based on the

a) Market rate b) Guideline rate

c) Recent sale instances d) As per intrinsic value

Ans : b

119. Money, cash in bank, gold, silver, jewellery and personal belongings are called as

a) Personal property b) Real property

c) Unreal property d) None of the above

Ans : a

120. Land, land with building are called as

a) Personal property b) Real property

c) Mofussil property d) None of the above

Ans : b

121. Rented properties, hotels, cinemas, malls are termed as

a) Income fetching marketable properties

b) Non-income fetching marketable properties
c) Non-income fetching - non-marketable properties
d) None of the above

Ans : a

122. Owner occupied bungalows, offices, factories are termed as

a) Income fetching marketable properties

b) Non-income fetching marketable properties
c) Non-income fetching - non-marketable properties
d) None of the above

Ans : b
291

123. Temple, church, school, college, public buildings, museum, fire station,
government buildings are termed as

a) Income fetching marketable properties

b) Non-income fetching marketable properties
c) Non-income fetching - non-marketable properties
d) None of the above

Ans : c

124. This approach is generally useful to value income fetching marketable properties

a) Income approach b) Market approach

c) Cost approach d) Composite rate method

Ans : a

125. This approach is generally recommended for the non-income fetching marketable
properties

a) Income approach b) Market approach

c) Cost approach d) Composite rate method

Ans : b

126. This approach is generally adopted for non-income fetching - non-marketable

property

a) Income approach b) Market approach

c) Cost approach d) Composite rate method

Ans : c

127. ................. normally includes profit of seller over and above cost of labour and cost
of materials that has been incurred by the seller in creation of the said asset

a) Cost b) Price
c) Value d) None of the above

Ans : b
292

128. “Value is an estimate of the price as it ought to be” - who said this?

a) Justice Hadley b) Viscount Simon

c) Lee Coca d) Prof. Jean Canonne

Ans : a

129. .............................. value is an estimated amount of the interest or legal right of a

person in a property, to derive existing and future benefit by putting land and
building to best possible legal and potential use.

a) Market value b) Legal value

c) Sale value d) Cost value

Ans : a

130. Sometimes property owners expect some likely changes in government and
expect the value of their property to rise in the near future. Such value is called as

a) Hope value b) Special value

c) Potential value d) Desired value

Ans : a

131. When a property is to be sold as quickly as possible with minimum time for market
exposure, it is termed as

a) Forced liquidation value b) Realisable value

c) Fair market value d) Open market value

Ans : a

132. A property is situated in a highly developed are. Due to heavy demand and less
supply, this property can be sold at a fancy price. This is called

a) Monopoly value b) Hope value

c) Mortgage value d) Intrinsic value

Ans : a
293

133. It is an imaginary value of the property worked out for special purposes of taxation
like wealth tax. This value is called as

a) Notional value b) Potential value

(Hypothetical value)

c) Market value d) Cost value

Ans : a

134. It is a value of the property to the speculator who invests in the property with sole
motive of selling at profit after short period of time. It is called as

a) Speculative value b) Special value

c) Potential value d) Notional value

Ans : a

135. Valuation is not an exact science. Mathematical certainly is not demanded, not
indeed is it possible. Who said this?

a) Justice Viscount Simon b) Justice Hadley

c) Prof. Jean Canonne d) Lee Coca

Ans : a

136. Temple property is not marketable, yet it has got value, we may call it as

a) Notional value b) Market value

c) True value d) Actual value

Ans : a

137. A property which can be physically touched and seen like cash, car, land, etc. are
called as

a) Intangible assets b) Tangible assets

c) Fixed assets d) None of the above

Ans : b
294

138. The assets which cannot be seen or touched but its effect can be notionally seen
and felt - They are called as

c) Social factors d) Legal factors

Ans : d

145. Reservation under different Acts, Height restriction rules near the airport area, safety
distance rules from High tension lines, railway tracks, highways, water courses are
some of the ............. factors affecting the value.

a) Economic factors b) Physical (technical) factors

c) Social factors d) Legal factors

Ans : d

146. A valuation report originates with the instruction given by the ............. in response
to which the task of writing a report is undertaken by a valuer.

a) Lawyer b) Client
c) Concerned department d) None of the above

Ans : b

147. The main requirement to write a valuation report

a) Technical and communication skill

b) Skill in the English knowledge
c) To write a detailed report like a project report
d) Good presentation

Ans : a
296

148. Valuation reports are to be prepared

a) Aft the time of receiving the relevant documents

b) After valuation is completed
c) Before undertaking valuation
d) During the inspection of the said property

Ans : b

149. Many a times, use of ‘cut’, ‘copy’ and ‘paste’ functions in computer make valuers
lazy about report writing which may result in enquiry by ................

a) Clients b) User

c) Investigation agency like d) Lawyer

CBI, Policy, etc.

Ans : c

150. News paper or media reports giving only information which may be without
expressing any opinion or advice which is left to the reader to make out. This is

a) Non-technical report b) Technical reports

c) Legal reports d) Project reports

Ans : a

151. It is the exercise of technical expertise and therefore gives all the necessary
information and data with their analysis and expresses definite conclusion or
opinion. The user takes appropriate decision based on this report. This is

a) Non-technical reports b) Technical report

c) Legal reports d) Project reports

Ans : b

152. A written report casts high degree of ........ on the valuer as it acts as a formal record
and becomes a document/

a) Accountability b) Duty
297

c) Integrity d) Honesty

Ans : a

153. At the time of valuation, the valuer should have high degree of ................ with the
client and property to be valued.

a) Attachment b) Detachment
c) Intimacy d) None of the above

Ans : b

154. While estimating the market value for mortgage, a valuer should consider himself
to be ..............

a) a lawyer b) a mortgage
c) a mortgagor d) both mortgagor and mortgagee

Ans : d

155. The first column of any valuation report should be

a) Name of the client b) Documents perused

c) Location d) Purpose of valuation

Ans : d

156. It means reduce in numbers of exhaust. It is the word applied to the consumption of
natural resources. Typical examples are natural gas, oil, coal, water, mineral

a) Depreciation b) Depletion
c) Exhaust d) None of the above

Ans : b

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298

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299

Pages 299 - 390

PART - VI

FREQUENTLY ASKED QUESTIONS

IN THE EXAMINATION - 449 Nos.
300

This page is kept vacant intentionally.

301

Part - VI

FREQUENTLY ASKED QUESTIONS (FAQ) IN THE EXAMINATION

1. Which of the following is not a natural attribute of a land, but artificially created by
man?

a) Benefit b) Tenure
c) Location d) Frontage

Ans : b

2. Onus of proof is a ................ in the evaluation of evidence.

a) Fact b) Principle
c) Continuous process d) One time process

Ans : c

3. Which of the following terms is not relevant to valuation of contaminated properties?

a) Environmental stigma b) Impaired value

c) Reinstatement value for d) Remediation cost
insurance

Ans : c

4. In perfect competition, an individual firm .................

a) has a price elastically of supply equal to one.

b) faces unitary elasticity of demand.
c) has a price elasticity of supply equal to infinity.
d) faces infinitely elastic demand.

Ans : c

5. Which of the following distinguishes investment in real estate vis-a-vis other forms
of investment?
302

a) Capital erosion b) Redemption of capital

c) Income generation d) Solvency

Ans : b

6. Which out of the following is not a factor that affects demand & supply of real estate?

a) Economic growth b) Interest rate

c) Increased population d) Number of cars in household

Ans : d

7. Under sec 61 of Indian succession Act, a will or any part of a will, which has been
caused by fraud and which takes away the free agency of the testator, is ..................

a) Illegal b) Valid
c) Voidable d) Void

Ans : d

8. Utility means existing and anticipated ............... due to ownership & use of property.

a) Marketability b) Scarcity
c) Transferability d) Benefits

Ans : d

9. The value of the rent controlled properties will have ............. value than vacant property.

a) 100 percent higher b) 50 percent higher

c) Exactly same d) lower

Ans : d

10. In case of gift, if donee dies before acceptance, then .................

a) Gift is valid. b) Gift is void.

c) Gift is reduced. d) Court has to decide.

Ans : b
303

11. Which valuation method should be used to calculate the market value of vacant
building excluding land?

a) Sales comparable b) Depreciated replacement cost

c) Income capitalization d) Residue technique

Ans : b

12. Which of the following is consistent with the law of demand?

a) A decrease in the price of a gallon of milk causes a decrease in the

quantity of milk demanded.
b) An increase in the price of a soda causes a decrease in the quantity of
soda demanded.
c) An increase in the price of a tape causes an increase the quantity of
tapes demanded.
d) A decrease in the price of juice causese no change in the quantity of
juice demanded.

Ans : b

13. H.A. Sturges formula for determining the number of classes is :

a) 1 - 3.322 * log N b) 1 + 33.22 * log N

c) 1 - 33.22 * log N d) 1 + 3.322 * log N

Ans : d

14. Sec 112 under Transfer of Property Act for waiver of forfeiture but where rent is
accepted after the institution of a suit to eject the lessee on the ground of forfeiture,
such acceptance .........................

a) is a forfeiture b) is not forfeiture

c) is determination of lease d) is transfer of lease

Ans : b

15. Oridinal utility analysis is otherwise known as :

a) Gossens second law b) Cardinallty approach

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c) Indifference curve analysis d) Rationality approach

Ans : a

16. Interest is paid because ;

a) Capital is scarce b) Capital is productive

c) Capital is attractive d) Capital is surplus

Ans : b

17. Severance of joint family status takes place from the date when the communication
.................

a) is received by the first coparcenary

b) is received by the last coparcenary
c) is received by the karta
d) is sent

Ans : d

18. Any profit or loss on the sale of sinking deprecation fund investments is transferred to
...............

a) Profit and loss account b) Asset account

c) Sinking fund a/c d) Depreciation account

Ans : a

19. A owes B Rs. 1,000 payable on 1st December 2017 with interest. On 1st June 2017,
A offers to pay the amount with interest up to 1st of June 2017. It is

a) a valid tender b) not a valid tender of performance

c) a legal tender d) an Illegal tender

Ans : a

20. Premature termination of lease is a major .......... factor affecting the value of leasehold
property.

a) Physical b) Legal
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c) Social d) economic

Ans : d

21. Data obtained by conducting a survey is called ……………

a) Primary data b) Secondary data

c) Measured data d) Regular data

Ans : a

22. Which of the following is not a criterion in determining the highest and best use of
land?

a) Physically possible b) Legally permissible

c) Financially feasible d) Socially acceptable

Ans : d

23. Which of the following is not a method used to calculate depreciation?

a) Straight line method b) Declining Balance method

c) Average of the year digits d) Constant percentage method

Ans : c

24. Where there is frequent fluctuations in stocks/ stock values, which of the following
provides suitable cover?

a) Fire floating policy b) Fire policy with Escalation

clause
c) Fire Reinstatement value policy d) Fire Declaration policy

Ans : b

25. Where rent reserved in an occupational lease is less than the full rental value, it is
called ..................

a) Acknowledgement rent b) Head rent

c) Standard rent d) Virtual rent

Ans : a
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26. Rehabilitations and resettlement award for affected as per land acquisition,
rehabilitation and resettlement act 2013 is made by

a) Central government b) Local panchayat, municipal (or)

village authority
c) State Government d) Tribunal authority

Ans : c

27. Before accepting the gift, if the donee expired, this is

a) Void b) Voidable
c) Valid d) The court will finalise

Ans : a

28. In case of lease hold property with perpetuity of 99 years lease and If the lease deed
is having renewable class of for further 99 years, the lessor’s interest is

a) More b) Not more

c) less d) revocable

Ans : c

29. The reversionary value of property is one

a) residual value of property

b) lease value of the property
c) value of the property in the hands of lessee
d) value of the property at the end of lease period in the hands of lessor

Ans : d

30. If the promiser promises to perform the promise of third person or to discharge the
liability (or) obligation of a third person in the case of the latter’s default if fullfilled by
person is

a) Indemnity b) Promiser
c) Guarantee d) none of above

Ans : c
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31. ........... is appointed to inform agriculturalist about the value, type of pesticides and its
level of poison.

a) ICAR b) CIBRAC
c) Rural bank d) RBI

Ans : b

32. As per RERA Act, the promoter has to collect from customer, maintain and spend the
money through escrow account. The percentage of money deposited is ........

a) 50% b) 60%
c) 70% d) 80%

Ans : c

33. Out of the following, the one which is not belonging to mobile pollution is

a) Tobacco smoking b) Gas mounted car

c) Mining d) Trucks

Ans : c

34. Deduction allowed made for rental income under income tax for the house hold rental
property is ................

a) 15% b) 25%
c) 30% d) 20%

Ans : c

35. The valuer should maintain the records for minimum of ................ years

a) 1 Year b) 3 Years
c) 5 Years d) 10 Years

Ans : b

36. The valuer should be straight forward and honest in performing professional service
because
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a) for the owner’s interest b) for his own interest

c) for the interest of society d) none of the above

Ans : c

37. To whom can a creditor prefer an appeal in case of rejection of his claim

a) Insolvency and bankruptcy board of India

b) Jurisdictional District court
c) National Company Law Tribunal (NCLT)
d) State High court

Ans : c

38. The class of locality, neighbourhood, prestigious aspects regions factors like temple,
church, worship places, sentiments like vaasthu, etc, are ............

a) Physical factors b) Natural factors

c) Legal factors d) Social factors

Ans : d

39. For RCC roof framed building, the life of building considered for valuation purpose is
.................

a) 40 to 60 Years b) 60 to 80 Years
c) 80 to 100 Years d) 100 to 120 Years

Ans : b

40. Which method is adopted for valuation of a property located at extension under
developing area of the city?

a) Unit rate method b) Cost approach method

c) Sales comparison method d) detailed estimate method

Ans : c

41. For a free hold property owned by a person, If half portion is rented out for tenant and
half portion is owned by the land lord, the property is valued by which method?
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a) Rent Capitalization method

b) income method
c) Cost approach method
d) The rental portion is valued by rent capitalization method and
owner’s portion is valued as free hold property.

Ans : d

42. When many number of units are available to the purchaser in excess of demand, it is

a) Sellers market b) Buyers market

c) perfect computation market d) Demand market

Ans : b
43. Saving is ............... the relationship with income is :

a) Income less consumption b) Consumption less saving

c) Saving of money d) None of above

Ans : a

44. What is extra premium for add on cover for act of god in standard peril policy?

a) 1% b) 2%
c) 3% d) None of the above

Ans : d

45. If a person having two wives dies, the property share is :

a) Him self and his sons will take equally

b) His sons will take equal share
c) His wives will take equal share
d) Wives and sons will take equal shares

Ans : d

46. As per LARAR Act, the acquisition advertisement is made in ....................

a) Any language b) English & local language

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c) local language d) any regional language

Ans : b

47. A gift is a made to two persons. If one person dies before accepting the gift, then

a) it is void b) it is voidable
c) it is donors option to finalise, d) none of above

Ans : a

48. The forest and animal are not bounded by the following act :

a) Indian forest act b) Indian wild life act

c) Environmental protection d) Bio diversified act
act 1986

Ans : c

49. Whether a tenant can transfer the property to other tenant?

a) with the permission of land lord b) it is not transferable

c) it is transferable d) None of the above

Ans : a

50. Under fundamental right in article 14, equality is for

a) Indian citizen b) All persons in India

c) Individuals only d) Peoples of India

Ans : b

51. Contingent contract is

a) Void b) Voidable
c) valid d) Complete

Ans : c
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52. In adjustment grid model, the first factor considered is

a) Size b) time
c) location d) age

Ans : b

53. Who has the power to acquire?

a) State government b) Central government

c) District Collector d) Corporation

Ans : c

54. If demand in unitary elastic a 25% increase in price will result in

a) 25% change in total revenue

b) No change in quantity demanded
c) 1% decrease in quantity demand
d) 25% decreases in quantity demanded

Ans : b

55. Cost of disturbance experienced during the remediation stage is known as

a) Cost of contract b) Cost of public liability

c) Cost of distribution d) Cost to operation

Ans : d

56. Price is a ................. concept

a) Exchange b) Market
c) Benefit d) Transferability

Ans : a

57. Insolvency process can be initiated by ................

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a) Insolvency professional b) Operational creditors

c) NCLT d) DRT

Ans : b

58. Under marginal productivity theory, reward for labour is determined by

a) Owner b) Government
c) Labour d) Marginal product

Ans : d

59. A valuer should act without conflict and interest coeircen or under influence of any
party.

a) This is not requirement b) This is in public interest

of valuer
c) This is proof d) It brings higher value of asset

Ans : b

60. Fire consequential loss policy pays the insurer

a) Net profit b) Standing charges

c) Increased cost of work d) All the above

Ans : d

61. When the owner’s right is imperfect and will be made perfect on fulfilment of certain
conditions is called

a) Co-Owner ship b) Concurrent ownership

c) Contingent ownership d) Duplicate ownership

Ans : c

62. In a city, the Development Control Rules are governed by

a) Approved plan b) Location

c) FSI d) Utility

Ans : c
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63. Two interest rates are considered when the situation of income is

a) Perpetual b) Annual
c) Terminable d) None

Ans : c

64. Accumulated sum of Rs 1/- per year for 6 years at the rate (1 + r)n - 1
APA = r
of interest of 8 %

a) 0.08/(10.08)6 -1} b) {(1+0.08)6-1}/0.08

c) {1- (10.08)6}/1 d) /(10.08)6

Ans : b

65. Key element of income approach?

a) Potential income stream b) Expenses

c) Outstanding loans d) Capitalization rates

Ans : d

66. The property value is Rs 100000, expected salvage is Rs 2000 after 5 years, what is
rate of depreciation? 1,00,000 - 2,000
5
i.e. 98%
a) 20 b) 19.60 5 = 19.6%
c) 30 d) 15

Ans : b

67. FSI is allowed 100 % for

a) Central Govt Offices b) State Govt Offices

c) Schools d) Sports complex

Ans : d

68. Where maximum rate of interest is obtained?

a) Shares & debentures b) Banks current accounts

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c) Fixed deposits d) Investment in housing society

Ans : c

69. The difference in rent received by head lessee after giving leased property by him to
sub-lessee is called

a) Contractual rent b) Standard rent

c) Profit rent d) Rack rent

Ans : c

70. Lessor gives open land to lessee to permit him to construct building, the lease is
called

a) Building lease b) Perpetual lease

c) Occupational lease d) Life lease

Ans : a

71. If Y.P is 12.50, then the rate of return is in percentage 100 / 12.5

a) 9% b) 8% c) 10% d) 12%
Ans : b

72. When the supply is excess than demand, then the market is

a) Stable market b) Seller market

c) Buyer market d) Vegetable market

Ans : c

73. In indifferent curve, the demand curve shows

a) down-ward from left to right b) down-ward from right to left

c) upward from right to left d) upward from left to rigtht

Ans : a

74. Hypothetical grid model applies to

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a) commercial buildings b) residential buildings

c) flats d) Govt offices

Ans : c

75. In a joint venture development, main parameters are :

a) Land rate & FSI b) Building rate & FSI

c) Land rate and building cost d) FSI & Plot coverage

Ans : c

76. The most accurate and reliable cost of construction acceptable by court is

a) cost of construction b) Quantity survey method

c) cost index method d) plinth area method

Ans : b

77. The economic life of a RCC load bearing structure is considered as ............

a) 80 years b) 60 years
c) 30 years d) 120 years

Ans : b

78. Where Transfer of Development rights was first introduced in India?

a) Bombay b) Kolkata
c) Hyderabad d) Chennai

Ans : a

79. Land can’t be ........... like other commodities.

a) transported b) bought
c) sold d) mortgaged

Ans : a
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80. Valuation is an art or science, mathematically certainty not required, nor indeed is it
possible.

a) Rustam C Cooper Vs Union of India AIR 1970 SC 564

b) Gold Coast Trust Ltd. Vs Humphray (1949) 17 ITR 19
c) Hays Will Trust Vs Hays and others
d) K P Varghese Vs ITO (1981) 131 ITR 597 (Sc)

Ans : b

81. For owner occupied portion, the District Valuation officer calculated the value on the
basis of what were the rates prevalent for sale of commercial flats in cannaught place.
For the tenanted portion, he capitalized the rental value. The method adopted by him
is acceptable.

a) Hays Will Trust Vs Hays and others

b) K P Varghese Vs ITO (1981) 131 ITR 597 (Sc)
c) Wenger & co Vs DVO(1978) 115 ITR 648 Delhi H C (combination
methods)
d) Gold Coast Trust Ltd. Vs Humphray (1949) 17 ITR 19

Ans : c

82. Terrorism cover for industrial risks is subject to a deduction of

a) 0.5% b) 1%
c) 1.50% d) 0.025%

Ans : a

83. The sum insured under debris removal add-on cover cannot exceed —— % of the
total sum insured under the fire policy.

a) 20% b) 15%
c) 1% d) 10%

Ans : d

84. Delta saving / Delta income =

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a) APS b) MPS
c) APC d) MPC

Ans : b

85. Theory of rent was proposed by

a) Ricardo b) Allmond Alla

c) Marshall d) F.B Hawley

Ans : a

86. Deflation means

a) Increase in price in goods b) Decrease in price in goods

c) Increase in quantity d) Decrease in quantity

Ans : b

87. Primary sector of Economics

a) Building factory that produce materials b) Building school

c) Agriculture d) Horticulture

Ans : c

88. Mr. ‘A” constructed a property, cost was Rs. 5,00,000/-, during 1990. He sold to ‘B’ in
2000 for Rs. 10,00,000/-. ..................... is the cost in the hands of Mr. ‘B’.

a) Historic cost b) Original cost

c) Replacement cost d) Reinstatement cost

Ans : b

89. When a land does not abut on any road and does not enjoy any legal approach, such
land is called

a) Land locked land b) Recess land

c) Double frontage land d) Tandom plot

Ans : a
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90. Properties which are under developed, somebody buys such properties, develop it
with the idea to earn profit. Such properties are called

a) Development properties b) Investment properties

c) Potential properties d) Non investment property

Ans : c

91. Shopping mall, service apartments, office blocks are

a) Investment properties b) Developed properties

c) Potential properties d) Non development properties

Ans : a

92. Which of the following is not an organic water pollutant?

a) Arsenic b) Lead
c) Organic fertilizer d) Heavy metal

Ans : a

93. If land rate is high compared to cost of construction, landlord’s share in a joint venture
will be

a) High b) Equal
c) Low d) None

Ans : a

94. Which of the following is generally acceptable?

a) Demand draft b) Money

c) Land d) None

Ans : b

95. A donee dies before acceptance of the gift is

a) Valid b) Void
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c) Voidable d) Landful

Ans : b

96. When a lessee transfers property, then the lessor, normally, claims a share in the profit.
This profit is known as ..................

a) Profit rent b) Imporoved rent

c) Unearned increase d) Head rent
in land value

Ans : c

97. Which of these is a method of calculating depreciation based on interest theories?

a) Direct appraisal method b) Straight line method

c) Declining balance method d) Sinking fund method

Ans : d

98. The Doctrine of unearned increase was enacted beacuse of a famous court
judgement. Select the correct judgement.

a) Commissioner of Wealth Tax, New Delhi vs. Sri. P.N. Sikand (1977)
107 ITR 922 (SC)
b) CIT vs. Smt. Ashima Sinha 1979) 116 ITR 26 (Calcutta), 1980 Tax 56(1)
19 Calcutta).
c) Controller of Estate Duty vs. Radha Devi Jalan (1968) 67 ITR 761,
Calcutta High Court.
d) C.W.T. vs. Venugopal Konar & Ors. ((1977) 109 ITR 52, Madras High
Court.

Ans : a

99. The landmark judgement, Commissioner of Wealth Tax, New Delhi vs. Sri. P.N. Sikand
(1977) 107 ITR 922 (SC) states that :

a) The increase in value of the leasehold interest of the property leased is

to be equally shared by both the lessor and lessee.
b) only the lessor has the right to the increase in value.
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c) only the lessee has the right to the increase in value.

d) the ratio of the lessor’s and lessee’s share is to be determined by
negotiation.

Ans : a

100. Can the tenant carry out repairs by himself?

a) Yes b) No
c) With oral permission d) With written permission from
of landlord landlord

Ans : c

101. Under Sec 192 of Companies Act - the value of the asset is duly calculated by

a) Company Seceretary b) Chartered Accountant

c) Registered Valuer d) Accountant

Ans : c

102. Who can write a Will?

a) Minor b) Lunatic
c) Person with a sound mind, d) None of the above
not a minor

Ans : c

103. Who can write a privileged Will?

a) Mariner & Airman b) Airman

c) Mariner in Sea Expedition d) Anyone

Ans : a

104. RERA - For alteration to the plan - the developer should take the consent from atleast
.................

a) 1/3 allotees b) 2/3 allotees

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c) All allotees d) No need of any consent

Ans : b

105. A car was bought for Rs. 2 lacs 2 years back. The market value of the car today is
1 lakh. What is the “realizable value”?

a) 1 lakh b) 2 lakhs
c) 3 lakhs d) None

Ans : a

106. S/Y =

a) APS b) APC
c) MPS d) MPC

Ans : a

107. In market approach, this is not considered :

a) Location b) Size
c) Age d) Purchase cost

Ans : d

108. In DCF technique, which is not given weightage?

a) Discount rate b) (IRR) Internal Rate of Return

c) Expenditure d) Location

Ans : d

a) Advisory committee b) Secretary Minister of forest

c) Chief Minister of forest d) Advisor Minister of forest

Ans : a
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116. Architect fees in insurance?

a) 1% b) 2% c) 3% d) 4%

Ans : c

117. Purchase of property lies in which concept?

a) Demand side b) Supply side

125. Value in use also called as ..............

a) Real value b) Subjective value

c) Market value d) None of the above

Ans : b

126. The land with high FSI or the land with low FSI - in which, the land value is high?

a) High FSI land b) Same FSI land

c) Low FSI land d) Equal FSI land

Ans : a

127. In supply and demand curves the quantity of goods in which axis

a) X - axis b) Y - axis
c) X & Y - axis d) None of above

Ans : a
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128. Which is correct?

a) Mean > Median > Mode b) Median > Mode > Mean
c) Mode > Mean > Median d) None of the above

Ans : a

129. By benefit approach method, this property is not valued

a) Dams b) Bridge
c) Highways d) Cinema Theatre

Ans : d

130. As per building bye laws, which is permissible in Cinema Theatre complex?

a) Security of capital b) Security of income

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c) Replacement cost d) Prospectus of appreciation

Ans : d

a) Estimate amount b) Price

c) Willing seller d) At an arm’s length transaction

Ans : a

149. Mr. A is going to start a project, approaches B for expert opinion. Relationship
between A and B is defined as

a) Contract for services b) Consultancy services

c) Service provider d) Fiduciary relationship

Ans : d
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150. Why should an entrepreneur do a feasibility study to start a new venture?

a) To estimate the expected sale b) Possible source of fund

c) Possible barriers to success d) Potential customer

Ans : c

151. “Carrying value”, the following asset statement best describes

a) To cost of the asset less its residual value

b) Net value of asset or value carried in book of a/c which is higher
c) The higher of due assets value in use of is recoverable amount
d) Original cost - accumulated depreciation amount

Ans : d

a) Sale of assets of borrower by the bank

b) DRT
c) With court intervention
d) Getting bank’s charge with Central Registry

Ans : a

159. Stationary source of air pollution

a) Light duty gasoline - Powered gas b) Mining

c) Tobacco d) Truck

Ans : b

160. Development control rules of the city / town decides the ................. of the property.

a) Security b) Rise
c) Usage d) Transferability

Ans : c

161. Under market approach, we can normally value only .................

a) Religious property b) Household property

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c) Non-marketable property d) Marketable property

Ans :. d

162. Under Transfer of property, immovable goods does not include ..............

a) Timber b) Timber, Jewellery

c) Grass only d) Timber, Jewellery, Grass or Crops

Ans : d

163. If contract specified time fails, then contracts becomes ..................

a) Invalid b) Voidable
c) Incomplete d) Disqualified

Ans : a

164. Price discrimination is not possible in .........................

a) Monopoly b) Perfect market

c) Duopoly d) Oligopoly

Ans : b

165. Which of the following details are not to be included in the valuation report?

a) Who gave instructions to prepare the report?

b) Which is the date as on which the value of the property is required to be
estimated?
c) The details of the location and the neighbourhood of the property.
d) The age of the owner of the property.

Ans : d

166. Which one is not giving rise to organic pollution in water pollution

a) Fertilizers b) Pesticides
c) Organic compounds d) Heavy metals

Ans : d
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167. Which of the following statement is correct

a) Hotels and restaurants should be valued on the basis of their

profitability.
b) Hotels and restaurants should be valued to their tangible assets only.
c) There are no intangible assets associated with the hotel and restaurant
industry.
d) Advertisement income in the hotel and restaurants investment be treated
as scale of profit.

Ans : a

1
168. Years purchase Re. 1, 10 years, 7% Y.P. = (1 + r)n

a) 1 - (1/1 + 0.07)10 / 0.07 b) 0.07 / 1 - (1 + 0.07)10

c) 0.07 / (1 + 0.07)10 d) 1 / (1 + 0.07)10

Ans : d

169. Most appropriate method of valuation income generation commercial assets?

a) Land and building b) Any method

c) Direct comparison method d) Discounted Cash Flow method

Ans : d

170. Which of the following statements is true related to obligation of insurer on notification
of a claim.

a) To defend the insurer b) To indemnify the insured

c) To investigate and settle d) To ensure that the damage applies
potentially covered claim to the property

Ans : c

171. Under discounted cash flow method, value of property increases with ...................

a) Higher property tax b) High capitalization rate

c) Lower discount rate d) Reduced income flow

Ans : c
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172. A single storeyed house was constructed in 1993, cost Rs. 10,00,000/-, What is the
value in the year 2000 by cost index method of CPWD? Index in 1993 - 244, Index in
2000 - 447, Base index is 100 for 1981 .

a) Rs. 10,00,000 x (447 - 244) b) Rs. 10,00,000 x (244 / 447)

c) Rs. 10,00,000 x (244 + 447) d) Rs. 10,00,000 x (447 / 244)

Ans : d

173. The average of 7 numbers 7, 9, 12, _, 5, 4, 11 is 9. The missing number is .................

a) 15 b) 16 c) 8 d) 13

Ans : a

174. Sale recorded at Registrar’s office is one of the sources from where ...............

a) Legal proof for market value of the property can be obtained.

Ans : d

181. Basic valuation principles underlying the direct comparison approach is the ...............

a) Principle of contribution b) Substitution

c) Conformity d) Standard

Ans : b

182. RERA occupancy certificate means

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a) Preparing occupation of any b) Sanctioned plan

building plan, layout
c) Cancellation of entire project d) Completion of entire project

Ans : a

183. Omitted amendment 44th Act - 1978

a) Directives b) Right of property

c) Abolition of titles d) Abolition of enforceability

Ans : b

184. Court shall presume a fact the court .............. it is completed to take the fact as
provided, i.e., it shall have to presume the fact

a) can exercise its discretion b) cannot exercise its discretion

c) may exercise its discretion d) will exercise its discretion

Ans : c

185. Cost of acquisition is Rs. 8,000/-. Salvage value is Rs. 1,000/-. Life of the machine is
3 years. For WDV, what is the depreciation rate? 8,000
-50% 4,000
4,000
a) 50% b) 25% -50% 2,000
c) 66% d) 100% 2,000
-50% 1,000
Salvage value 1,000

Ans : a

186. An income yielding commercial property is to be valued by

a) Comparable method b) Cost approach method

c) Income capitalisation d) DCF method
method

Ans : d

187. Burden of proof lies upon a person who has to prove the fact and which
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a) will shift b) never shift

c) may shift d) may (or) may not shift

Ans : b

188. Sec 58 Indian Easement Act the grant control render the property which is

a) Safe b) Unsafe
c) Danger d) Unsafe and danger

Ans : d

189. Section 54 of Easement Act the grant of licence may

a) Express only b) Implied only

c) Express and Implied d) Oral only

Ans : c

190. In which of the following cases, the court approved comparable sales method of
valuation for owner occupied portion of the building and rental method of valuation for
tenanted portion of the same building

a) V.C. Ramchandran v/s C.W.T. b) Wenger & co v/s D.V.O.

c) Jawajl Nagnathan v/s R.D.O. d) C.W.T. v/s P.N. Sikand

Ans : b

191. Which of the following is not nearer to money?

a) Exchange of bills b) Treeasury bill

c) Currency notes d) Bond

Ans : d

192. .................. refers to a situation where any person or a body corporate is unable to fulfil
its financial obligations (often occurring due to several factors such as a decrease in
cash flow, losses and other related issues).

a) Insolvency b) Bankruptcy
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c) Liquidation d) Acquisition

Ans : a

193. Lessor has right to ................

a) Receive lease rent for the unexpired period of lease.

b) Receive profit rent from the property for the unexpired period of the lease.
c) Receive lease rent for the economic life of the building.
d) Receive lease rent for the physical life of the building.

Ans : a

194. Head lessee subleases the property. The rent he gets will be called as

a) Head rent b) Virtual rent

c) Standard rent d) Rack rent

Ans : d

195. .................... is not recognised model under sales comparision

a) Adjusted grid model b) Hedonic model

c) Reversible analysis model d) Weightage score system analysis

Ans : c

196. Valuer appearing in court on value is called

a) Ordinary witness b) Witness of opinion

c) Witness of fact d) Interested witness

Ans : b

197. Price elasticity of demand for any perfectly competitive fim’s output is

a) Less than 1 b) Equal to 0

c) Infinity d) 1

Ans : c
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198. RERA is for

a) Residential building b) Commercial building

c) Residential & Commercial d) Godown

Ans : c

199. Forest (conservation) Act 1980 mainly provides for .................

a) Restriction on the dereservation of forests.

b) Restrictions on the development of wild life.
c) Conervation of any developmental activity like fencing, bridges, culverts,
dams.
d) Restriction on the entry of visitors.

Ans : a

200. Joint venture for redevelopment of property is applicable for ..................

a) Industrial b) Apartment
c) Cinema d) Hotel

Ans : b

201. Which is not a part of immovable property under transfer of property act?

a) Car b) Building embedded to earth

c) Standing timber, growing d) Jewellery
grass or crops

Ans : c

202. Value is an estimate of .................... as it ought to be

a) Price + Profit b) Price

c) Cost d) Offer amount

Ans : b

203. A lease of immovable property from year to year or exceeding one year, etc. can be
339

a) An ordinary instrument b) An unregistered instrument

c) A registered instrument d) Written instrument

Ans : c

204. Section 11 of Contract Act 1872 defines

a) An agreement b) Lawful consideration

c) Competency of parties d) Free consent

Ans : c

205. Contract of indeminity is

a) Tripartite b) Bilateral
c) Multipartite d) Multilateral

Ans : b

206. Which of the following lives of the buildings is used to determine depreciation of
building?

a) Economic life b) Physical life

c) Chronological life d) Residual life

Ans : a

207. Supply and demand is considered as ................. aspect affecting the value of the
property

a) Physical b) Social
c) Economic d) Legal

Ans : c

c) Over all loss d) Indemnity

Ans : d

216. Peril based policy is

a) Automobile policy b) Marine Policy

c) Engineering policy d) Fire & Special perils Policy

Ans : d

217. Fire insurance Policy is issued to cover

a) To cover Market value of the property

b) To cover reinstated value of the property
c) To cover the escalated value of the property
d) To cover the three types said above with adequate additional premium

Ans : d

218. Taj Mahal had a great damaging impact due to pollution. Pin point the contaminant.

a) SO2 b) NO2
c) SPM d) None of the above

Ans : a

219. Acid rain is defined as

a) Rainfall which has pH less than 5.6

b) Rainfall which has pH less than 7
c) Rainfall which has pH more than 5.6
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d) Rainfall which has pH more than 5.6

Ans : a

220. Which was the first country to impose a constitution obligation on the state and citizens
to protect and improve the environment as one of the primary duties?

a) India b) Japan
c) USA d) None of the above

Ans : a

221. The study of Supply and demand is aspect of

a) a Physical b) a Social
c) an Economic d) a legal

Ans : c

222. Value in Use is often referred to as

a) Objective value b) Subjective value

c) Exchange value d) Negotiated value

Ans : b

223. Value in Exchange is also known as

a) Cost b) Price
c) Transaction d) Interaction

Ans : b

224. Interest is defined as the possessed by an object.

a) Demand b) Price c) Value d) Legal rights

Ans : d

225. If the owner’s right which is imperfect is made perfect on fulfillment of certain conditions,
it is called as
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a) Co-Ownership b) Concurrent Ownership

c) Duplicate Ownership d) Contingent Ownership

Ans : d

226. The exclusive right of a Flat owner over his own Flat along with rights of proportionate
share in common areas is called

a) Co-Ownership b) Concurrent Ownership

c) Duplicate Ownership d) Contingent Ownership

Ans : a

227. Years purchase .................. if number of years increases.

a) Increases b) Decreases c) remains same d) None

Ans : b

228. As the unexpired period of lease increases, the capital value after reversion goes on

a) Increasing b) Decreasing
c) Without changing d) None

Ans : b

229. Investment in Real Estate enjoy the benefits of

a) Perfect Competition b) Capital appreciation

c) Divisibility d) None

Ans : b

230. Whether gifted property attracts capital gain?

a) Yes b) No
c) Not applicable d) None of the above

Ans : b
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231. The age of the building is 20 years. The life of the building is 40 years. The replacement
cost of the building as on 2018 is Rs. 5,000/-. The salvage value is Rs. 500/-. Using
straight line method, what is depreciated rate of construction?
5,000 - 500 20
1 x 40
a) Rs. 2,250/- b) Rs. 2,500/- 5,000 - 2,250
c) Rs. 2,750/- d) Rs. 3,000/- = 2,750

Ans : c

232. Sum insured (provisional) under the declaration policy is Rs. 1,00,00,000/-. Rate of
premium is Re. 1 per million. Average sum insured is Rs. 50,00,000/-. What is the
refund premium?

c) Until debt is not paid d) Till contract is not rescinded

Ans : a

241. Which valuation methodology should be used to calculate the market value of vacant
building excluding land?

a) Sales comparable b) Depreciated replacement cost

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c) Income capitalization d) Residue technique

Ans : b

242. After leasing of the property, the lessor’s right is sometimes called .................... right

a) diminishing b) occupational
c) residual d) possession

Ans : c

243. Return of unutilized land to the land owner after .................... years in LARAR act.

a) 2 years b) 3 years c) 4 years d) 5 Years

Ans : d

244. The property value is Rs. 1,00,000. Expected salvage value is Rs. 2,000 after 5 years.
What is the rate of depreciation?

a) 20 b) 19.60 c) 30 d) 15

1,00,000 - 2,000 98%

= = 19.6%
5 5

Ans : b

245. A mobile phone was purchased for Rs. 50,000/-. Its salvage value is Rs. 10,000/-.
Total life time use 60,000 hours. Used time 20,000. What is the depreciation of the
cell phone?

a) Rs. 12,000/- b) Rs. 15,000/- c) Rs. 18,000/- d) None of above

50,000 - 10,000 20,000

x = 13,333
1 60,000

Ans : d

246. Cost of acquisition is Rs. 8,000/-. Salvage value is Rs. 1,000/-. Life of the machine is
3 years. For WDV, what is the depreciation rate?
347

a) 50% b) 25% c) 66% d) 100%

@ 50% = 8,000 x 0.5 x 0.5 x 0.5 = 1,000 r n

A = P (1 - 100 )
@ 25% = 8,000 x 0.75 x 0.75 x 0.75 = 3,375
@ 66% = 8,000 x 0.34 x 0.34 x 0.34 = 314
@ 100% = 8,000 x 0 x 0 x 0 = 0

Ans : a

247. The net income was reported at Rs. 24,000/- and the property sold for Rs. 3,00,000.
What capitalisation rate is applied to this sale?

a) 7% b) 8% c) 9% d) 10%

24,000
x 100 = 8%
3,00,000

Ans : b

248. The age of the building is 20 years. The life of the building is 40 years. The replacement
cost of the building as on 2018 is Rs. 5,000/-. The salvage value is Rs. 500/-. Using
straight line method, what is depreciated rate?

a) Rs. 2,250/- b) Rs. 2,500/- c) Rs. 2,750/- d) Rs. 3,000/-

254. A single storeyed house was constructed in 1993, cost Rs. 10,00,000/-, What is the
value in the year 2000 by cost index method of CPWD? Index in 1993 - 244, Index in
2000 - 447, Base index is 100 for 1981 .

a) Rs. 10,00,000 x (447 - 244) b) Rs. 10,00,000 x (244 / 447)

c) Rs. 10,00,000 x (244 + 447) d) Rs. 10,00,000 x (447 / 244)

C.I.I. 2000 447

10,00,000 x = 10,00,000 x
C.I.I. 1993 244

Ans : d

255. A machine was purchased for Rs. 1,00,000/- @ 15% depreciation of SLM. What is
the written down value after 2 years?

a) Rs. 70,000/- b) Rs. 80,000/- c) Rs. 60,000/- d) Rs. 90,000/-

1,00,000 - (2 x 15,000) = Rs. 70,000

Ans : a

256. A property has a net income of Rs. 30,000/-. One appraiser decides to use a
12 percent capitalisation rate, while a second appraiser uses a 10 percent rate. What
is the difference in appraisal value of the two valuers?

a) Rs. 50,000/- b) Rs. 60,000/- c) Rs. 40,000/- d) Rs. 70,000/-

100
30,000 x = 2,50,000 3,00,000 - 2,50,000 = Rs. 50,000
12
100
30,000 x = 3,00,000
10

Ans : a

257. Lessee receives an income of Rs. 30,000 per annum. He pays Rs. 16,000/- rent to
landlord. If the lessee receives a rent of 8% return, how much the landlord will expect
his return.
350

a) 0.09 b) 0.07 c) 0.01 d) 0.10

Lessee = 8%
Lessor = 7%
(Note : Other details are not relevant)

Ans : b

258. Total age of this building is 4 years. After four years, the depreciated value is equal to
24% of the cost. Find out the percentage of depreciation (near to answer) by WDV
method.

a) 24 b) 25 c) 30 d) 35

@ 24% = 100 x 0.76 x 0.76 x 0.76 x 0.76 = 33.36

@ 25% = 100 x 0.75 x 0.75 x 0.75 x 0.75 = 31.64
@ 30% = 100 x 0.70 x 0.70 x 0.70 x 0.70 = 24.01
@ 35% = 100 x 0.65 x 0.65 x 0.65 x 0.65 = 17.85

Ans : c

259. A machine was purchased of Rs. 18,000/- before 2 years. It is sold for Rs. 16,000/-
considering 10% depreciation (of Rs. 18,000/-) per annum. The machinery was sold
for

a) 2,000 less b) 1,600 less

c) 1,600 profit d) No loss and no gain

18,000 - (1,800 x 2) = Rs. 14,400

16,000 - 14,400 = Rs. 1,600 Profit

Ans : c

260. Factory building has 1200 S.M. built-up area. Plot area is 2000 S.M. Building is
25 years old and total life is 50 years. Replacement cost today is Rs. 25000 per S.M.
Industrial plot is available for Rs. 8000 per S.M. Which of the following is the fair sale
price (ignoring savage) for the property?

a) Rs. 4,60,00,000 b) Rs. 3,10,00,000

c) Rs. 1,60,00,000 d) Rs. 1,84,00,000
351

2,000 x 8,000 = Rs. 1,60,00,000

25
1,200 x 25,000 x = Rs. 1,50,00,000
50

b) Available comparable sale instances in the locality during relevant period

of valuation
c) Details of year of purchase of land and price paid while acquisition.
d) Analysis of data collection by giving details of weight ages adopted for
different factors and adjustment made in sale rate.

Ans : c

275. Which one of the following actions should be done by valuer if he has knowledge of
any prior valuer having been appointed before accepting the assignment?

a) Communicate in writing with prior valuer.

b) Reject the valuation assignment.
c) Carry out the valuation assignment and arrive at conclusions which are
within range of reasonableness of conclusions arrived by prior valuer.
d) Carry out the valuation assignment and arrive at independent conclusions
without knowledge of a prior valuer.

Ans : d

276. Which one of the following statement is the responsibility of valuer in case of value
dispute?

a) Prepare plan of property.

b) Prepare machine drawings.
c) Meet regulatory authorities for value discussions.
d) Substantiate his valuation report by providing relevant supporting
evidence.

Ans : d

277. Valuer should endeavour to ensure that he provides true and adequate information,
because

a) This is not required under any law

b) This makes a sensible valuation report
c) This misleads client
d) This misleads public

Ans : b
355

278. Statement that valuer does not have interest in property valued appears in one of
following section of report -

a) Declaration b) Conclusion
c) Assumptions and limiting conditions d) Summary

Ans : a

279. Opinion expressed on value for the property by the valuer as an expert witness in a
valuation dispute case is .................... to the court.

a) Binding b) Not binding

c) Of no value d) In form of advice

Ans : b

280. Acceptance of valuation report submitted by valuer in the court does not depend of
....................

a) Reasons given by the valuer in the valuation report

b) The valuer successfully withstanding the test of cross examination.
c) Age of the valuer
d) Substantiating the report by producing supporting instances as proof.

Ans : c

281. As an independent valuer, the valuer should not charge .................... fee.

a) Professional b) Success
c) Mandate d) Legal

Ans : b

282. A valuer should not use or divulge to other clients or any other party any confidential
information about the .................... company.

a) Subject b) Client
c) Public d) Listed

Ans : a
356

283. In the case of ...................., either outflow of resources to settle the obligation is not
probable or the amount expected to be paid to settle the liability cannot be measured
with sufficient reliability.

a) Liability b) Provision
c) Contingent liabilities d) Contingent assets

Ans : c

284. .................... refers to a situation where any person or a body corporate is unable to
fulfil its financial obligations (often occurring due to several factors such as a decrease
in cash flow, losses and other issues).

a) Insolvency b) Bankruptcy
c) Liquidation d) Acquisition

Ans : a

285. Deflation is ....................

a) Deficit budget
b) Reduction in taxation
c) Contraction in volume of money or credit that results in a decline of price
level
d) Increase in public expenditure

Ans : c

286. In case of a female intestate dying without issue but leaving her husband ....................

a) A husband will take all property

b) A husband will not take any of the property
c) A husband will take all property except property inherited from her father
or mother
d) A husband will only take 25 per cent of her property

Ans : c

287. Under sec 2(n) of RERA ‘common areas’ mean ....................

357

a) Open parking areas b) Terraces

c) Staircase d) Open parking space, terraces, and
staircase

Ans : d

288. Question of onus of proof when both parties lead evidence

a) TRUE b) FALSE
c) Will vary d) Need not be

Ans : c

289. X transfers Rs.500 to Y on condition that he shall execute a certain lease within three
months after V’s death, and, if he should neglect to do so to Z, if Y dies in X’s life time,

a) The disposition shall not take effect in favour of Z

b) The disposition in favour of Z takes effect
c) The disposition requires further conditions
d) The disposition in favour of X takes effect

Ans : b

290. Premature termination of lease is major .................... factor affecting the value of
leasehold property,

a) Physical b) Legal
c) Social d) Economic

Ans : d

291. A monopoly market will usually generate : ....................

a) Reasonably probable future use b) Physically possible use

c) Financially feasible use d) Present inferior user of
property

Ans : d

300. Under sec 60 of Indian succession act, who can appoint a guardian or guardians for
his child during minority?

a) Father b) Mother
c) Uncle d) Friends

Ans : a

301. Hypothetically plotting scheme is mainly used to value ....................

a) Large open land b) Flats

c) Industries d) Residence

Ans : a

302. Depreciation fund/sinking fund method is designed to :

a) Only provide for depreciation of an asset

360

b) Provide for depreciation & also to accumulate the amount for its
replacement
c) Provide for the payment of some liability
d) To accumulate the amount of its replacement

Ans : b

303. Market value of an object depends upon the future ....................that can be derived out
of it.

a) Benefits b) Demand
c) Supply d) Loan

Ans : a

304. Under profit method of valuation income is generated from ....................

a) The amount which Re 1 invested today will become after some time at
a certain rate of interest
b) The actual return obtain from an investment
c) So calculated that future discounted receipts and discounted payments
always show profit
d) A rate fixed by the reserve bank of India above which lending cannot be
done by any bank

Ans : b

314. Which of the following is not relevant while estimating market value of property with
improvements?

a) Continuation of existing use

Ans : b

346. Value is an estimate of .................... as it ought to be

369

a) Price + Profit b) Price

c) Cost d) Offer amount

Ans : b

347. Capital amount paid once in order to receive an annuity of Rs. 1 for a specified period
of time at the specified rate of interest is called ....................

a) Net amount b) Capital

c) Years purchase d) Capitalized value

Ans : d

348. Investment in real estate enjoys the benefits of ....................

a) Perfect competition b) Capital appreciation

c) Divisibility of holding d) Easy liquidity

Ans : b

349. As per RERA Act under sec 10 (3) if Government acquires multi-crop irrigated land
than ....................

a) Less value amount of land

b) No cultivable wasteland shall be developed for agricultural purposes
c) A less area o cultivable wasteland shall be developed for agricultural
purposes
d) Equivalent area of cultivable wasteland shall be developed for agricultural
purposes

Ans : d

350. The factor which is not to be considered when applying the residual method of valuation
is ....................

a) Anticipated price by sale of the finished property

b) Cost of development project
c) Profit motive of the developer
d) Social benefit of the project

Ans : d
370

351. Estimate of an amount for auction sale is known as .....................

a) Liquidation value b) Salvage value

c) Net present value d) Replacement value

Ans : a

352. Inadequate infrastructure in the locality results in .................... market value of property

a) Higher b) Lower
c) Stagnant d) 50 percent higher

Ans : b

353. No person shall construct any building with its plinth

a) Less than 40 C.Mts. b) Less than 45 C.Mts

c) Less than 55 C.Mts d) Less than 35 C.Mts

Ans : c

354. An ownership flat ‘A’ with 80 S.M. Area is in building in by lane. Similar flat ‘B’ in similar
building but located on main road is recently sold at Rs. 95,000 per S.M. If weightage
for location is considered at 20 percent, which of the following will be the fair sake
price of flat ‘A’?

a) Rs. 76,00,000 b) Rs. 91,20,000

c) Rs. 60,80,000 d) Rs. 50,00,000

Ans : c

355. As per IBC, 2016, an application against the decision of the liquidator rejecting the
claim of a creditor may be made to

a) The Insolvency and Bankruptcy Board of India

b) The National Company Law Tribunal
c) The committee of creditors
d) The Debt Recovery Tribunal

Ans : b
371

356. Which of the following economic activity is not in the teritary sector?

a) Banking b) Bee-keeping
c) Teaching d) Working in a call centre

Ans : b

357. In which of the following methods of depreciation, the depreciated replacement cost
of the building is directly obtained from the formula itself.

a) Written down value method b) Straight line method

c) Constant percentage method d) Sinking fund method

Ans : c

358. Which of the following denotes the dividend declared by the directors between two
annual general meetings?

a) Proposed dividend b) Final dividend

c) Interim dividend d) Unpaid dividend

Ans : c

359. A property fetches a leaseholder Rs. 40,000 per annum. The rent fixed to the paid to
the superior landlord is Rs. 17,000 per annum. If freeholder expects a return of 8 percent,
then the leaseholder should expect a rate as indicated below so that he makes a
reasonable profit.

a) 0.09 b) 0.07 c) 1.00 d) 0.01

Ans : a

360. Value of a property depends upon the future .................... that can be derived out of it.

a) Benefits b) Demand
c) Supply d) Cost

Ans : a

361. When there are only few sellers of the commodity, the market is called
372

a) Monopoly b) Duopoly
c) Oligopoly d) Monopsony

Ans : c

362. Which of the following investment is having constrains of liquidity?

a) Long term Govt. Securities b) Immovable properties

c) Shares & stocks d) Bank FDs

Ans : b

363. As per sec 60A under transfer of property act, Where a mortgagor is entitled to
redemption he may require the mortgage, instead of re-transferring the property, to
assign the mortgage debt and transfer the mortgaged property to such third person
as the mortgagor may direct than the mortgagee.

a) Shall not be bound to assign and transfer accordingly.

b) Shall be bound to assign and transfer accordingly.
c) Is bound if the mortgagor assents
d) Shall not be bound to assign

Ans : b

364. Supply and demand is considered as .................... aspect affecting the value of the
property.

a) Physical b) Social
c) Economic d) Legal

Ans : c

365. Whenever there us a provision to the effect ‘that the court shall presume a fact’ the
court ..................... It is compelled to take the fact as provided, i.e., it shall have to
presume the fact.

a) Can exercise its discretion b) Cannot exercise its discretion

c) May exercise its discretion d) Will exercise its discretion

Ans : c
373

366. Which of the following mathematical formula is used to find out Years Purchase for
annuity receivable in perpetuity?

a) 100/Rate of interest b) 1 / {1-(100/rate of interest) ^n}

c) ((100/rate of interest) ^n)-1 d) {((100/rate of interest) ^n)-1}/rate of
interest

Ans : a

367. .................... is a situation whereby a court of competent jurisdiction has declared a

person of other entity insolvent, having passed appropriate orders to resolve it and
protect the right the creditors

a) Bankruptcy b) Insolvency
c) Liquidation d) Acquisition

Ans : a

368. Which of the following investment finds hedge against inflation

a) Long term Govt securities b) Bank FD’s

c) Shares & stocks d) Immovable properties

Ans : d

369. The plots which is connected to main road through a passage is called ....................

a) Narrow plots b) Rectangular plots

c) Ribbon plots d) Tandem plots

Ans : d

370. Who is not a special purchaser of property among the following?

a) Foreign purchaser b) Relative of the seller

Ans : d

377. In 99 year perpetuity, lease is to be extended for another 99 years

a) Details of age of lessor and lessee

b) Improvements and extra FSI used
c) Date of the year of commencement
d) Date of start first year

Ans : c

378. Section 54 of Easement act the grant of License may ....................

a) Express only b) Implied only

c) Express or Implied d) Oral only

Ans : c

379. Which of the following can be transferred under the Transfer of Property Act?

a) Easement along with the dominant heritage

b) Political pension
c) Succession
d) Stipends of Government civil pensioners

Ans : a

380. ‘A’ leases land to ‘B’ on condition that he shall walk a hundred miles in an hour. The
lease is ....................

a) Valid b) Void
c) Voidable d) Illegal

Ans : b

381. Which of following statement is true regarding Hindu succession (amendment) Act
2005.
376

a) Women can now act as Karta of joint Hindu family.

b) Women cannot act as Karta of joint Hindu family before or after passing
of the Hindu
c) Succession (amendment) Act 2005.
d) Women cannot become Karta of joint Hindu family.

Ans : a

382. When the result of a combination of two or more assets or interests where the combined
value is more than the sum of the separate values is known as -

a) Real investment value b) Synergistic value

c) Liquidation value d) Hope value

Ans : b

383. Onus of proof is a .................... in the evaluation of evidence

a) Fact b) Principle
c) Continuous process d) One time process

Ans : c

384. Which of the following is not the surrender of lease?

a) Premature termination of a lease.

b) Unilaterally terminated by a lessee
c) Terminated with the consent of the lessor
d) If it happens post expiry of the lease

Ans : d

385. Under which of the valuation approach, future cash flows from property will yield to
capitalized value of property?

a) Market approach b) Income approach

c) Cost approach d) Depreciated Replacement Cost
Method

Ans : b
377

386. Under Sec 58 of Indian Easements Act the grantor cannot render the property which is

a) Safe b) Unsafe
c) Dangerous d) Unsafe & dangerous

Ans : d

387. Annual Sinking fund to be set aside each year for recouping Rs 1 at the end of
6 years, at 5 percent rate of interest is represented by formula ....................

a) 0.05/ ((1+ 0.05)6-1} b) {(1+0.05)6+1} / 0.05

c) 5 / (1+ 5)6-1) d) 0.05 / {(1+0.05)6+1}

Ans : d

397. Which property does the corporation has a power to acquire

a) Movable
b) Immovable property
c) Both movable & immovable property
d) Neither movable & immovable property

Ans : a

398. The value of the rent Controlled properties will have .................... value than vacant
property.

a) 100 percent higher b) 50 percent higher

c) Exactly same d) Lower

Ans : d

399. In case of gift, if donee dies before acceptance, then,

a) Gift is valid b) Gift is void

c) Gift is reduced d) Court has to decide

Ans : b

400. In case of .................... of contract, the motive (intention) for the breach is immaterial.

Ans : a

407. Which of the following represents the year purchase for Rs.1 with remunerative rate of
interest at 8% and annual sinking fund amount to be set aside for recouping Rs .1 is
0.021.

a) 1 / (0.08+0.021) b) 0.021/0.08
c) (0.08+0.021) / (0.021) d) 1/(0.08-0.021)

Ans : a

408. Which one of the following is not essential element of the basic concepts of valuation
of immovable property?

a) Scarcity b) Transferability
c) Safety of assets d) Utility

Ans : c

409. ‘A’ owes B Rs. 1000 payable on 1st December 2017 with interest. On 1st June 2017
A offers to pay the amount with interest up to 1st of June 2017.

a) It is a valid Tender b) It is not a valid Tender of

performance
c) It is a legal tender d) It is an Illegal Tender

Ans : a

410. Lessor has right to ....................

a) Receive profit rent from the property for the unexpired period of the lease
b) Receive lease rent for the unexpired period of lease
c) Receive lease rent for the economic life of the building.
d) Receive lease rent for the physical life of the building.

Ans : b
382

411. Which of the following is not a criterion in determining the highest and best use of
land?

a) Physically possible b) Legally permissible

c) Financially feasible d) Socially acceptable

Ans : d

412. Marriage value (also often referred to as synergic value) in valuation basically
means ....................

a) Extinction of lease holder’s interest in the property when the merger

takes place
b) Merger of right of co-owner of property with the co-owner
c) Increase in the value of the property due to merger of two different
interests held by to different persons.
d) Owner’s interest in the property which is extinguished at the time of
merger.

Ans : c

413. The important criteria for the selection of the best land in the town is

a) More width of road b) Industrial zone

c) Prime location and High FSI d) Residential zone

Ans : c

414. Which one of the following is not the characteristic of real estate market?

a) No free flow of information b) It is imperfect market

c) It is perfect investment market d) Heterogeneity

Ans : b

415. An agreement is voidable by the party whose consent is obtained by

a) Misrepresentation b) Fraud
c) Incomplete information d) Wrong information

Ans : b
383

416. Which of the following is not to be considered while estimating Market value of the
property?

c) Average-of-the year Digits d) Constant percentage method

Ans : c
385

426. Right to property is a .................... right.

a) Fundamental b) Statutory
c) Constitutional d) Human

Ans : c

427. Number of years for which a new asset is profitably used for its intended purpose is
known as ....................

a) Economic life b) Normal useful life

c) Age d) Physical life

Ans : a

428. Useful life of an asset is affected by which of the following?

a) Cost b) Replacement cost

c) Wear and tear d) Net Book Value

Ans : c

429. An investment pays Rs. 300 annually for five years, with the first payment occurring
today. The present value (PV) of the investment discounted at a 4% annual rate is
approximately ....................

a) Rs. 1,336 b) Rs. 1,389

c) Rs. 1,625 d) Rs. 1,925

Ans : b

430. Where a coparcenary consists of several branches and a partition takes place

a) Each branch takes as per capital

b) Each branch and member of each branch takes per capital
c) Each branch and member of each branch takes per stripes
d) Each branch takes per stripes and member of each branch takes per
capital

Ans : a
386

431. A valuer should co-operate and be available for .................... and investigation carried
out by the concerned authority

a) Inspection b) Scrutiny
c) Alliance d) Argumentation

Ans : b

432. Valuer should adopt .................... rate of capitalization if income flow is safe & secured.

a) Lower b) Higher
c) Same rate as lending rate of bank d) Interest rate of his own choice

Ans : a

433. Which of the following is not in relevant factor while estimating depreciated replacement
cost of a building?

a) Year of construction b) Size

c) Accessibility d) Specification

Ans : c

434. Not true with respect to valuation of Joint venture development of property

a) estimate market value of land offered for development of land owner

b) estimate cost of construction of building proposed on land.
c) required to consider which political party is ruling in the state.
d) consider value of financial benefit and profit @ future date that is
contingent upon performance and fulfillment of terms of contract.

Ans : c

435. In the following approach to valuation, an accrued depreciation must be counted to

determine market value of assets

a) Market approach b) Income approach

c) Cost approach d) Discounted cash flow method

Ans : c
387

436. Common in distress sale forced sale ....................

a) Adequate marketing time b) Market value

c) Insufficient market time d) Private negotiations

Ans : c

437. Economic principle is not required to be considered for conventional valuation of

property ....................

a) Demand b) Price
c) Utility d) Cost

Ans : d

438. Opinion expressed on value of the property by valuer as expert witness in a valuation
of dispute case is .................... to the court.

a) binding b) not binding

c) of no value d) inform of advice

Ans : b

439. Infrastructure works like augmentation of road networks & transport facilities will result
in increased ....................

a) Environmental deterioration b) Overall developments

c) Crime Rate d) Withdrawal of capital

Ans : b

440. Not a fact but an estimate

a) cost b) price
c) value d) Loss

Ans : c

441. Adverse changes to demand for the product or services produced by an asset will
result into ....................
388

a) Physical b) Functional
c) Economic d) Legal

Ans : c

442. Factor is not considered for weightage adjustment in sales comparison

a) Location b) Size
c) Accessibility d) payable by seller of comparable

Ans : d

443. Valuation of land always involves consideration on the principle of

a) HABU b) Competition
c) Surplus productivity d) Contribution

Ans : a

444. Sec 107 under transfer of act, a lease of immovable property from year to year, or for
any term exceeding one year or reserving a yearly rent, can be made only by

a) Ordinary instrument b) Registered instrument

c) Unregistered instrument d) Oral

Ans : b

445. Why should an entrepreneur do a feasibility study for a new venture?

a) To see if there are possible barriers to success

b) To identify possible sources of funds
c) To estimate the expected sales
d) To explore potential customers

Ans : a

446. Fully developed land with fully tenanted building occupied by the protected tenants by
.................... of valuation

a) Any method b) Cost approach

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c) Market approach d) Income approach

Ans : d

447. Which is the most appropriate method of valuation for an income generating
commercial asset?

a) Land & Building method b) Any method

c) Direct comparison method d) Discounted cash flow method

Ans : d

448. Which of the following need not form part of the valuation report if fully tenanted property
is offered for sale by the user of the report?

a) Prevalent cost of construction in the locality

b) Total rent receivable from the property
c) Details about total life period for which the rental income flow will continue
d) Details of all outgoings and prevalent rate of capitalization in the market
for similar property in the locality.

Ans : a

449. The property falling in the locality lacking in the infrastructure will .................... with the
value of the property

a) Increase b) Decrease
c) Stabilize d) Have no relation with

Ans : b

* * *
390

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391

Pages 391 - 408

PART - VII

MODEL QUESTION PAPER

PRESCRIBED BY IBBI
392

This page is kept vacant intentionally.

Part - VII 393

MODEL QUESTION PAPER FOR VALUATION EXAMINATION

Asset Class: LAND and BUILDING

1. The price elasticity of demand measures the change in the quantity demanded of a
service in relation to a change in its price when nothing but the ___________ changes.
a) price
b) cost
c) quality
d) value
Ans.(a)

2. Other things remaining same, the law of demand states __________.

a) the higher the price, the lower the quantity demanded
b) the higher the price, the higher the quantity demanded
c) the higher the price, the lower the quantity supplied
d) the higher the price, the higher the quantity demanded
Ans.(a)

3. A market which has only one seller selling a homogeneous product to many buyers, is
known as _______.
a) Monopoly
b) Oligopolistic
c) Perfect Competition
d) Monopolist Competition
Ans.(a)

4. Which of the following statements is not true about factors of production?

a) Land means natural resources.
b) Labour means human resources.
c) Capital means financial resources.
d) Entrepreneurship means pursuit of opportunity beyond resources controlled.
Ans.(c)

5. Which of the following is not true about Ricardian theory of rent?

a) Rent increases with increase in population.
b) Rent is surplus above cost.
c) Rent is unearned income.
d) Rent arises only in the short run.
Ans.(d)

6. Which of the following is not correct about functions of money?

a) It is a medium of exchange.
b) It is a measure of economic power.
c) It is a standard of deferred payments.
d) It is a store of value.
Ans.(b)

7. Which of the following is not a cause of demand-pull inflation?

a) Increase in wages and salaries
b) Increase in Government spending
394

c) Increase in interest rates

d) Increase in exports
Ans.(c)

8. If a person has an income of Rs.30000 and his consumption is Rs.10000, then his
propensity to save is____.
a) 1.33
b) 0.33
c) 0.67
d) 1.50
Ans.(c)

9. Which of the following is an example of secondary sector of an economy?

a) Mining
b) Forestry
c) Food Processing
d) Pisciculture
Ans.(c)

10. How are Gross Domestic Product (GDP) and Gross National Product (GNP) related?
a) GNP = GDP – NR + NP
b) GNP = GDP + NR - NP
c) GNP = GDP + EX - IM
d) GNP = GDP -EX + IM
Ans.(b)

11. In double entry system, accounts are primarily classified in to ___________.

a) Receiver account & Giver account
b) Income account & Expenses account
c) Real account & Nominal account
d) Personal Account & Impersonal account
Ans.(d)

12. Discount received is recorded on which side of a cash book?

a) Receipts
b) Payments
c) Income
d) Expense
Ans.(b)

13. For a real estate construction company, which of the following are not part of Profit
and Loss Statement?
a) Revenue from apartment sales
b) Interest paid to lenders
c) Cash deposited in bank
d) Depreciation expense
Ans.(c)

14. Proposed dividend is shown in the Balance Sheet of a company under the head _____.
a) provisions
395

b) reserves and surplus

c) current liabilities
d) other liabilities
Ans.(a)

15. Difference between variable cost per unit and selling price can be classified as______
margin per unit.
a) contribution
b) gross
c) net
d) profit
Ans.(a)

16. Right to property is a ___ right.

a) fundamental
b) statutory
c) constitutional
d) human
Ans.(c)

17. Which of the following is not a requirement of a contract?

a) Competent Parties
b) Free Consent
c) Legal Object
d) Adequate Consideration
Ans.(d)

18. Performance of contract is one of the methods to__________.

a) create a new contract
b) set-aside a contract
c) make a contract void
d) discharge a contract
Ans.(d)

19. In case of a ___________, the duty is one imposed by the law and is owed to the
community at large.
a) contingent contract
b) cecile agreement
c) government tender
d) tort
Ans.(d)

20. As per section 36 of the Insolvency and Bankruptcy Code, 2016, the liquidator shall
hold the liquidation estate ___________.
a) as an agent of debtor
b) as an agent of committee of creditors
c) as a fiduciary for the benefit of all the creditors
d) as a fiduciary for the benefit of all the stakeholders
Ans.(c)
396

21. Section 231 (2) of the Companies Act, 2013 empowers a tribunal to __________, if it
is satisfied that the compromise sanctioned under section 230 cannot be implemented
satisfactorily, and the company is unable to pay its debts as per the scheme.
a) wind up the company
b) restructure the debt
c) call for rearrangement
d) replace the management
Ans.(a)

22. In a right skewed frequency distribution, __________.

a) mean is typically greater than the median
b) mean is typically less than the median
c) mean is typically less than the mode
d) mean is equal to mode which is equal to median
Ans.(a)

23. When numbers are associated with weights, then obtained mean is said to be _______.
a) weighted arithmetic mean
b) harmonic mean
c) standard mean
d) geometric mean
Ans.(a)

24. If two events A and B are mutually exclusive, the probability of occurrence of either A
or B is__________.
a) difference between individual probabilities of A and B
b) sum of the individual probabilities of A and B
c) always 1
d) one minus sum of the probabilities of A and B
Ans.(b)

25. Gradual shifting of a time series over a long period of time is called as __________.
a) periodicity
b) cycle
c) regression
d) trend
Ans.(d)

26. Technology that permits safe, efficient, and inexpensive clean-up of contaminants in
property tends to minimise _________ in asset value.
a) decrease
b) increase
c) fluctuations
d) variations
Ans.(a)

27. Which planning provision is required around the battery limit of industry and for
industry having odour problem?
a) No development zone
b) Green belt
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c) Special permission zone

d) Industrial regulation zone
Ans.(b)

28. Which of the following is not covered under the Indian Forest Act, 1927?
a) Reserved forest
b) Village forest
c) Protected forest
d) Prohibited forest
Ans.(d)

29. Which of the following legislations does not provide for pollution control?
a) The Water (Prevention and Control of Pollution) Act, 1974
b) The Air (Prevention and Control of Pollution) Act, 1974
c) The Environment (Protection) Act, 1986
d) The Technology (Transfer of Abuse) Act, 2007
Ans.(d)

30. A valuer shall act with objectivity in his professional dealings by ensuring that his
decisions are made ________.
a) without the presence of any bias
b) with coercion
c) with confidence
d) with undue influence of any party
Ans.(a)

31. A valuer, while respecting the confidentiality of information acquired during the course
of performing professional services, shall maintain proper working papers for a period of
______.
a) 3 years
b) 2 years or such shorter period as required in its contract for a specific valuation
c) 3 years or such longer period as required in its contract for a specific valuation
d) 2 years
Ans.(c)

32. Integrity of registered valuer is seriously affected by ____.

a) being honest
b) being straightforward
c) misrepresenting any facts or situations
d) ignoring public interest
Ans.(c)

33. Which of the following is not a duty of the valuer?

a) To verify ownership in document and occupancy on actual site
b) To identify plot number in document as well as on-site
c) To be responsible for correctness of survey findings by his assistant
d) To investigate title of the property to be valued
Ans.(d)
398

34. Under the Right to Fair Compensation and Transparency in the Land Acquisition and
Rehabilitation Act, 2013, market value is decided by the collector as per________.
a) circle rate/guidelines rates of last 5 years
b) the average of the sale price for similar type of land being acquired, ascertained from
the highest fifty per cent of the sale deeds registered during the preceding three years
in the nearest village or nearest vicinity of the land being acquired
c) purchase price of adjoining land
d) purchase price paid by the owner at the time of purchase of land which is to be acquired
Ans.(b)

35. Which of the following would have effect on development potential and values of
properties?
a) Floor space index
b) Ownership pattern
c) size and height of rooms
d) provision of utility services in a building
Ans.(a)

36. The approach to valuation of rented properties depends on_________.

a) nature and behaviour of landlords
b) category of tenants - tenant protected or not protected under the applicable rent act
c) rent paying capacity of the tenant
d) cordial and homely relationship between landlord and tenant
Ans.(b)

37. As per the Real Estate (Regulation and Development) Act, 2016, what percentage of
collections needs to be deposited by developers in Escrow accounts towards the cost of
construction including that of land?
a) 50%
b) 60%
c) 70%
d) 80%
Ans.(c)

38. As per the Transfer of Property Act, 1882, immovable property includes ______.
a) furniture
b) growing crops
c) grass
d) things permanently fastened to anything attached to the earth
Ans.(d)

39. Where, on a transfer of property, an interest therein is created in favour of a person to

take effect only on the happening of a specified event, such interest is called _________.

a) simple interest
b) diminishing interest
c) vested interest
d) contingent interest
Ans.(d)
399

40. A mortgage is a transfer of an interest in a specific immovable property for the purpose
of securing __________.
a) the payment of money advanced by way of loan
b) fully paid up debts
c) transfer of ownership of property
d) transfer of rights to sublease
Ans.(a)

41. A gives Rs. 5,00,000 to B on condition that he shall marry A’s daughter C. At the date
of transfer, C was dead. The transfer is void ______.
a) it is forbidden by the law
b) court regards it as immoral or opposed to public policy
c) it is impossible to fulfil the condition
d) it is immoral transfer
Ans.(c)

42. The Hindu Succession Act, 1956 does not apply to ______.
a) a follower of the Arya Samaj
b) a Sikh by religion
c) a child both of whose parents are Jains by religion
d) a person who is a convert to Christian
Ans.(d)

43. Which of the following items cannot be transferred under Inheritance/Succession laws
in India?
a) Personal movable property
b) Jewellery
c) Property not owned by self
d) Personal belongings
Ans.(c)

44. Value is an estimate of what ______ ought to be.

a) value
b) price
c) cost
d) worth
Ans.(b)

45. The value at the end of utility period of the asset without being dismantled is called
____ value.
a) salvage
b) realisable
c) scrap
d) junk
Ans.(a)

46. Real estate has some _______and, therefore, has a value.

a) profit
b) immobility
c) characteristics of non-marketable and non-investment property
400

d) use
Ans.(d)

47. Which of the following factor is not physical yet affects the valuation of the subject
property?
a) Damages to the building
b) Gross Domestic Product
c) Property location
d) Neighbourhood properties
Ans.(b)

48. Property is a ___ concept.

a) physical
b) legal
c) technical
d) social
Ans.(b)

49. The price that would tend to prevail in a free, open and competitive market on the basis
of equilibrium set by the forces of demand and supply is called ______.
a) value in exchange
b) value in use
c) optimum value
d) realisable value
Ans.(a)

50. What is the subject matter of valuation?

a) Interest in a property
b) Land and Building
c) Standard Rent
d) Profit Rent
Ans.(a)

51. A fund formed by setting aside an annual recurring amount for a given period of time
to recoup capital invested in a landed property is called ____.
a) sinking fund
b) annual amount of Rs. 1
c) annual value
d) investment value
Ans.(a)

52. A project requires an investment of Rs.10 lakh and has an NPV of Rs.16 lakh. What is
its profitability index?
a) 1.0
b) 1.6
c) 0.6
d) 3.2
Ans.(b)

53. Which one of the following best defines Annual sinking fund?
401

a) Annual sum required to be invested to amount to Rs. 1/- in specified years

b) Monthly sum required to be invested to amount to Rs. 10/- in specified years
c) Annual sum required to be invested to amount to Rs. 10/- in specified years
d) Annual sum required to be invested to amount to Rs. 100/- in specified years
Ans.(a)

54. A proposed development of Metrorail station in the city would _____.

a) decrease in supply of real estate in surrounding area
b) increase demand of real estate in surrounding area
c) decrease cost of construction of buildings in surrounding area
d) decrease demand of the real estate in surrounding area
Ans.(b)

55. Which one of the following is not a characteristic of real estate market?
a) No Free flow of information
b) It is imperfect market
c) It is perfect investment market
d) Heterogeneity
Ans.(c)

56. Which factor would negatively influence demand in real estate?

a) Low liquidity
b) Potential of capital appreciation
c) Regular income
d) Redevelopment potential of the property
Ans.(a)

57. Under rent capitalization method, value of the property increases with_______.
a) higher property tax
b) higher capitalization rate
c) lower capitalization rate
d) longer duration
Ans.(c)

58. In case the unexpired period of lease is too long then reversionary value would be___.
a) negative net present value
b) zero
c) negligible
d) less than zero
Ans.(c)

59. Which among the following is not a factor affecting market rent?
a) City
b) Location
c) Type of building
d) Turnover of the lessee
Ans.(d)

60. In relation to a lease agreement, the actual rent specified in the lease is called _____.
a) contractual rent
402

b) effective rent
c) negotiated rent
d) standard rent
Ans.(a)

61. Which of the following is not correct about ‘surrender of lease’?

a) Premature termination by lessee
b) Unilaterally terminated by a lessee
c) Terminated with the consent of the lessor
d) It can happen post expiry of the lease
Ans.(d)

62. Acceptance of project depends on __________.

a) positive net present value
b) negative net present value
c) zero net present value
d) zero internal rate of return
Ans.(a)

63. For which of the following, profit method of valuation is most appropriate?
a) Vacant Land
b) Petrol pump
c) Residential Home
d) School
Ans.(b)

64. The market demand curve shows ____________.

a) effect on market supply of a change in the demand for a good or service
b) marginal cost of producing and selling different quantities of a good
c) quantity of a good that consumers would like to purchase at different prices
d) effect of advertising expenditures on the market price of a good
Ans.(c)

65. Market approach basically operates on the_______.

a) principle of increasing and decreasing returns
b) principle of substitution
c) principle of conformity
d) principle of contribution
Ans.(b)

66. Which of the following is not a source from which sale instances of immovable property
in a particular locality can be collected?
a) Sales record at the registrar’s office
b) Advertisements in newspapers
c) Auction sale information from different authorities
d) Share market
Ans.(d)

67. The residual income from real estate available to land is representative of the principle
of_______.
403

a) surplus productivity
b) balance
c) increasing and decreasing returns
d) consistent use
Ans.(a)

68. Which of the valuation method is generally used for carrying out valuation of large
plots when sale instances of large size plots in the locality are not available?
a) Sales comparison method
b) Hypothetical plotting scheme
c) Hypothetical building scheme
d) Adopting rental instances
Ans.(b)

69. Quick estimation of costs of construction can be carried out by_________.

a) sum of digit method
b) detail estimation
c) plinth area rate
d) discounted cash flow method
Ans.(c)

70. Actual survival life of the building before it collapses is called the _____.
a) useful life
b) economic life
c) physical life
d) residual life
Ans.(c)

71. Asset which has become outdated mainly due to the planning and designing being
unsuitable for present day requirement of the user is an example of ___________.
a) technological obsolescence
b) economic obsolescence
c) functional obsolescence
d) both technological obsolescence as well as economic obsolescence
Ans.(c)

72. Depreciated Replacement Cost is market value of special purpose industrial plant
building subject to potential______.
a) profitability
b) cost
c) price
d) value
Ans.(a)

73. Which one of the following valuation methodology is most appropriate for valuing a
non-income generating residential bungalow?
a) Discounted Cash Flow Method
b) Sales Comparable & Depreciated Replacement Cost Method
c) Profit Method
d) Direct Capitalization Method
404

Ans.(b)

74. While carrying out valuation of property for bank finance, which of the following is not
to be taken into consideration?
a) Age of the building
b) Rent fetching capacity of the property
c) Economic obsolescence
d) Amount of loan
Ans.(d)

75. The income chargeable under head ‘capital gains’ is computed by deducting the
___________ from the full value of the consideration received as a result of transfer of the
capital asset __________.
a) expenditure incurred wholly and exclusively in connection with such transfer
b) expenditure incurred wholly and excessively after such transfer
c) indexed cost of repairing to be carried out
d) index cost of any improvements carried out after such transfer
Ans.(a)

76. Under the provision of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, enforcement of security interest means
__________.
a) sale of assets of the borrowing party by the bank
b) sale of charged assets by the secured creditor through the Debt Recovery Tribunal
c) sale of charged assets by the secured creditor without court intervention
d) getting bank's charge registered with central registry
Ans.(c)

77. If owner of plot A with house has a right of way over his neighbour’s plot B for
beneficial enjoyment of house, owner A is called ____.
a) co-owner
b) dominant owner
c) joint owner
d) servient owner
Ans.(b)

78. Which of the following transaction is an arm’s length transaction?

a) Transaction between parties at auction sale.
b) Transaction between parent and subsidiary company
c) Transaction between two old friends
d) Transaction between two brothers
Ans.(a)

79. Which return would you adopt as base while determining appropriate rate of the net
profit, unless it is otherwise found unsuitable?
a) The return from investments in stock and shares
b) The return from gilt-edge security
c) Interest paid in the saving account
d) The return from investment in gold
Ans.(b)
405

80. Which of the following judgements recognises the concept ‘Valuation is an art, not an
exact science. Mathematical certainly is not demanded, nor indeed is it possible.’.
a) K.P. Varghese vs ITO (1981) 131 ITR 597 (SC)
b) Gold Coast Trust Ltd. vs Humphray (1949) 17 ITR 19
c) Rustam C Cooper vs Union of India AIR 1970 SC 564
d) Hays Will Trust vs Hays and Others (1971) 1 WLR 758
Ans.(b)

81. Which of the following is expressed by a valuer while giving expert evidence in the
examination-in-chief in the court?
a) Opinions regarding values with reasoning
b) Evidence of facts
c) Answers without reasoning
d) Answers only in ‘yes’ or ‘no’
Ans.(a)

82. In context of the property insurance, which of the following is a human peril?
a) War
b) Age of the Property
c) Cyclone Facade
d) Upliftment
Ans.(a)

83. An insurance policy generally allows one to value the respective building and/or
contents by-____
a) Internal Rate of Return
b) Replacement Cost
c) Floor space index
d) Ground Coverage
Ans.(b)

84. A fire broke out in Hemant's factory and damaged half of the stock which was to be
shipped to a nearby cloth dealer. His fire insurance policy had the average clause in it. Actual
value of the stock: Rs.3,00,000, Sum insured for the stock: Rs.2,00,000, Loss incurred:
Rs.1,50,000 (As half the stock was destroyed). The claim amount will be Rs. ______.
a) Rs.1,00,000
b) Rs.3,00,000
c) Rs.2,00,000
d) Rs.1,50,000
Ans.(a)

85. When insurable amount is lower than ‘value at risk’, it is called ______.
a) over insured
b) fair insurable amount
c) fair premium for insurance
d) under insured
Ans.(d)
406

86. Upon paying the amount of loss to the insured, the insurer steps into the place of the
insured, taking over all his rights. It is called exercise of __________.
a) right of reinstatement
b) right of contribution
c) right of subrogation
d) right to salvage
Ans.(c)

87. Where the opinion of an expert is required for litigation in valuation, the report ____.
a) must rely on requirements imposed by the local authority where the property is located
b) rely on requirements imposed by the local authority where the Client is registered
c) rely on requirements imposed by the local authority of the registered office of the
lawyer
d) rely on requirements imposed by the local authority of the registered office of the reliant
party
Ans.(a)

88. While valuing assets where the valuer is not conversant with its features, __________.

a) it is advisable to engage the services of an expert and the signed report of the expert be
made a part of valuation report
b) it is advisable to engage the services of an expert and his report need not be made a part
of valuation report
c) he can privately seek the services of such expert and need not disclose in the report
d) it is enough to mention in report about details of expert engaged.
Ans.(a)

Attempt Questions 89 to 94 based upon the following case study.

A business man purchased a plot of 1000 Sq.mt. in a posh locality of a city in the year 1987 for a price
of Rs. 30,00,000. In the year 1988, he constructed a residential bungalow having 300 Sq.mt. built up
floor area at ground level and 100 Sq.mt. built up area at first floor level at the cost of Rs. 14,00,000.
Prevalent replacement cost of similar bungalow as on today is Rs. 30,000 per Sq.mt. Prevalent land
price in the locality at present is Rs. 60,000 per Sq.mt. Age of building is 30 years and the total life of
the building is 60 years.

89. What will be the depreciation amount of the bungalow by adopting straight line method
of depreciation and considering scrap value at 10 % ?

a) Rs.60,00,000
b) Rs.54,00,000
c) Rs.45,00,000
d) Rs.12,00,000
Ans . (b)

90. What will be the depreciation amount of the bungalow by adopting constant percentage
method of depreciation?

a) Rs.54,00,000
b) Rs.47,37,600
c) Rs.60,00,000
407

d) Rs.54,46,000
Ans. (b)

91. What will be the market value of the land at present?

a) Rs.240,00,000
b) Rs.600,00,000
c) Rs.480,00,000
d) Rs.410,00,000
Ans. (b)

92. What will be the total market value of the bungalow property for the bank loan purpose?

a) Rs.600,00,000
b) Rs.666,00,000
c) Rs.612,00,000
d) Rs.566,10,000
Ans (b)

93. What is the balance economic life of the building?

a) 60 years
b) 30 years
c) Zero
d) 45 years
Ans. (b)

94. Which of the following will not be considered for the estimation of present market value of
above property?

a) Deprecation
b) Current Replacement cost of the building
c) Economic obsolescence
d) Current land rate
Ans. (c)

****
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409

Pages 409 - 468

PART - VIII

MOCK TESTS - 3 Nos.

410

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411

Part - VIII

MOCK TEST NO. 1

1. A property was acquired on 01.04.1972. The property was sold on 01.04.2017. On

which date, the FMV is to be ascertained?

a) 01.04.1981 b) 01.04.2001
c) 01.04.1972 d) 01.04.2017

Ans : b

2. 99 years lease with renewal clause is called as

a) Long lease c) Short lease

c) Perpetual lease d) None of the above

Ans : c

3. A person seeks an income of Rs. 1,000 per annum from an investment. He wishes
this is to be an 8% return on his investment. What is the amount he has to invest?

a) Rs. 1,000/- b) Rs. 80/-

c) Rs. 12,500/- d) Rs. 10,000/-

Ans : c

4. If any property is to be valued for mortgage purpose to bank as collateral security,

the important factor to be considered is

a) Loan amount b) Value of the property

c) Location of the property d) Marketability & enforceability

Ans : d

5. Which are same?

a) Straight line method b) Linear method and

and linear method constant percentage method
412

c) Linear method and d) Sinking fund and

sinking fund method straight line method

Ans : b

r n
6. A=P(1- ) - this formula is to find the
100

a) Depreciated value by constant percentage method

b) Depreciated value by straight line method
c) Depreciated value by sinking fund method
d) Replacement value by straight line method

Ans : a

7. The meaning of cost of construction with reference to income tax valuation is

a) The value of the property purchased

b) The market value of land and depreciated value of building
c) The amount spent by the assessee in the construction of his new
building
d) The replacement value of the building

Ans : c

8. Land and building method is also known as

a) Depreciated cost method b) Detailed estimate method

c) Book value method d) Composite rate method

Ans : a

9. A corner plot is normally enjoys a higher rate by ............ percentage when

compared to the rate of single frontage plot

balance sheet of a company. This is called as
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a) Direct appraisal method b) Written down value

c) Straight line method d) Constant percentage method

Ans : b

16. Workout N.P.V. of a building having 20 years of age and 60 years of total life. Its
replacement cost as on today is Rs. 4,30,000/-. Salvage value 10%. Adopt SLM

a) Rs. 3,11,000/- b) Rs. 4,11,000/-

c) Rs. 3,01,000/- d) Rs. 4,01,000/-

Ans : c

17. In this method, rate of depreciation is adopted as prescribed in Income tax Act -
This is called as

a) Statuatory depreciation method b) Linear method

c) Straight line method d) Sinking fund method

Ans : a

18. Vyagramukhi plot has .............. front width along the road and ............. width in the
rear side.

a) Wider, narrow b) Equal, equal

c) Narrow, wider d) None of the above

Ans : a

19. The mortgager delivers possession of the property to the mortgagee. The
mortgagee receives rent and profits from the property and retains the possession
till the full mortgage money is paid. This mortgage is called as

a) Simple mortgage b) Mortgage by conditional sale

c) Usufructuary mortgage d) English mortgage

Ans : c

20. Additional securities pledged to the bank in addition to the primary security are
called as
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a) Primary security b) Collateral security

c) Current assets d) Stocks

Ans : b

21. It is an estimate of the price of the property would fetch in open market on ‘as is
where is basis’ in a short possible time is called as

a) Reserve price b) Market value

c) Forced sale value d) Auction value

Ans : c

22. Collapse of American Economy in 2008 - 2009 was due to

a) Lehman Brothers scam b) Joseph Edwin scam

c) Charles Brothers scam d) Winston (p) Ltd scam

Ans : a

23. .......................... possession is taken by the bank when the borrower is in

33. The main requirement to write a valuation report

a) Technical and communication skill

b) Skill in the English language
c) To write a detailed report like a project report
d) Good presentation

Ans : a

34. Many a times, use of ‘cut’, ‘copy’ and ‘paste’ functions in computer make valuers
lazy about report writing which may result in enquiry by ................

a) Clients b) User
c) Investigation agency like d) Lawyer
CBI, Policy, etc.

Ans : c
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35. While estimating the market value for mortgage, a valuer should consider himself
to be ..............

a) a lawyer b) a mortgage
c) a mortgagor d) both mortgagor and mortgagee

Ans : d

36. It means reduce in numbers of exhaust. It is the word applied to the consumption of
natural resources. Typical examples are natural gas, oil, coal, gravel

a) Depreciation b) Depletion
c) Exhaust d) None of the above

Ans : b

37. The Doctrine of Unearned Increase was enunciated because of a famous court
judgement. Select the correct judgement.

a) CIT vs. Smt. Ashima Sinha (1979) 116 ITR 26 (Calcutta), 1980 Tax 56(1) 19
(Calcutta).
b) Commissioner of Wealth Tax, New Delhi vs. Sri P.N. Sikand (1977) 107 ITR
922 (SC).
c) Controller of Estate Duty vs. Radha Devi Jalan (1968) 67 ITR 761, Calcutta
High Court.
d) C.W.T. vs. Venugopal Konar&Ors. (1977) 109 ITR 52, Madras High Court.

Ans :

38. The landmark judgement, Commissioner of Wealth Tax, New Delhi Vs. Sri P.N.
Sikand (1979) 107 ITR 922 (SC) states that:

a) only the lessor has the right to the increase in value

b) the increase in value of the leasehold interest of the property leased is to be
equally shared by both the lessor and lessee.
c) only the lessee has the right to the increase in value
d) the ratio of the lessor’s and lessee’s share is to be determined by negotiation

Ans :
419

39. The most common reason for value differing from price is that buyer/ seller is
uninformed as to what a property’s market value is but agrees on a contract at a
high or cheap price. In this case, the valuer has to .......................

a) to estimate the true market value

b) to estimate the true market price
c) not its market price
d) not its market value

Ans : b

40. Value in Use is often referred to as .......................

a) Objective value b) Subjective value

c) Exchange value d) Negotiated value

Ans : b

41. Real estate has some ....................... and, therefore, has a value.

a) Profit b) Immobility
c) Characteristics of d) Use
non-marketable and
non-investment property

Ans : d

42. The price that would tend to prevail in a free, open and competitive market on the
basis of equilibrium set by the forces of demand and supply is called .......................

a) Value in exchange b) Value in use

c) Optimum value d) Realizable value

Ans : a

43. Which one of the following is not a characteristic of real estate market?

a) No Free flow of information b) It is imperfect market

c) It is perfect investment market d) Heterogeneity

Ans : c
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44. Fee simple means .......................

a) Freehold ownership b) Complete ownership

c) Leasehold ownership d) Most complete ownership subject
to the Government powers

Ans : d

45. In a condominium the common area rights like lifts, staircase and pavements are
called as
a) Co-Ownership b) Concurrent Ownership
c) Duplicate Ownership d) Contingent Ownership

Ans : b

46. The ....................... to value is most useful in determining insurable value, and cost
to construct a new structure or building

a) Cost Approach b) Market Approach

c) Income Approach d) None of the above

Ans : a

47. Which of the following would have effect on development potential and values of
properties?

a) Floor space index b) Ownership pattern

c) Size and height of rooms d) Provision of utility services in a
building

Ans : a

48. Value is an estimate of what ....................... ought to be.

a) Value b) Price
c) Cost d) Worth

Ans : b

49. Which one of the following valuation methodology is most appropriate for valuing a
non-income generating residential bungalow?
421

a) Discounted Cash Flow Method

b) Sales Comparable & Depreciated Replacement Cost Method
c) Profit Method
d) Direct Capitalization Method

Ans : b

50. Which of the following transaction is an arm’s length transaction?

a) Transaction between parties at auction sale.

b) Transaction between parent and subsidiary company
c) Transaction between two old friends
d) Transaction between two brothers

Ans : a

51. Since comparable sales are not identical to the subject property, adjustments may be
made for

a) Date of sale b) Location, style, amenities

c) Square footage, Site size d) All the above

Ans : d

52. If the comparable is superior to the subject in a factor or aspect, ....................... is

needed for that factor

a) Downward adjustment b) Upward adjustment

c) No adjustment d) Adhoc adjustment

Ans : a

53. Residual method is used for properties .......................

a) Ripe for development b) Redevelopment

c) For bare land only d) All of the above

c) directly proportional d) not related

Ans : d

64. Two interest rates are considered for ....................... income

a) Perpetual b) Terminable
c) Annual d) None

Ans : a

65. As the unexpired period of lease increases, the capital value after reversion goes on
.......................

a) Increasing b) Decreasing
c) Without changing d) Negligible

Ans : d

66. Profit method used for trading properties where evidence of rates is slight, such as
hotels, restaurants and gas filling stations by adopting .......................

a) Three-year average of net income (as per profit and loss or income
statement) and capitalized using an appropriate yield
b) Five-year average of net income is capitalized using an appropriate
yield
c) Future income to be derived
d) None of the above

Ans : a

67. Under rent capitalization method, value of the property increases with .......................

a) Higher property tax b) Higher capitalization rate

c) Lower capitalization rate d) Longer duration

Ans : c

68. As per which Section of Transfer of Property Act are against those provisions of
Mohammedan law?
425

a) Section 13 of Transfer of Property Act

b) Section 14 of Transfer of Property Act
c) Section 13 and 14 of Transfer of Property Act
d) Section 129 of Transfer of Property Act

Ans : c

69. As per Transfer of Property Act Mohammedan gift is subject to .......................

a) No writing is necessary
b) Delivery of possession is essential
c) No writing is necessary, but delivery of possession is essential
d) Writing is necessary and delivery of possession is not essential

Ans : c

70. According to Transfer of Property Act, 1882 Instrument means

a) Non-testamentary instrument
b) Testamentary instrument
c) Both testamentary and non- testamentary instrument
d) None of the above.

Ans : a

71. Under the Transfer of Property Act, 1882, the term “attested” means

a) Attested by two or more witnesses

b) Attested by one witness only
c) Attested by two witnesses only
d) No condition prevails

Ans : a

72. Within the meaning of provisions of the Transfer of Property Act, 1882, the immovable
property does not include:

a) Standing timber or grass b) Standing timber, jewelry and crops

c) Standing timber, growing d) Only grass
crops or grass

Ans : c
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73. Under section 16 of the Transfer of Property Act, 1882 where an interest created for
the benefit of a person or class of persons fails then:

a) Any interest created in the same transaction intended to take effect after
or upon failure of such prior interest also fails
b) Any interest created in the same transaction and intended to take effect
after or upon failure of such prior interest does not fail
c) Such failure does not affect
d) None of the above

Ans : a

74. According to the provisions of section 19 of the Transfer of Property Act, 1882

a) The vested interest is not defeated by the death of the transferee before
he obtains possession
b) Vested interest is defeated by the death of transferee before he obtains
possession
c) No such provision is made
d) None of the above.

Ans : a

75. Under the provisions of section 6 of the Transfer of Property Act, 1882, a right to future
maintenance

a) Can be transferred b) Cannot be transferred

c) No such provision is d) None of the above
made in the Act

Ans : b

76. Under the Transfer of Property Act, 1882, registered pertains to

a) Registration of property b) Registration of documents

c) Registration of parties d) None of the above

Ans : b

77. According to the provisions of the Transfer of Property Act, 1882, an easement cannot
be transferred apart from the dominant heritage
427

a) The statement is true b) The statement is false

c) The statement is partly true d) None of the above

Ans : a

78. Under the provisions of the Transfer of Property Act, 1882, right to sue

a) A mere right to sue can be transferred

b) A mere right to sue cannot be transferred
c) No such provision is made in the Act
d) None of the above

Ans : b

79. Sale for tangible immovable assets can be made by .......................

a) Rs. 100 or more to be done by a registered instrument

b) Less than Rs. 100 to be done by delivery of property
c) More than Rs. 100 to be done by delivery of property
d) Rs. 100 or less to be done by a registered instrument

Ans : a

80. Document is not necessary if value of immovable property is less than .......................

a) Rs.100 b) Rs. 1000

c) If by delivery d) If held in possession

Ans : a

81. In mortgage contract any condition that prevents the mortgagor from getting back his
property after the mortgage debt has been paid will be .......................

a) Invalid b) valid
c) void d) voidable

Ans : a

82. At any time after the principal money has become due the mortgagor has .......................
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a) Right of redemption b) Has no rights

c) only by the Court decisions d) None of the above

Ans : a

83. Rights on redemption means

a) Right of Redemption is available from the date of execution - No time

specified
b) There must be demand and from the date mortgagor can redeem at
any time. - Debt payable on demand:
c) The money only due after specified date then from the date redemption
starts. - Term is fixed:
d) All the above

Ans : d

84. Which of the following is not correct about ‘surrender of lease’?

a) Premature termination by lessee

b) Unilaterally terminated by a lessee
c) Terminated with the consent of the lessor
d) It can happen post expiry of the lease

Ans : d

85. A lease of immovable property from year to year or exceeding can be by .......................

a) Oral agreement b) Unregistered instrument

c) Registered instrument d) Written statement

Ans : c

86. Head lessee subleases the property and he receive the rent and it is called as
.......................

a) Head rent b) Standard rent

c) Differential rent d) Monopoly rent

Ans : a
429

87. A gift to two or more donees of whom one does not accept it. Then the gift is
.......................

a) Void as to interest which he would have taken had he accepted

b) Valid as to interest which he would have taken had he accepted
c) Voidable at the option of the donor
d) Valid at the option of receiver

Ans : a

88. If owner of plot A with house has a right of way over his neighbour’s plot B for beneficial
enjoyment of house, owner A is called .......................

a) Co-owner b) Dominant owner

c) Joint owner d) Servient owner

Ans : b

89. An Easement is imposed on property, that property is called .......................

a) Co-ownership b) Dominant ownership

c) Joint ownership d) Servient ownership

Ans : d

90. Under Section 52 of the Easement Act, License is .......................

a) For exclusive possession

b) Does not create or transfer an interest in the land
c) Not transferable and revocable
d) All the above

Ans : d

91. Under Section 57of Easement Act, Grantor’s duty to ....................... defects

a) Disclose b) Not to disclose

c) Not necessary d) Duty of the licensee

Ans : a
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92. Under Section 58 of Easement Act, the grant control render the property, which is?

a) Safe b) Unsafe
c) Danger d) Unsafe and danger

Ans : b

93. Under Section 61 of Easement Act, Revocation of the licensed property is .......................

a) Expressed or implied b) Expressedonly

c) Implied only d) None of the above

Ans : a

94. The Real Estate Act (RERA) makes it mandatory for commercial and residential real
estate projects, before launching the project, where with .................... has to register
with RERA.

a) land area is over 500 square metre or proposal for 8 building units
b) 500 square metre of land area only
c) proposal for 8 building units only
d) land area less than 500 sqm is also required to register

Ans : a

b) equal to or more than 100 acres in rural areas
c) equal to or more than 50 acres in urban areas and 100 acres in rural
areas
d) equal to or more than 100 acres in urban areas and 50 acres in rural
areas.

Ans : c
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104. Exercise :

A client wants to purchase a petrol bunk outlet situated on the main road in the center of town.
The main road has traffic of 300 PCU. For the land, the company pays the rent
Rs. 4,00,000/ per annum. Total income from sale of petrol and diesel and other items is Rs.
2,00,00,000/-. Property tax Rs. 50,000/6 months. Staff salary and other out goings are Rs.
60,000/ per month. Other expenses for running the business is Rs. 1,70,00,000/-. Rate of
capitalisation is 12%.

Question :

1. What is the total income for the owner?

2. What is the total expense for the owner?
3. What is the net profit?
4. What is the method to be used?
5. What is Y.P.?
6. What is the amount the client can pay to purchase the bunk?

Answers :

Given data :

Ground rent = Rs. 4,00,000 / annum

Income from sale of petrol = Rs. 2,00,00,000
Property tax = Rs. 50,000 / 6 months
Staff salary & other out goings = Rs. 60,000 / month
Other expenses = Rs. 1,70,00,000
Rate of capitalisation = 12%

Solution :

1.0. Income to the owner of the bunk

Ground rent = Rs. 4,00,000

Income from sale of petrol&diesel = Rs. 2,00,00,000
Total income for the owner = Rs. 2,04,00,000 (1)

2.0. Expenses for the owner

Property tax (50,000 x 2) = Rs. 1,00,000

434

Staff salary & other out goings = Rs. 7,20,000

(60,000 x 12)
Other expenses for running the = Rs. 1,70,00,000
business
Total expenses = Rs. 1,78,20,000 (2)

3.0. Net profit

Net income / Net profit = 2,04,00,000 - 1,78,20,000

Net profit = Rs. 25,80,000 (3)

100
4.0. Years purchase = = 8.5 (4)
12

5.0. Method = Profit method (5)

6.0. Value

Value of the bunk by capitalising = 25,80,000 x (100 / 12)

@ 12%
Capitalised value = Rs. 2,15,00,000/-

... The amount that can be paid for the = Rs. 2.15 crores (6)
purchase of the bunk

* * *
435

MOCK TEST NO. 2

Courtesy : IOV Coimbatore branch

1. Per-capita GNP is the total GNP divided by ____________

i) Total population
ii) Total number of persons earning
iii) Total male population
iv) Total Adult population
Ans : i
2. Propensity to consume is _________ of income used for consumption

i) Amount
ii) Percentage
iii) Total
iv) None of the above
Ans : ii
3. In India, different income classes (EWS/LIG/MIG/HIG) represent ________
distribution of national income

i) High
ii) Medium
iii) Unequal
iv) Equal
Ans : iii
4. National Product is summation of _______

i) Values of outputs of all Firms

ii) Production of all Firms
iii) Value of Government spending
iv) Value of Savings
Ans : i
5. In an open economy, part of output consumed outside the country is called
________

i) Import
ii) Export
iii) Domestic production
iv) All the above
436

Ans : ii
6. Industry sector is generally ___________ intensive

i) Labour
ii) Capital
iii) Land
iv) Profit
Ans : ii
7. Nominal GNP measures gross output of an economy at current prices; Real GNP
measures gross output of an economy at ________

i) Current year
ii) Year of independence
iii) 2000
iv) Base year
Ans : iv
8. Saving is __________

i) Part of income not spent

ii) Part of Expenditure
iii) Part of Investment
iv) Govt Securities
Ans : i
9. India’s Primary sector engages _______ workers than needed

i) Less
ii) More
iii) Moderate
iv) None of the above
Ans : ii
10. If a person has an income of Rs.30000 and his consumption is Rs.10000, then
his propensity to save is____.

i) 1
ii) 0.33
iii) 0.67
iv) 3
Ans : iii
11. WDV stands for
437

i) Written Down Value

ii) Write Down Value
iii) Written Depreciated Value
iv) Write Depreciated Value
Ans : i
12. Adjustment entries recorded in which book:

i) Journal
ii) Ledger
iii) Journal Proper
iv) Cash book
Ans : iii
13. Arrange the steps of accounting in sequential order -
(a) Trial Balance;
(b) Journal Entry;
(c) Balancing of Accounts;
(d) Ledger Posting.

i) abcd
ii) bdac
iii) cadb
iv) bdca
Ans : iv
14. At breakeven point

i) Total expenses + Total Revenue

ii) Total expenses = Total revenue
iii) Total Revenue - Total expenses
iv) Total Income = Total Output
Ans : ii
15. In double entry system, accounts are primarily classified in to ___________.

i) Cash and Property

ii) Tangible and Intangible
iii) Real and Nominal
iv) Personal Account & Impersonal account
Ans : iv
16. In criminal matter, an accused can be proceeded against under the law in force
at the time of -------------

i) Committing the offence

438

ii) Judgement
iii) Trail
iv) None of the above
Ans : i
17. Transfer of Property Act, 1882 requires registration of all such deeds which
purport to transfer real estate of value --------

i) over Rs. 10000/-

ii) over Rs. 5000/-
iii) over Rs. 100/-
iv) over Rs. 1/-
Ans : iii
18. An agreement without any consideration is not a contract, however amongst near
relatives, --------- is also plausible consideration in a contract but the instrument of
such a contract must necessarily be--------

i) love and affection, written

ii) love and affection, registered
iii) Friends and well wishers, registered
iv) Partners, registered
Ans : iii
19. The decisions of an arbitral tribunal must be --------------

i) Principal Arbiter
ii) By majority
iii) All the Arbiters
iv) Any one of the Arbiters
Ans : ii
20. State if true or false:
Under the SARFAESI Act, any Security Interest created over Agricultural
Land cannot be proceeded with.

i) True
ii) False
Ans : i
21. The disrepair for which a leaseholder or tenant is usually liable for mainly
commercial properties when he has agreed to return premises in good repair is
called ---------

i) All the below

ii) As is were is
iii) Good condition
iv) Dilapidation
439

Ans : iv
22. If A and B are mutually exclusive events, then P(A+B) is _____ .

i) P(A)-P(B)
ii) P(A)+P(B)
iii) P(A)=P(B)
iv) P(A) x P(B)
Ans : ii
23. Mode is ______________ .

i) Highest value
ii) Average data
iii) The middle most data
iv) the data with maximum frequency.
Ans : iv
24. If the sample size increases the sampling error __________ .

i) Increases
ii) Decreases
iii) No effect
iv) Equals
Ans : ii
25. For a left skewed data, the mean is _________ .

i) Half the median

ii) Greater than the median.
iii) Twice the median
iv) Less than the median.
Ans : iv
26. The industrial site distance should be at least

i) 5 km from seashore
ii) 500 m. from High Tide Line in coastal area
iii) 3 km from High Tide Line in coastal area
iv) Non of the above
Ans : ii
27. Which of the following will not have to obtain separate site clearance from the
Central Government?
440

i) Projects affecting reserve forest

ii) Oil exploration
iii) Mining of minerals
iv) Township projects
Ans : iv
28. The neighborhood of bus and car bodies manufacturing units are affected by

i) Latest within 12 months after the date of report

ii) Latest within 2 years after the date of report
iii) Latest within 6 months after the date of report
iv) Non of the above
Ans : iv
38. As per sec 54 of TPA Act Sale is a transfer of property in exchange for a --------
paid, only promised to be paid or partly paid and partly promised

i) Money
ii) Price
iii) Value
iv) Amount
Ans : ii
39. Transfer of Development Rights (TDR) is a concept in

i) Land management
ii) Money management
iii) Social welfare
iv) Non of the above
Ans : i
40. According to SARFAESI Act, before effecting sale of the immovable property,
the authorised officer shall obtain valuation of the property from

i) Registered valuer “34AB wealth tax act”

ii) Approved valuer
iii) Panel valuer
iv) Registered valuer “Companies act”
Ans : i
41. The Rent Control Act generally only applies on lease agreements of at least -----
--- months
i) 6 months
ii) 11 months
iii) 24 months
iv) 12 months
443

Ans : i
42. As per the Transfer of Property Act, 1882, immovable property includes _

i) furniture.
ii) growing crops.
iii) grass.
iv) things permanently fastened to anything attached to the earth.
Ans : iv
43. Under the Transfer of Property Act, 1882, the expression 'registered' pertains to

i) Registration of property
ii) Registration of documents
iii) Registration of parties
iv) Registration of charges
Ans : ii
44. What is real estate?

i) Physical land and building only

ii) Physical land and building with all developments, etc., over and under the
land with rights.
iii) Real interest of the property
iv) Physical land and building only with all developments, etc., over and under
the land.
Ans : iv
45. Cost represents the ________ side of a Transaction.

i) Exchange
ii) Supply
iii) Demand
iv) Bargaining
Ans : ii
46. Value of an object arises out of its _________ .

i) Manufacture
ii) Marketing
iii) Usefulness
iv) Cost
Ans : iii
47. What is common in Distress sale & Forced sale ?
444

i) Circumstances
ii) Value
iii) Insufficient marketing time
iv) private negotiations
Ans : iii
48. What is the name of the value of the property realized after auction sale?

i) Liquidation value
ii) Salvage value
iii) Net Present value
iv) Replacement value
Ans : i
49. Value of an object depends upon the future ______ that can be derived out of it.

a) Benefits
b) Demand
c) Supply
d) Cost
Ans : i
50. Construction of a building on the Land can be called

i) a Production
ii) a Conversion
iii) a Potential
iv) an Improvement
Ans : iv
51. Development Control Rules decides the _________ of the property

i) Security
ii) Risk
iii) Utility
iv) Transferability
Ans : iii
52. Development Control Rules decides the _________ of the property

i) Security
ii) Risk
iii) Utility
iv) Transferability
Ans : iii
445

53. Supply and Demand controls __________ of property

i) Transferability
ii) Scarcity
iii) Utility
iv) Non-transferability
Ans : iii
54. The Plots which is connected to the access road through a passage is called
_______

i) Narrow Plots
ii) Rectangular Plots
iii) Ribbon Plots
iv) Tandem Plots
Ans : iv
55. The open unobstructed view from then front of building is called ________

i) Frontage
ii) Access width
iii) Vista
iv) Wide view
Ans : iii
56. The study of Supply and demand is __________ Aspect

i) a Physical
ii) an Economic
iii) a Social
iv) a legal
Ans : ii
57. When the tenant will bear the burden of all outgoings, it will be termed as

i) Virtual rent
ii) Net rent
iii) Gross rent
iv) Exclusive rent
Ans : iv
58. The highest rent that is receivable for the property, by the landlord, in the open
market is called

i) Virtual rent
ii) Market rent.
iii) Gross rent
iv) Exclusive rent
446

Ans : ii
59. The NPV of a project generally ……………. as the rate of return increases.

i) decreases
ii) increases
iii) equal
iv) No effect
Ans : i
60. The difference between head rent and improved rent is called

i) Net rent
ii) Profit rent
iii) Gross rent
iv) Annual rent
Ans : ii
61. Rent fixed by court proceedings may be

i) Fair rent
ii) Standard Rent
iii) Statuary rent
iv) All the above
Ans : iv
62. Gymnasiums will come under which occupancy?

i) Residential
ii) Mercantile
iii) Special Residential
iv) Assembly
Ans : iv
63. What is the Years Purchase for Rs 1/- with a remunerative interest 8% and
Annual Sinking Fund to be set aside for recouping Rs 1/- is 0.021is

i) 1/(0.08 + 0.021)
ii) 0.021/0.08
iii) (0.08 + 0.021)/0.021
iv) None
Ans : i
64. Recess land and land locked lands:

i) They both generally abut on a private road.

ii) They both generally abut on a public road.
447

iii) They both generally do not abut on a public road.

iv) None of the above
Ans : iii
65. A multistoreyed building has several flats, almost all similar. Two recently sold
comparables were found. The valuer, using the market comparison approach, set
up the following table:
Flat under Valuation Comparable 1 Comparable 2
Date of Sale 1 ½ years ago 3 years ago
Rate per sq.ft. Rs. 18,500 Rs. 18,000
What would be the best estimate of the rate?

i) Rs. 19,000 per sq.ft..

ii) Rs. 17,500 per sq.ft.
iii) Rs. 17,000 per sq.ft..
iv) Rs. 18,000 per sq.ft.
Ans : i
66. Belting Theory is used for Valuation of

i) Buildings
ii) Plant & Machinery
iii) Land with less width and more depth
iv) Shares
Ans : iii

67. Which of the following is not a marketable property

i) Government property
ii) Shop
iii) House building
iv) Hotel building
Ans : iii
68. Market approach basically operates on the_______.

i) principle of increasing and decreasing returns

ii) principle of substitution
iii) principle of conformity
iv) principle of contribution
Ans : ii
69. Which of the following is not a source from which sale instances of immovable
property in a particular locality can be collected?

i) Sales record at the registrar’s office

448

ii) Advertisements in newspapers

iii) Auction sale information from different authorities
iv) Share market
Ans : iv
70. Economic obsolescence occurs due to

i) Wear and tare of the building

ii) Under-utilisation of buildings
iii) Out dated planning of building
iv) All the above
Ans : ii
71. A building is 40 years old. It has a total life span of 80 years. Current
replacement cost of the building is INR 40,00,000. The salvage value of the
materials of the building at the end of its life is 10% of its CRC. What is the
depreciation in % today?

i) 55%
ii) Rs 18,00,000
iii) Rs 45,000
iv) 45%
Ans : ii
72. The estimated of the age of a structure based on its utility and physical wear and
tear is called

i) Economical Age
ii) Total Age
iii) Physical Age
iv) Effective Age
Ans : iv
73. Which one of the following valuation methodology is most appropriate for valuing
a non-income generating residential bungalow?

i) Discounted Cash Flow Method

ii) Sales Comparable & Depreciated Replacement Cost Method
iii) Profit Method
iv) Direct Capitalization Method
Ans : ii
74. Owelty money is to be determined by a valuer for the purpose of

i) Settlement
ii) Land Acquisition
iii) Market sale
iv) Family Partition
449

Ans : iv
75. The base year for Capital Gain Tax calculation as on date is

i) 2001-2002
ii) 2000 -2001
iii) 1981-1982
iv) 1978-1979
Ans : i
76. While carrying out valuation of property for bank finance, which of the following is
not to be taken into consideration?

i) Age of the building

ii) Rent fetching capacity of the property
iii) Economic obsolescence
iv) Amount of loan
Ans : iv
77. For valuation of easement, the valuer is to estimate the value of the interest of

i) Dominant owner only

ii) servient owner only
iii) Dominant and servient owner
iv) None of the above
Ans : iii
78. For the purpose of Insurance, valuers generally provide

i) Reinstatement Value
ii) Historic Value
iii) Book Value
iv) Present Value
Ans : i
79. The difference between one honest valuation and another may range upto 15%

i) V.C. Ramchandran vs. CWT (1979) 126 ITR 157 Karnataka HC

ii) K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC)
iii) Gold Coast Trust Ltd. vs. Humphray (1949) 17 ITR 19
iv) Subh Karan Choudhury vs. IAC (1979) 118 ITR 777 Kolkata HC (Special
Value/FMV)
Ans : ii
80. Valuation is not an exact science. Mathematical certainly is not demanded, nor
indeed is it possible

i) V.C. Ramchandran vs. CWT (1979) 126 ITR 157 Karnataka HC

450

i) Only fire, lightening, explosions & implosions

ii) Flood, storm & tempest, inundation
iii) Land slide, rock slide & impact by road or rail
iv) All of them said above

Ans : iv
82. Fire insurance policy in addition to the assessed loss, also pays

i) Loss minimisation expenses

ii) 1% of claim amount towards debris removal
iii) 3% claim amount towards Engineers/Architects Fee
iv) All the above
Ans : iv
83. Insurance policy is

i) A simple contract between two parties

ii) Assures for return of the premium on completion of the policy period
iii) An offer and acceptance document
iv) A saleable document by an insurer to the insured
Ans : iii
84. Duties of the insured

i) To make the premium payment through the bank, from where he had taken a
loan
ii) To disclose all material facts of the property to be insured
iii) To sought for a fire & burglary risk in the same policy as demanded by the
banker
iv) To inform a lower value of risk so as to pay a lower premium
Ans : ii
85. AOG Peril is

i) Loss due to war, invasions, act of foreign enemy hostilities

ii) Loss due to fire
iii) Loss due to earthquake
iv) Loss due to Lightening, STFI, subsidence, land slide and rock slide
451

Ans : iii
86. Which of the following is not required to be mentioned in a leasehold valuation
report

i) Postal address of the property

ii) Name of the title holder of the property
iii) Name of the Lessor
iv) Name of the heir of the Lessor
Ans : iv
87. Valuation reports under The Companies (Registered Valuers and Valuation)
Rules, 2017 shall be prepared following

i) Indian Valuation Standards

ii) International Valuation Standards
iii) Global Valuation Standards
iv) IBBI Standards
Ans : ii
452
453

MOCK TEST NO. 3

Courtesy : IOV Coimbatore branch

1. Sarkaria Commission was made in the year

i) 1980 ii) 1981

iii) 1982 iv) 1983

RBI : 1935, SBI : 1955, NABARD : 1982

2. Maximum limit of investment in small scale industries

i) 0 to 25 lacs ii) 25 – 50 lacs

iii) 50 – 1 cr iv) 25 – 5 cr

Tiny sectors : 0 - 25 lacs

3. Cost behaviour refers to

i) Whether a particular expense has to be incurred honestly

ii) Low costs reach to change in the level of activity
iii) Whether a cost incurred in a manufacturing trading or service company
iv) Classifying costs as either product or period costs

4. Indifference curves of two no’s

i) Positive curves ii) Negative curves

iii) Parallel iv) Perpendicular

Indifference curves : Convex to the originIndifference curves refers to Two products.

5. Demand pull inflation rises due to

i) Mismatch between demand and supply of commodities

ii) Increase in the price of precious metal
iii) Persistent rise in factored cost
iv) Combine phenomena of demand pull and cost push inflation
454

Increase in wages, Govt spending, Population. Decrease in production.

6. In Closed economy

i) GDP = GNP ii) GDP < GNP

iii) GDP > GNP iv) GDP = GNP G

NP = GDP + (Export - Import) NNP = GNP - Depreciation

7. Which of the following deposits gives highest rate of interest

i) Current deposit ii) Fixed deposit

iii) Recurring deposit iv) None of the above

8. This is capital

i) Money ii) Forest

iii) Machinery iv) Trademarks

The term capital is used in economics in various senses. In ordinary language and
sometimes in economics also capital is used in the sense of money. But when we talk
of capital as a factor of production, to confuse capital with money is quite wrong. Of
course, money is used to purchase various factors such as raw materials, machinery,
labour which help to produce goods, but money itself does not directly help in the
production of goods.

The money which is available for investment and productive purposes has been called
money capital or financial capital by some economists. But money capital is not the
real capital. The real capital consists of machinery, tools, tube well, factories; tractors,
etc., Which directly assist in the production of goods.

Similarly, government securities and bonds, shares and debentures of public limited
companies do not represent real capital. Securities, bonds, stocks, etc., Possessed
by individuals yield income to them but they cannot be called real capital because they
represent only titles of ownership rather than factors of production.

9. In the following which one gives short term loan?

i) SBI ii) Agricultural Bank, NABARD

iii) Commercial Bank iv) Industrial development bank
455

10. The real GDP is measured in .................... prices & The nominal GDP is measured in
.................... prices

i) Base year & Current year ii) Current year

iii) Base year iv) Current Year & Base year

11. A Machinery purchased for Rs. 18,000 / before two years. Its sold for Rs. 16,000/
considering 10% depreciation per annum. The machinery sold for

i) Rs. 2,000 Less ii) Rs. 1,600 Less

iii) Rs. 1,600 profit iv) No Loss and No Gain

Depreciated value : 18,000 - 18,000 x 0.2 = 14,400,

Profit = Sale value – Depreciated Value

12. The owner of the business used, goods of worth Rs. 200 for his personal use. In this
transaction which account will be credited

i) Drawing Account ii) Sales Account

(Credit what goes out)
iii) Purchase Account iv) Capital Account

13. A Capital reserve account is created when

i) A new fixed asset is purchased

ii) The asset becomes absolute due to invention of new technology
iii) A fixed asset is obtained from gift
iv) The asset is sold on profit

14. Outstanding Wages

i) Nominal Account ii) Real Account

iii) Personal Account iv) Profit Account

Illustration 7
Classify the following into personal, real and nominal accunts

(a) Capital (b) Building

(g) Purchases (h) Chandru

(i) Outstanding wages

Solution :

Sl.No. Items Classification

(a) Capital Personal account

(b) Building Real account
(c) Carriage inwards Nominal account
(d) Cash Real account
(e) Commission received Nominal account
(f) Bank Personal account
(g) Purchases Nominal account
(h) Chandru Personal account
(i) Outstanding wages Personal account

15. Average Fixed cost is obtained

i) TC/Q ii) TFC/Q

iii) TVC/Q iv) None

16. Public liability in a property

i) Reduce the value ii) Public helps in reducing the

toxic and contaminate
iii) Public takes the property iv) None of the above

17. As per SARFAESI Act 2002 within how many days borrower should repay the debit
from the date of notice

i) 30 days ii) 60 days

iii) 90 days iv) 180 days

18. Article 14 of the constitution of India protects the rights of the equality before the law to

i) A citizen of India only ii) All persons

iii) Children only iv) Adult citizens only
457

19. Depreciation is in which section of income tax act

i) Section 35 ii) Section 34

iii) Section 33 iv) Section 32

20. Who is the guardian of the girl child? Any Child

i) Father ii) Mother

iii) Uncle iv) Any one of the relatives

21. All agreements are contract as per Indian contract act 1872

i) Section 25 ii) Section 11

iii) Section 12 iv) Section 10

22. Harmonic mean is better than the other means ....................

i) Height and Length ii) Speed

iii) Binary values 0 – 1 iv) Ratios

data expressed as rates such as kilometers per hour, kilometres per litre, hour per
semester, tones per month

23. When three coins are tossed what is the probability of getting maximum no of heads

i) 1/24 ii) 1/16

iii) 1/12 iv) 1/8 (1/2*1/2*1/2)

24. A Time series Consists of

i) Two components ii) Three components

iii) Four components iv) Five components

(Secular, Seasonal,
Cyclical, Irregular)

25. In a Positive Skewed data:

i) Mean=Median=Mode ii) Mean>Median>Mode

iii) Mean<Median<Mode = iv) Mean ‘“ Median ‘“ Mode
Negative Skew.
458

26. For a old building valuation report to be prepared the building is defected by pollution.
Before preparing report consult the pollution consultant.

i) Not Required ii) Required

iii) Refer legal opinion iv) Option of the building owner

27. Which is not true? With respect to factory Act

i) 10 persons working in the preceding 12 months with power

ii) 20 persons working in the preceding 12 months without power
iii) Manager of a factory is a occupier
iv) Mining is a factory

28. Property not contaminated, located in area of contamination is ....................

i) Contaminated ii) Suspected

iii) Remediated iv) Adjacent properties

29. When was “Utilized of green revolution” applied in India

i) 1969 ii) 1961

iii) 1966 iv) 1991

30. Which of the following is correct?

(i) A valuer shall conduct the valuation independent of external influences.
(ii) A valuer shall maintain complete independence in his / its professional
relationships.
(iii) A valuer shall conduct the valuation according to the direction of his client.

i) (ii) and (iii) only ii) (i) and (iii) only

iii) (i) and (ii) only iv) None of the above

31. Which of the following is correct?

(i) A valuer shall provide all information and records as may be required by the
authority.
(ii) A valuer shall provide all information and records as may be required by the
Tribunal, Appellate Tribunal.
(iii) A valuer shall provide all information and records as may be required by the
registered valuers organisation with which he/it is registered.
(iv) A valuer shall provide all information and records as may be required by a
tender committee of a valuation tender.
459

i) (ii) and (iii) only ii) (i) (ii) and (iii) only
iii) (i) (ii) and (iv) only iv) (i) and (iv) only

32. Where illegal activity is suspected, the valuer is advised to

(i) disclose the activity if there is a legal obligation to do so
(ii) suggest alternative, legal ways in which the client’s needs might be met
(iii) report to the Police
(iv) refuse to accept the assignment

i) (ii) and (iii) only ii) (i) (ii) and (iii) only
iii) (i) (ii) and (iv) only iv) (i) and (ii) only

33. Which of the following is correct?

(i) A valuer shall maintain integrity by being straightforward in all professional
relationships.
(ii) A valuer shall maintain integrity by being forthright in all professional relationships.
(iii) A valuer shall maintain integrity by being honest in all professional relationships.

i) (i) and (ii) only ii) (ii) and (iii) only

iii) (i) & (iii) only iv) All

34. Under Transfer of property act Instruments means

i) Non-testamentary instrument ii) Testamentary instrument

iii) Both iv) None

35. Is the permissible for land lord to disconnect / cut off essential services being provided
to tenant

i) Yes ii) No
iii) Yes after order from court iv) Yes after notice to tenant

36. Where TDR is introduced first in India

i) Chennai ii) Delhi

iii) Calcutta iv) Mumbai

37. What is ‘Carpet Area’ as per RERA

460

i) Area of an apartment, including external walls, services shafts, exclusive

balcony / veranda / terrace area, but includes the area covered by the
internal partition walls of the apartment
ii) Carpeted floor area
iii) Net usable floor area of an apartment, excluding external walls,
services shafts, exclusive balcony / veranda / terrace area, but
includes the area covered by the internal partition walls of the
apartment
iv) Super Built up area

38. Land Acquisition authority

i) Tahsildar ii) VAO

iii) RDO iv) Collector

39. Lease with building – what is the name of lease

i) Occupational lease ii) Building lease

iii) Life time lease iv) Short time lease

40. If the owner’s right which is imperfect is made perfect on fulfillment of certain conditions
is called

i) Contingent ownership ii) Duplicate ownership

iii) Co ownership iv) Concurrent ownership

41. According to SARFAESI Act, before effecting sale of the immovable property, the
authorised officer shall obtain valuation of the property from

i) Registered valuer “34AB wealth tax act”

ii) Approved valuer
iii) Panel valuer
iv) Registered valuer “Companies act”

42. In case of operating lease which statement is true ?

i) Depreciation can’t be accounted by lessee

ii) All repairs carried out by lessee
iii) All taxes to be paid by lessee
iv) All buildings are constructed by lessee
461

43. How many toilets and urinals provided in the Cinema theatre?

i) Toilet 1 in 100 and Urinals 1 in 25

ii) Toilet 2 in 200 and Urinals 1 in 50
iii) Toilet 3 in 400 and Urinals 1 in 75
iv) Toilet 4 in 500 and Urinals 1 in 100

44. A value is also known as estimate of .................... and the future .................... that can
be obtained from the property.

i) Price & Income ii) Present worth & Benefits

iii) Value & Profit iv) None of the above

45. Petrol Pumps

i) Utility and Non Marketable ii) Utility and Marketable

iii) Marketable property iv) Income fetching and Marketable

46. Cost represents the .................... side of a Transaction.

i) Exchange ii) Supply

iii) Demand iv) Bargaining

47. Which is the safest and earliest liquidity

462

i) 2% of stock market ii) 10% of Return of Real estate

investments
iii) 7% of bank FD iv) 30% pf promotors loan

48. What is common in Distress sale & Forced sale?

i) Circumstances ii) Value

iii) Insufficient marketing time iv) Private negotiations

Distress sale – Non Legal, Forced Sale – Legal.

49. Which one correct with respect to condominium ownership

i) Beneficial ownership ii) Co ownership

iii) Time share ownership iv) Owning a portion of multiunit
building

50. Value of an object depends upon the future .................... that can be derived out of it.

i) Benefits ii) Demand

iii) Supply iv) Cost

51. In joint venture which factors decides the ratio of landlord and promotor for
redevelopment

i) Approved plan ii) Plot coverage

iii) Land cost & Building cost iv) FSI

52. Vertical interest is about

i) Legal concept of space above land surface

ii) Legal concept of space below land surface
iii) i & ii both
iv) None of the above

The vertical division of real property has its basis in the legal concept of land as a
volume of space above and below the land surface.

53. Supply and Demand controls .................... of property

463

i) Transferability ii) Scarcity

iii) Utility iv) Non-transferability

54. A disruption or loss of supply of labour or material will result in ....................?

i) Physical obsolescence ii) Economic obsolescence

iii) Functional obsolescence iv) Legal obsolescence

55. A fraction of a whole property is to valued. Such a building fraction is classified as

i) Investment property ii) Non marketable property

iii) Service property iv) None of the above

A building is to be valued for fire insurance purposes, the building is treated as a

fraction of a whole property. The building fraction is classified as Service Property

56. Dilapidation of building is

i) Physical obsolescence ii) Economic obsolescence

iii) Functional obsolescence iv) Legal obsolescence

57. The amount set aside for getting back the capital invested after the period for which
annuity will cease

i) Annual Income ii) Deferred Income

iii) Gross Income iv) Sinking fund

58. Project profitable if IRR .................... then discount rate.

i) Greater ii) Lesser

iii) Equals iv) None

IRR is a actual rate of return in the project. Discount rate is the expected rate of return
in the project.

59. Reversionary value means

i) The value on reversion of rent i.e. new rent agreement between landlord and
tenant
ii) An amount reverted after lease of the property
464

iii) A specified value estimated for payment of taxes such as capital gains
act or municipal act
iv) Present value of land which would revert to the lessor after expiry
of lease period.

60. Which of the following element is not key element of the income approach

i) Potential income stream ii) Outstanding loan

iii) Expenses iv) Capitalization rate

61. When it is expected that the property values will rise, which one is correct?

i) Increase the Capitalization rate

ii) Increase the remunerative rate
iii) down the remunerative rate
iv) down the capitalization rate

62. Years purchase .................... if number of years increases

i) Increases ii) Decreases

iii) Remains same iv) None

63. What is the Years Purchase for Rs 1/- with a remunerative interest 8% and Annual
Sinking Fund to be set aside for recouping Rs 1/- is 0.021is

i) 1/(0.08 + 0.021) ii) 0.021/0.08

iii) (0.08 + 0.021)/0.021 iv) None

64. Which is the following is not physical characteristics of land

i) Land is in destructible ii) Land has different soil strata

iii) Scarcity iv) Land is immovable

65. A multistoreyed building has several flats, almost all similar. Two recently sold
comparables were found. The valuer, using the market comparison approach, set up
the following table:
Flat under Valuation Comparable 1 Comparable 2
Date of Sale 1½ years ago 3 years ago
Rate per sq.ft. Rs. 18,500 Rs. 18,000
What would be the best estimate of the rate?
465

i) Rs. 19,000 per sq.ft.. ii) Rs. 17,500 per sq.ft.

iii) Rs. 17,000 per sq.ft.. iv) Rs. 18,000 per sq.ft.

66. Deterioration of environment is .................... proportional to market value

i) Inversely ii) Directly

iii) Not iv) None

67. Under adjustment grid model for sales instances premises having a positive weightage
is considered on sale rate while comparing with subject premises having standard
specification

i) Sub stand ii) Normal specification

iii) Superior iv) Deluxe

68. Market approach basically operates on the ....................

i) principle of increasing and decreasing returns

ii) principle of substitution
iii) principle of conformity
iv) principle of contribution

69. When the result of a combination of two or more assets or interests where the combined
value is more then the sum of the separate values is known as

i) Real investment value ii) Liquidation value

iii) Hope value iv) Synergistic value (As per IVS
Commonly termed as Marriage
Value/Merger Value)

70. In calculating cost index numbers for basic cost of construction of an RCC load bearing
building by CPWD which of the following items is not given any weightage

i) Bricks ii) Stone chips

iii) Skilled labours iv) Wooden furniture work in the
building

71. A building is 40 years old. It has a total life span of 80 years. Current replacement cost
of the building is INR 40,00,000. The salvage value of the materials of the building at
the end of its life is 10% of its CRC. What is the depreciation in % today?
466

i) 55% ii) 45%

iii) Rs 45,000 iv) Rs 18,00,000

72. The estimated of the age of a structure based on its utility and physical wear and tear
is called

i) Economical Age ii) Total Age

iii) Effective Age iv) Physical Age

73,. Percentage of deduction for residential rental income

i) 5% ii) 10%
iii) 20% iv) 30%

74. Owelty money is to be determined by a valuer for the purpose of

i) Settlement ii) Land Acquisition

iii) Market sale iv) Family Partition

75. The base year for Capital Gain Tax calculation is

i) 2001-2002 ii) 2000 -2001

iii) 1981-1982 iv) 1978-1979

76. While carrying out valuation of property for bank finance, which of the following is not
to be taken into consideration?

i) Age of the building ii) Rent fetching capacity of the

property
iii) Economic obsolescence iv) Amount of loan

77. For valuation of easement, the valuer is to estimate the value of the interest of

i) Dominant owner only ii) servient owner only

iii) Dominant and servient iv) Non of the above
owner

78. For the purpose of Insurance, valuers generally provide

i) Reinstatement Value ii) Historic Value

iii) Book Value iv) Present Value
467

79. A buyer who looked at seven very similar homes in a three year old subdivision made
an offer on the home with the lowest list price, the buyer was utilizing the principle of
....................

i) Substitution ii) Anticipation

iii) Contribution iv) Conformity

80. The difference between one honest valuation and another may range upto 15%

i) V.C. Ramchandran vs. CWT (1979) 126 ITR 157 Karnataka HC

ii) K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC)
iii) Gold Coast Trust Ltd. vs. Humphray (1949) 17 ITR 19
iv) Subh Karan Choudhury vs. IAC (1979) 118 ITR 777 Kolkata HC (Special
Value/FMV)

81. Valuation is not an exact science. Mathematical certainly is not demanded, nor indeed
is it possible

i) V.C. Ramchandran vs. CWT (1979) 126 ITR 157 Karnataka HC

ii) K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC)
iii) Gold Coast Trust Ltd. vs. Humphray (1949) 17 ITR 19
iv) Subh Karan Choudhury vs. IAC (1979) 118 ITR 777 Kolkata HC (Special
Value/FMV)

82. Escalation clauses added to fire policy allows automatic regular increase not exceeding
....................% in sum insured during policy period

i) 5% ii) 10%
iii) 25% iv) 50%

83. Which of the following perils is covered under fire at extra premium

i) Impact damage ii) Bush fire

iii) Subsidence iv) Forest fire

84. Minimum retention premium under fire declaration policy is derived at what % the
annual premium

i) 10% ii) 25%

iii) 50% iv) 75%
468

85. Contract of indemnity is

i) Bilateral ii) Tripartite

iii) Multi partite iv) Multilateral

86. Upon paying the amount of loss to the insured, the insurer steps into the place of the
insured, taking overall his rights. It is called exercise of ....................

i) Proximate Cause ii) Contribution

iii) Subrogation iv) Indemnity

87. Which of the following is not required to be mentioned in a leasehold valuation report

i) Postal address of the property

ii) Name of the title holder of the property
iii) Name of the Lessor
iv) Name of the heir of the Lessor

88. Valuation reports under The Companies (Registered Valuers and Valuation) Rules,
2017 shall be prepared following

i) Indian Valuation Standards

ii) International Valuation Standards
iii) Global Valuation Standards
iv) IBBI Standards

* * *
469

Pages 469 - 508

PART - IX

FREQUENTLY ASKED QUESTIONS

IN THE EXAMINATION - 175 Nos.
470

This page is kept vacant intentionally.

471

FAQ - 175

A FEW MORE ONE MARK QUESTIONS

WHICH APPEARED IN THE EXAMINATION

Compiled by : Mr. R. Jayaraman

Tiruchirappalli

1. Where a coparcenary consists of several branches and a partition takes place

a) Each branch takes as per capital

b) Each branch and member of each branch takes per capital
c) Each branch and member of each branch takes per stripes
d) Each branch takes per stripes and member of each branch takes per
capital

Ans : a

2. A valuer should co-operate and be available for and investigation carried out by the
concerned authority

a) Inspection b) Scrutiny
c) Alliance d) Argumentation

Ans : b

3. Valuer should adopt rate of capitalization if income flow is safe & secured.

a) Lower b) Higher
c) Same rate as lending rate of bank d) Interest rate of his own choice

Ans : a

4. Which of the following is not in relevant factor while estimating depreciated replacement
cost of a building?

a) Year of construction b) Size

c) Accessibility d) Specification

Ans : c
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5. Not true with respect to valuation of Joint venture development of property

a) Estimate market value of land offered for development of land owner

b) Estimate cost of construction of building proposed on land.
c) Required to consider which political party is ruling in the state.
d) Consider value of financial benefit and profit @ future date that is
contingent upon performance and fulfillment of terms of contract.

Ans : c

6. Following approach to valuation, an accrued depreciation must be counted to determine

market value of assets

a) Market approach b) Income approach

c) Cost approach d) Discounted cash flow method

Ans : c

7. Common in distress sale forced sale will have

a) Adequate marketing time b) Market value

c) Insufficient market time d) Private negotiations

Ans : c

8. Economic principle is not required to be considered for conventional valuation of

property

a) Demand b) Price c) Utility d) Cost

Ans : d

9. Opinion expressed on value of the property by the valuer, as expert witness, in a

valuation of dispute case is ........................ to the court.

a) binding b) not binding

c) of no value d) inform of advice

Ans : b
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10. Total age of building 4 years. After four years the depreciated value is equal to 24% of
the cost. Find out the % of depreciation (near to answer) by WDV method?

a) 24 b) 25 c) 30 d) 35

Ans : c

11. Infrastructure works like augmentation of road networks & transport facilities will result
in increased ........................

a) Environmental deterioration b) Overall developments

c) Crime Rate d) Withdrawal of capital

Ans : b

12. Not a fact but an estimate

a) cost b) price c) value d) Loss

Ans : c

13. Adverse changes to demand for the product or services produced by an asset will
result into

a) Physical b) Functional c) Economic d) Legal

Ans : c

14. Key element of income approach?

a) Potential income stream b) Expenses

c) Outstanding loans d) Capitalization rates

Ans : d

15. Factor is not considered for weightage adjustment in sales comparison

22. After leasing of the property, the lessor’s right is sometimes called ........................ right

a) diminishing b) occupational
c) residual d) possession

Ans : c

23. Which of the following is considered as a special property

a) Residential land b) Industry

c) Commercial office space d) Sports Arena

Ans : d

24. The property falling in the locality lacking in the infrastructure will ........................ with
the value of the property

a) Increase b) Decrease
c) Stabilize d) Have no relation with

Ans : b

25. Which valuation methodology should be used to calculate the market value of vacant
building excluding land?

a) Sales comparable b) Depreciated replacement cost

c) Income capitalization d) Residue technique

Ans : b
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26. In case of Usufructuary mortgage, the mortgagee is placed in possession and has a
right to enjoy the rent and profit

a) Until debt is paid b) Till contract is rescinded

c) Until debt is not paid d) Till contract is not rescinded

Ans : a

27. Vertical interest is about ........................

a) Legal concept of space above land surface

b) Legal concept of space below land surface
c) Both (1 & 2)
d) None of the above

Ans : c

28. A condition that decreases the utility of the property and is not economically feasible
to cure is called ........................

a) Incurable function
b) Fully depreciated property having no value
c) Incurable functional obsolescence
d) Unfunctional obsolescence

Ans : c

a) Reduce tax burden

b) Provide funds for replacement of fixed asset
c) Show the true financial position in the balance
d) Comply with the legal requirements

Ans : b

34. ........................ is the expression of future benefits in terms of present value

a) Annuity b) Capitalization
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c) Net Income d) Weighted averaging

Ans : a

35. Market value of reversionary right of lessor is estimated by

a) Deferring cost of the building

b) Capitalizing rent received from the property
c) Capitalizing profit rent for unexpected lease
d) Deferring market value of property as freehold

Ans : d

36. Adverse changes to demand for the product or services produced by an asset will
result into

a) Physical obsolescence b) Functional obsolescence

c) Economic obsolescence d) Legal obsolescence

Ans : c

37. Loss in value from forces external to the property and which is incurable is called
........................

a) Incurable depreciation b) Declining Sinking Fund

c) Economic obsolescence d) Functional Deterioration

Ans : c

38. A Hindu dies leaving behind father and son’s daughter’s son. They are

a) Class I heirs b) Class II heirs

c) Class III heirs d) Preferential heirs

Ans : b

39. Under see 63 of the Indian Easements Act the licensee has a rights on revocation
which means ........................

a) entitled to a reasonable time to leave the property

b) no right to remove any goods from such property
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c) not entitled for a reasonable time to leave the property

d) no right to keep any goods from such property

Ans : c

40. In case when the owner’s right, which is imperfect and it be subsequently made perfect,
on fulfilment of certain conditions, it is called

a) Co - ownership b) Concurrent ownership

c) Duplicate ownership d) Contingent ownership

Ans : d

41. A Hindu female wife dies and is survived by her husband have one son and two
unmarried daughter D1 and D2 how property of wife will be divided?

a) 1 by 3 to husband, 1 by 3 sum and remaining 1 by 3 to daughters

b) Into four equal parts
c) One half to husband and remaining half to son and daughters
d) One half to son and remaining half to husband and daughters

Ans : b

42. Which is the following element is not the key element of the income approach?

a) Potential income streams b) Expenses

c) Outstanding loans d) Capitalization rate

Ans : c

43. Under profit method of valuation income is generated from ........................

a) Only tangible assets b) Both tangible & intangible assets

c) Only intangible assets d) Only movable assets

Ans : b

44. Which return would you adopt as base while determining appropriate rate of the net
profit, unless it is otherwise found unsuitable?

a) The return from investments in stock and shares

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b) The return from gilt-edge security

c) Interest paid in the saving account
d) The return from investment in gold

Ans : b

45. The income chargeable under head ‘capital gains’ is computed by deducting the
........................ from the full value of the consideration received as a result of transfer of
the capital asset.

a) Expenditure incurred wholly and exclusively in connection with such

transfer
b) Expenditure incurred wholly and excessively after such transfer
c) Indexed cost of repairing to be carried out
d) Index cost of any improvements carried out after such transfer

Ans : a

46. Which one of the following best defines Annual sinking fund?

a) Annual sum required to be invested to an amount of Re. 1/- in specified

years
b) Monthly sum required to be invested to an amount of Rs. 10/- in specified
years
c) Annual sum required to be invested to an amount of Rs. 10/- in specified
years
d) Annual sum required to be invested to an amount of Rs. 100/- in specified
years

Ans : a

47. The value at the end of utility period of the asset without being dismantled is called
........................ value.

a) Salvage b) Realizable c) Scrap d) Junk

Ans : a

48. Where on a transfer of property, an interest therein is created in favour of a person to

take effect only on the happening of a specified event, such interest is called
.........................
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a) simple interest b) Diminishing interest

c) Vested interest d) Contingent interest

Ans : d

49. The approach to valuation of rented properties depends on .........................

a) nature and behaviour of landlords

b) category of tenants - tenant protected or not protected under the
applicable rent act
c) rent paying capacity of the tenant
d) cordial and homely relationship between landlord and tenant

Ans : b

50. A rupee received today can be invested now to earn interest, this can result in a higher
value in future is called as ........................

a) benefit cost b) opportunity cost

c) investment cost d) market cost

Ans : c

51. The weightage score method is applicable to

a) market approach b) income approach

c) both a and b d) cost approach

Ans : c

52. According to Hindu Succession Act, on her dying intestate wife property shall devolve
........................

a) On her children alone

b) On her children and husband alone
c) On her children, husband and her parents.
d) On her children and husband and thereafter upon her parents and the
heirs of parents

Ans : d
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53. As per Hindu Succession Act, in the absence of any issue to her, the property inherited
from her parents would be

a) Reverted back to her parents

b) Reverted back to her parents or heirs of her parents,
c) Reverted back to her parents or heirs of her parents, instead of devolving
upon the husband or heirs of husband.
d) Reverted back to her parents, instead of devolving upon the husband

Ans : c

54. According to Hindu Succession Act, when two or more heirs succeed to the property
of an intestate, they shall take ........................

a) Their share as per capita and called as joint tenants.

b) Their share as per stripes and called as joint tenants.
c) Their share as per capita and per stripes and called as joint tenants.
d) Their share as per capita and per stripes as tenants in common and not
joint tenants

Ans : d

55. As per Mohamedan Law, succession among heirs of the same class but belonging to
different branches ........................

a) May either by per capita the succession is equally undivided

b) May either by per strips the succession is equally undivided
c) May either by per capita or per strips the succession is according to
number of heirs equally divided
d) May either by per capita or per strips the succession is unequally divided

Ans : c

56. As per Mohamedan Law, the share of a female in place of a male

a) Female : Male = 1 : 1 b) Female : Male = 1 : 2

c) Female : Male = 1 : 1/2 d) Female : Male = 1/2 : 1

Ans : d
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57. ‘A’ makes a contract with ‘B’ to beat his business contract, this is an example of
.....................

a) Valid contact b) Illegal contract

c) Voidable contract d) Unenforceable contract

Ans : b

58. Which of the following term is not included in the International Valuation Standards
definition of market value

a) Sale price b) Estimated amount

c) Date of valuation d) Willing seller

Ans : a

59. Which one of the following statements is true as per guidelines pertaining to
remuneration and costs as per Companies (Registered valuers and valuation) rules,
2017?

a) Valuer should charge fees as per the guidelines for fees given by any
major public sector bank
b) Valuer can accept fees or charges which are disclosed to and approved
by the persons fixing the remuneration
c) Valuer can accept fees or charges other than those which are disclosed
to and approved by the persons fixing the remuneration
d) Valuer should charge fees as per the guidelines for fees given on Wealth
Tax Act

Ans : b

60. A Tort is inflicted against .....................

a) With consent b) Free consent

c) Without consent d) Implied consent

Ans : c

61. Section 114A under Transfer of Property Act, where a lease of immovable property
has been determined by for forfeiture for a breach of an express condition which
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provides that on breach thereof the lessor may re-enter, no suit for ejectment shall be

a) Lessor consent
b) Unless and until the lessor has served on the lessee a notice in writing
c) Without any notice in writing
d) Oral consent

Ans : b

62. Any profit or loss on the sale of sinking (depreciation) investments is transferred to
.....................

a) Profit and loss account b) Asset account

c) Sinking fund account d) Depreciation account

Ans : a

63. Which of the following is not covered under fire floating policy?

a) Stocks in process blocks b) Stocks in godown

c) Stocks in the open d) Stocks in transit

Ans : d

64. As per IBC, 2016, debts owed to a secured creditor in the event of such secured
creditor has relinquished security, ranks equally with .....................

a) Workmen’s dues for a period of 24 months prior to liquidation

commencement date
b) Wages and any unpaid dues owed to the employees other than workmen
for the period of twelve months preceding the liquidation commencement
date
c) Insolvency process cost
d) Dues to the Central Government

Ans : c

65. A ..................... contract is a contract to do or not to do something, if some event,

collateral to such contract does, or, does not happen
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a) Ordinary b) Voidable
c) Contingent d) Unenforceable

Ans : c

66. Which of the following define is appropriate for the term real estate?

a) Building and other improvements

b) Property that is not encumbered by leases
c) Land and anything permanently attached to the land
d) Building and fixture

Ans : c

67. Reversionary value means .....................

a) The value on revision of rent .i.e. a new rent agreement between landlord
and tenant
b) An amount reverted back on sale of property
c) A specified value estimated for payment of taxes such as capital gains
or municipal taxes
d) Present value of land which would revert to the lessor after expiry of
lease period

Ans : d

68. Which of the following is an optional cover under Industrial All Risks Policy?

a) Machinery breakdown b) Electronic equipment

c) Business interruption d) Business interruption
(Machinery breakdown) (Fire & Special perils)

Ans : c

69. A notice under Section 111 of Transfer of property Act can be waived .....................

a) By express or implied consent of the person to whom it is given

b) By implied consent of the person to whom it is given
c) By express consent of the person to whom it is given
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d) By notice to either of the party

Ans : a

70. Which one is true in case of contaminated restored property?

a) Stigma is removed
b) Market will pay reasonable price
c) Market will still pay less than the similar property in the market
d) Market will pay the cost of remediation also

Ans : b

71. Is it permissible for landlord to disconnect / cut off essential service being provided to
tenant?

a) Yes b) No
c) Yes, after notice to tenant d) Yes, after order from court

Ans : d

72. Gross profit in the context of consequential loss (fire) policy means one of the following

a) Turnover minus variable and standing charges

b) Net profit and cost of production
c) Net profit and standing charges
d) Net profit and variable charges

Ans : c

73. Moving along with indifference curve the .....................

a) Marginal rate of substitution for a good, increases as more of the good

is consumed
b) Marginal rate of substitution is constant
c) Marginal rate of substitution equal to 0
d) Consumer does not prefer one consumption point to another

Ans : b
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74. The constant increase in production of cereals constitutes the component of a time
series

a) Cyclic variation b) Dummy trend

c) In journal d) In profit and loss account

Ans : b

81. Occupancy rights of the occupant of the premises under Easement Act is as .....................

a) Licensee b) Statutory tenant

c) Lessee d) Trespasser

Ans : a

82. Contract of indemnity is .....................

a) Tripartite b) Bilateral
c) Multipartite d) Multilateral

Ans : b

83. Which one of these is not a primary sector?

a) Farming b) Dairy
c) Fishing d) Textile

Ans : d
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84. Amount received by sale of scrap by a club is treated as .....................

a) Income b) Expense
c) Assets d) Liability

Ans : a

85. ‘A’ purchased a mine for Rs 2,50,000 minerals in the mine were expected to be
5,00,000 tonnes. In the first year, 50,000 tonnes of minerals were used. What is the
depreciation for the first year?

a) Rs. 20,000/- b) Rs. 25,000/-

c) Rs. 10,000/- d) Rs. 15,000/-

Ans : b

86. Salaries due for the month on March will appear .....................

a) On the receipt side of the cash book

b) On the payment side of the cash book
c) As a contra entry
d) Nowhere in the cash book

Ans : d

87. In case of ..................... the motive (intention) of the breach is often taken into
consideration

a) Tort b) Contract
c) Agreement d) Tender

Ans : b

88. As per Companies Act, 2013, sec 192(2), the notice for approval of the resolution by
the company or holding company in general meeting under sub section(1) shall include
the particulars of the arrangement along with the value of assets

a) Involved in such arrangement duly calculated by an auditor

b) Involved in such arrangement duly calculated by an liquidator
c) Involved in such arrangement duly calculated by a registered valuer
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d) Involved in such arrangement duly calculated by a Insolvency Resolution

Professional

Ans : d

89. He presented the theory of rent .....................

a) Malthus b) Allarna Iqbal

c) Ricardo d) Marshall

Ans : c

90. Which one of the following is not true under Factories Act, 1948?

a) Factory is any premises whereon 10 or more workers are working, or

were working on any day of the preceding 12 months, and in any part of
which a manufacturing process is being carried on with the aid of power
b) Factory is any premises whereon 20 or more workers are working, or
were working on any day of the preceding 12 months, and in any part of
which a manufacturing process is being carried on with the aid of power
c) A mine or mineral mining site is a factory
d) Occupier of a factory means the person who has ultimate control over
the affairs of the factory

Ans : c

91. Mean is a measure of .....................

a) Location (central value) b) Dispersion

c) Correlation d). Variation

Ans : a

92. The market value of reversionary right of the lessor is estimated by .....................

a) Deferring cost of the building

b) Capitalizing rent received from the property
c) Capitalizing profit rent for unexpired lease
d) Deferring market value of the property as freehold

Ans : d
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93. As per Right to Fair Compensation and Transparency in Land Acquisition,

Rehabilitation and Resettlement Act under Section 12, the Government to determine
the extent of land to be acquired, should be conducted in

a) Presence of Officers b) Presence of owner

c) In the absence of owner d) In the absence of any person
authorized by the owner

Ans : a

94. Ingredients of Investment property are self-liquidity, utility & .....................

a) Scarcity b) Non marketability

c) Non recovery d) Marketability

Ans : d

95. The problems related to price rise are handled under .....................

a) Management accounting b) Cost accounting

c) Financial accounting d) Inflation accounting

Ans : d

96. When a minor coparcener files a suit for partition through guardian or next friend and
court finds the partition being for the welfare of the minor, the partition / severance of
status place from the date

a) The institution of the suit b) Of the court order

c) Fixed by the court d) Agreed by the parties

Ans : c

97. A contract by which one party promises to save the other from loss caused to him by
the conduct of promisor himself or by conduct of any person is called as

a) Contract of indemnity b) Contract of breach

c) Contract of guarantee d) Performance of contract

Ans : c
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98. Remedies for enforcement of the fundamental rights conferred by this part - writs of
habeas corpus, mandamus, prohibition, certiorari and .....................

a) Ultra vires b) Ratio Decidendi

c) Quo Warranto d) Stare Decisis

Ans : c

99. The forest animals are not bounded by the following act .....................

a) Indian Forest Act b) Indian Wild Life Act

c) Environmental protection Act 1986 d) Bio diversified Act

Ans : c

100. After wife expired, the property right goes to, .....................

a) Husband
b) Husband cannot take
c) Self-acquired property to husband and ancestral to her parents or her
parents legal heirs
d) Only 25% goes to husband

Ans : c

101. The annual equivalent of premium plus actual rent paid is called -

a) Standard rent b) Actual rent

c) Acknowledgement rent d) Virtual rent

Ans : d

102. As per IBC, 2016, who cannot initiate a fast track corporate insolvency resolution
process?

a) Financial creditor b) Operational creditor

c) Corporate debtor d) Insolvency professional

Ans : d
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103. Which of the following statement is true as per fire policy condition on the happening
of a loss?

a) The insured can abandon the damaged property to the insurers

b) The insurers have a right to take possession of the premises where the
loss has occurred
c) The insurers do not have a right to take possession of the premises
where the loss has occurred
d) The insurers should settle entire cost of reinstatement as estimated by
insured’s consultant without any analysis

Ans : b

104. Which is correct in the following statement -

A. Inflation benefits the debtors
B. Inflation benefits the bond holder

a) ‘A’ only b) ‘B’ only

c) Both ‘A’ & ‘B’ d) Neither ‘A’ or ‘B’

Ans : a

105. The total cost is generally considered as sum of .....................

a) Fixed cost and average cost b) Fixed cost and marginal cost
c) Marginal cost and average cost d) Fixed cost and variable cost

Ans: d

106. Deterioration of environment is ..................... proportional to market value of property

a) Inversely b) Directly
c) Not d) Indirectly

Ans : a

107. Determination of the price that would be equitable between a lessor and lessee for
either permanent transfer of the lease assets or the cancellation of the lease liability is
known as .....................
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a) Investment value b) Synergic value

c) Equitable value d) Liquidation value

Ans : b

108. Classification is the ..................... of facts that are distinguished by some significant
characteristics

a) Part b) Survey
c) Tabulation d) Grouping

Ans : d

109. The seasonal indices for each month or quarter of different years are called .....................

a) Typical seasonal b) Link relatives

c) Chain relatives d) Specific seasonal

Ans : c

110. The process of transferring the transactions relating to changes in a particular item at
one place in the form of an account is called .....................

a) Balancing b) Casting
c) Journalizing d) Posting

Ans : d

111. As per indifference curve analysis consumer equilibrium is attained when:

a) Slope of indifference curve is constant

b) Slope of both indifference curve and income price line are equal
c) Slope of both indifference curve and income price line are opposite
d) Both income price line and indifference curve are parallel

Ans : b

112. For the management of the environment, which one of the following is not a major
legislative measure in India?
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a) Factories Act 1948

b) The Water (Prevention and Control of Pollution) Act, 1974
c) The Air (Prevention and Control of Pollution) Act, 1981
d) The Environment (Protection) Act 1986

Ans : a

113. Which of the following element is not part of definition of market value?

a) The most probable price

b) As of a specified date
c) Cost incurred by the seller in creating the asset
d) The buyer and seller each acting prudently

Ans : c

114. Every transfer of immovable property made with intent to defeat or delay the creditors
of the transferor shall be voidable

a) At the option of any creditor so defeated or delayed

b) At the option of debtor
c) At the option of the court
d) At the option of the Government

Ans : a

115. A population consisting of the result of the conceptually repeated trial is known as
.....................

a) Finite population b) Hypothetical population

c) Infinite population d) Real population

Ans : b

116. An ownership flat with 140 sq.m. area is licensed for an amount of Rs 1,10,000 per
month. Society maintenance charges are Rs 20,000 per 3 months. Which of the
following will be market value of the flat on income approach by adopting 4 percent as
rate of capitalization?

a) Rs. 3,10,00,000/- b) Rs. 1,10,00,000/-

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c) Rs. 2,00,00,000/- d) Rs. 1,32,00,000/-

Ans : a

117. Under which of the following circumstances reinstatement basis of settlement will not
apply under fire reinstatement policy?

a) Insured fails to intimate to the insurer within 6 months of any extended

time to replace the damaged property
b) Insured is unable to replace the damaged property
c) Insured is unwilling to replace the damaged property
d) In cases when the insured fails to intimate to the insurer within 6 months
or any extended time to replace the damaged property and insured is
unable or unwilling to replace the damaged property

Ans : d

118. As per Right to Fair Compensation and Transparency in Land Acquisition,

Rehabilitation and Resettlement Act under Section 4(2), the Government shall ensure
the completion of Social Impact Assessment study within a period of

a) One month b) Three months

c) Six months d) Nine months

Ans : c

119. When does corporate insolvency commence?

a) On the date filling an application by operational creditors

b) On the date filling an application by financial creditors
c) On the date admission of application by adjudicating authority
d) On the date of appointment of interim insolvency resolution professional

Ans : c

120. Following does not affects demand of Real Estate?

a) In-migration/Out-migration
b) Lower interest rate on housing loan
c) Consumer confidence
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d) Paying capacity

Ans : b

121. Due to ..................... of properties in real estate market, conditions of perfect competition
are almost absent

a) Homogeneity b) Heterogeneity
c) Unstable characteristics d) Lack of demand

Ans : b

122. Which of the following statement is correct?

a) Hotels and restaurants should be valued on the basis of their profitability

b) Hotels and restaurants should be valued on the basis of their tangible
assets only
c) There are no intangible assets associated with the hotel and restaurant
industry
d) Advertisement income in a hotel or restaurant cannot be treated as part
of profit

Ans : a

123. This is not a cause of inflation

a) Rise in customer confidence b) Decrease in supplies

c) Corporate decisions to charge more d) Increase in supplies

Ans : a

124. Which cannot be said as criteria air pollutant?

a) Carbon dioxide b) Carbon monoxide

c) Nitrogen oxide d) Sulphur oxide

Ans : a

125. Which of the following is not a function of Cost Accounting?

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a) Cost ascertainment b) Planning and control

c) Decision making d) External reporting

Ans : d

126. Which of the following is not a part of modifying principle:

a) Principle of consistency b) Principle of materiality

c) Principle of conservatism d) Principle of dual aspects

Ans : b

127. In the mining industry the method used for valuation is known as :

a) Depreciation b) Diminution
c) Amortization d) Depletion

Ans : d

128. A valuer should not take up an assignment under the Act / Rules if he /it or any of his /
its relatives or associates is not independent in relation to the company and assets
being valued because .....................

a) It involves conflict of interest

b) It leads to reporting higher value
c) It leads to reporting value
d) It leads to reporting average value

Ans : a

129. Variable cost per unit ............................

a) Variable cost per unit b) Remains constant

c) Increases when output increases d) Decreases when output
decreases

Ans : a

130. What happens to inflation with increase in cash reserve ratio?

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a) Inflation increases b) Inflation decreases

c) No changes d) Deflation is caused

Ans : a

131. Right to privacy is ............................ right

a) Fundamental b) Constitutional
c) Statutory d) None of the above

Ans : b

132. The term environment is defined under which act that includes relation between
environment, water and air?

a) The Environment Act b) Water Cess Act

c) Air Act d) Technology Act

Ans : a

133. Standard or scale used to measure transactions and events in?

a) Rupees b) Dollar
c) Local currency d) Pounds

Ans : c

134. As per the companies act 2013, any scheme of corporate debt restructuring under
Sec 230 (2) (1) (c) (v) must include a valuation report in respect of the shares and the
property and all assets, tangible and intangible, and movable and immovable, of the
company by

a) a registered valuer
b) State government
c) An auditor’s report is sufficient
d) Reserve Bank of India guidelines is sufficient

Ans : a

135. Regression coefficient is independent of :

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a) Origin b) Scale
c) Logical property d) Assignable property

Ans : a

136. Despite the absence of a contractual relationship, ....................... will exist wherever
there is a relationship of sufficient ‘proximity’ between a professional advisor and a
person who relies on his or her advice.

a) A duty of care b) No duty of care

c) Fiduciary care d) No care

Ans : c

137. If the central bank buys financial securities form the open market to increase the
monetary base, this is an example of :

a) open market operations b) lender of last resort

c) financial regulation d) financial intermediation

Ans : a

138. Cost of machine Rs. 1,00,000/-, scrap value Rs. 10,000/-, life 4 years, what will be the
amount of depreciation according to sum of years digit method in the first year.

a) Rs. 40,000/- b) Rs. 45,000/-

c) Rs. 36,000/- d) Rs. 38,000/-

Ans : c

139. Number of firm in a monopoly market is

a) Two b) Many c) One d) Three

Ans : c

140. The factor which is not responsible for the occurrence of business cycles is :

a) social customs b) decline

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c) likes and dislikes of people d) scientific and technological

developments

Ans : a

141. The maximum limit of investment in tiny industry is :

a) 0 to 25 lakhs b) 25 lakhs to 50 lakhs

c) 50 lakhs to 1 crore d) 25 lakhs to 5 crore

Ans : a

142. In which of the following case, the court has for the first time approved of Investment
theory of Rent fixation, by allowing 1.50 percent more return than the return on gilt
edged security on value of land and 2.5 percent extra yield on the cost of the building,
as fair return to the landlord on his investment in an immovable property?

a) Jawaji Nagnathan V/s RDO (Adilabad)

b) Sorab Talati V/s Joseph Michem
c) R.C. Cooper V/s Union of India
d) Wenger & Co. V/s D.V.O.

Ans : b

143. Market equilibrium refers to a situation in which market price is ................

a) high enough to allow firms to earn a fair profit

b) just above the intersection of the market supply and demand curves
c) low enough for consumers to buy all that they want
d) at a level where there is neither a shortage nor a surplus

Ans : d

144. A valuer should maintain proper working papers for production before a regulatory
authority or for a peer review for minimum of which of the following period, assuming
that there is no pending case before the Tribunal or Appellate Tribunal

a) One year b) Two years

c) Three years d) Ten years

Ans : c
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145. According to policy condition, the fire policy ceases cover if the building incurred
becomes unoccupied for more than .................

a) 15 days b) 30 days
c) 45 days d) 60 days

Ans : d

146. Sale comparison method and development method of valuation are the two main
methods under .....................

a) Income approach b) Cost approach

c) Market approach d) Residual approach

Ans : c

147. A tandem plot ....................

a) is similar to recess land

b) is similar to landlocked land
c) has access only by a private road or a common passage
d) is always on the main road

Ans : c

148. An inferior good is one for which an increase in income causes

a) decrease in supply b) increase in demand

c) increase in supply d) decrease in demand

Ans : d

149. When the present value of minimum lease payments is approximately equal to the fair
value of the lease assets, it is called .................

a) Finance lease b) Long term lease

c) Operating lease d) Short term lease

Ans : a
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150. Which one of the following should not be done by a valuer with the confidential
information about the subject company, which has come to his / its knowledge without
proper and specific authority or without legal or professional right or duty to disclose

a) Use or divulge to other clients or any other party

b) Maintain records
c) Use in his / its valuation exercise
d) maintain confidentiality of information

Ans : a

151. Which of the following scenario need not be a connection with the Highest and Best
use of existing buildings or land?

a) Continued inferior use

b) Modifying / improving existing use
c) Conversion to alternative use
d) Partial / total demolition with subsequence redevelopment

Ans : d

152. What is full form of SEZ?

a) Secure entry zone b) Special entry zone

c) Secure economic zone d) Special economic zone

Ans : d

153. Following indicates of years an asset will endure before it deteriorates to an unusable
condition?

a) Useful life b) Economic life

c) Physical life d) Residual life

Ans : c

154. CPWD has not given any weightage?

a) Bricks b) Stone chips

c) Skilled labor wages d) Wooden furniture in the building

Ans : d
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155. Purchaser, Occupants, Tenant comprises what side of the market?

a) Demand b) Supply
c) Equilibrium d) Neutral

Ans : a

156. Prevalent rate of capitalization can be obtained from

a) Local property dealers

b) Analysis of recent transaction of rented property in the market
c) Local authority
d) Recent re-sale transaction of vacant property in market

Ans : b

157. Which of the following is not helpful in analysis of market data and in deriving the net
income multiplier from income approach of valuation?

a) Potential gross income b) Gross income

c) Depreciation d) Sale price

Ans : c

158. Value of lessee’s interest in a property will normally

a) Diminish with passage of time

b) Increase with passage of time
c) Remain the same till lease is extinguished
d) Increases annually

Ans : a

159. Factor is not considered in value estimation by cost approach?

a) Deduction of management expenses

b) Assessment of depreciation
c) Estimation of market value of land
d) Determination of reproduction or replacement cost new

Ans : a
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160. Not relevant under the sales comparison approach?

a) Inspect and analyse the subject property to be valued

b) Identify and locate possible comparable property sales
c) Estimate of cost of constructing the subject property
d) Analyse difference between subject property and comparable

Ans : c

161. Receipt of money in the future is worth less than money received at present

a) Disagree with statement

b) Agree with statement
c) Depends on circumstances
d) It is same after all money is money today or tomorrow

Ans : c

162. Following is most accurate factor for applicability of income approach of valuation of
a property?

a) Subject property has recently sold

b) Subject property is unique
c) Subject property is old
d) Subject property produces an income

Ans : d

163. Following factors do not affect the physical life of building?

a) Materials used in construction b) Workmanship

c) Weather condition d) Shape of the land

Ans : d

164. Section 118 under transfer of property act, when 2 persons mutually transfer the
ownership of one thing for the ownership of other, neither thing or both things being
money only the transaction is called

a) A transfer b) Exchange
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c) Lease d) Eviction

Ans : b

165. Under Section 59 of Indian Succession Act, which person may dispose of his property
by will

a) Person of unsound mind b) Person of sound mind

c) Minor d) Intoxicated person

Ans : b

166. Which of the following is NOT an input:

a) Labour b) Entrepreneurship
c) Natural resources d) Production

Ans : b

167. Which of the following Acts is considered an umbrella legislation with a wider scope in
comparison to the other notifications?

a) The Water (Prevention and Control) Act 1974

b) The Air (Prevention and Control) Act 1981
c) The Environment (Protection) Act 1986
d) The Water (Prevention and Control of Pollution) Cess Act 1977

Ans : c

168. Which of the following statement is true when a signing valuer has relied on work done
by others who do not sign the certification

a) Signing valuer has basis to believe that individuals performing work are
competent
b) Signing valuer blindly relies on work carried out by contributing valuer
c) Signing valuer can transfer responsibility to contributing valuer in case
of discrepancy and claim innocence
d) Signing valuer should not disclose name of the contributing valuer to the
client

Ans : b
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169. The demand curve in demand & supply graph indicates ...................

a) Effect on market supply of a change in the demand for a good or service

b) Marginal cost of producing and selling different
c) Quantity of a good that consumers would like to purchase at different
prices
d) Effect of advertising expenditures on the market price of a good

Ans : c

170. Index numbers are expressed in ...................

a) Percentages b) Median
c) Range d) Mode

Ans : a

171. Which of these is one of the causes of inflation?

a) Increase in public expenditure b) Deficit financing

c) Increase in administrative prices d) All the three

Ans : d

172. As per Right to Fair Compensation and Transparency in Land Acquisition,

Rehabilitation and Resettlement Act under Section 6, Government shall ensure that
the Social Impact Assessment Study report are prepared and made available in

a) The local language b) Any language

c) English d) No publication

Ans : a

173. Business profit is equal to total revenue minus:

a) Economic cost b) Managerial cost

c) Explicit cost d) Implicit cost

Ans : d
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174. Under transfer of property Act, the seller is ......................

a) Not entitle to the rents and profits of the property till the ownership thereof
passes to the buyer
b) Entitle to the rents and profits of the property till the ownership thereof
passes to the buyer
c) Entitle to the rents and other profits
d) Entitle to the profits

Ans : b

175. The difference between disposable income and consumption is ......................

a) Saving b) Expenditure
c) Both d) None of the above

Ans : a

* * *
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Pages 509 - 540

PART - X

ATTACHMENTS - 3 Nos.
510

This page is kept vacant intentionally.

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Attachment - 1

MODEL QUESTION PAPER OF VALUATION EXAMINATION FOR ASSET

CLASS: LAND AND BUILDING WITH EFFECT FROM 1st APRIL, 2019

1. When proportionate change in price is equal to proportionate change in quantity

demanded of any commodity, then such demand is called:

a. unitary elastic demand

b. relatively elastic demand
c. relatively inelastic demand
d. cross elasticity

Ans. (a)

2. Other things remaining the same, the law of demand states that:

a. the higher the price, the higher the quantity demanded

b. the higher the price, the lower the quantity demanded
c. the higher the price, the lower the quantity supplied
d. the lower the price, the lower the quantity demanded

Ans. (b)

3. A market which has only one seller selling a homogeneous product to many buyers is
known as:

a. monopoly
b. oligopoly
c. perfect competition
d. monopolistic competition

Ans. (a)

4. _____ is regarded as the reward for entrepreneur.

a. Rent
b. Investment
c. Profit
d. Capital

Ans. (c)

5. The frequency at which one unit of currency is used to purchase domestically produced
goods and services within a given time period is known as:

a. velocity of money
b. speed of money
c. momentum of money
d. count of circulation of money

Ans. (a)
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6. Which of the following is not a cause of demand-pull inflation?

a. Increase in wages and salaries

b. Increase in government spending
c. Increase in interest rates
d. Increase in exports

Ans.(c)

7. If a person has an income of Rs.30000 and his consumption is Rs.10000, then his
propensity to save is:

a. 1.33
b. 0.33
c. 0.67
d. 1.50

Ans. (c)

8. Investment does not depend significantly upon the __________.

a. population growth
b. level of income
c. progress of technology
d. expectation of the entrepreneur

Ans. (b)

9. When economic activities go unreported or not measured by societies current

techniques to monitor economic activity it falls under________.

a. mixed economy
b. capitalist economy
c. parallel economy
d. socialist economy

Ans. (c)

10. When we take the sum total of values of output of goods and services in the country,
without adding net factor incomes received from abroad, the figure so obtained is
called:

a. gross national product

b. net national product
c. gross domestic product
d. net domestic product

Ans. (c)
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11. In double entry system, accounts are primarily classified in to ___________.

a. receiver account & giver account

b. income account & expenses account
c. real account & nominal account
d. personal account & impersonal account

Ans. (d)

12. For a real estate construction company, which of the following is not part of Profit and
Loss statement?

a. Revenue from apartment sales

b. Interest paid to lenders
c. Cash deposited in bank
d. Depreciation expense

Ans.(c)

13. Difference between selling price and variable cost per unit can be classified as______
margin per unit.

a. contribution
b. gross
c. net
d. profit

Ans. (a)

14. _______ can be filed in the court of law for the violation of Directive Principles of
State Policy given under the Constitution of India.

a. Writ
b. Civil suit
c. Criminal case
d. No action

Ans. (d)

15. Which of the following is not a requirement of a contract?

a. Competent Parties
b. Free Consent
c. Legal Object
d. Adequate Consideration

Ans.(d)
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16. Performance of contract is one of the methods to__________.

a. create a new contract

b. set-aside a contract
c. make a contract void
d. discharge a contract

Ans.(d)

17. A contract to perform the promise, or discharge the liability, of a third person in case of
default is known as:

a. contract of indemnity
b. contract of guarantee
c. contingent contract
d. quasi contract

Ans.(b)

18. A owes money to B under the contract. It is agreed between A, B and C that B shall
henceforth accept C as his debtor instead of A. Which of the following statement is
true?

a. Now, B can claim payment from C.

b. B cannot claim payment from C.
c. B can claim payment from A only.
d. Now, B cannot claim payment from either A or C

Ans.(a)

19. A person employed to do any act for another, or to represent another in dealing with
third persons is called?

a. Principal
b. Agent
c. Surety
d. Principal debtor

Ans. (b)

20. A Tort is right:

a. in rem
b. in personam
c. in recission
d. in novation

Ans. (a)
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21. With reference to the Arbitration and Conciliation Act, 1996, if the parties fail to
determine number of arbitrators, which statement holds true?

a. The arbitral tribunal shall consist of sole arbitrator only.

b. The civil court shall take the cognizance of the matter.
c. The arbitral tribunal shall consist of a judge not less than the rank of a High
Court Judge.
d. The arbitral tribunal shall consist of a judge not less than the rank of a District
Judge.

Ans. (a)

22. With reference to auction sale, select the correct statement:

a. The auctioneer can accept payment by means of a bill of exchange

b. The auctioneer cannot sell goods on credit or accept payment by means of a
bill of exchange
c. The auctioneer shall mandatorily accept the payment of purchase price by
means of a cheque
d. The auctioneer can sell goods on credit as he deems fit

Ans. (b)

23. Mr. X desires a Court to give judgment that he is entitled to certain land in the
possession of Mr. Y, by reason of facts which he asserts, and which Mr. Y denies, to be
true. Select the correct statement.
a. Mr. Y must prove the existence of the facts
b. There is no burden on either to prove the facts
c. Mr. X must prove the existence of the facts
d. The Registrar of the property concerned shall prove the possession
Ans.(c)

24. As per section 36 of the Insolvency and Bankruptcy Code, 2016, the liquidator shall
hold the liquidation estate:
a. as an agent of debtor
b. as an agent of committee of creditors
c. as a fiduciary for the benefit of all the creditors
d. as a fiduciary for the benefit of all the stakeholders

Ans. (c)

25. Section 231 (2) of the Companies Act, 2013 empowers a tribunal to __________, if it is
satisfied that the compromise sanctioned under section 230 cannot be implemented
satisfactorily, and the company is unable to pay its debts as per the scheme.

a. wind up the company

b. restructure the debt
c. call for rearrangement
d. replace the management

Ans. (a)
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26. When numbers are associated with weights, then obtained mean is said to be _______.

a. weighted arithmetic mean

b. harmonic mean
c. standard mean
d. geometric mean

Ans. (a)

27. The patterns of change within a year that tend to be repeated from previous period is
called ________.

a. irregular variation
b. seasonal variation
c. secular trend
d. cyclical fluctuation

Ans. (b)

28. Technology that permits safe, efficient, and inexpensive clean-up of contaminants in
property tends to minimise _________ in asset value.

a. decrease
b. increase
c. fluctuations
d. escalation

Ans. (a)

29. Which planning provision is required around the battery limit of industry and for
industry having odour problem?

a. No development zone
b. Green belt
c. Special permission zone
d. Industrial regulation zone

Ans. (b)

30. In which of the following Act, provisions for health and safety in industries are
covered?

a. The Environment Protection Act

b. The Forest Act
c. The Factories Act
d. The Industrial Dispute Act

Ans. (c)
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31. Which of the following legislations does not provide for pollution control?

a. The Water (Prevention and Control of Pollution) Act, 1974

b. The Air (Prevention and Control of Pollution) Act, 1974
c. The Environment (Protection) Act, 1986
d. The Technology (Transfer of Abuse) Act, 2007

Ans. (d)

32. A valuer shall act with objectivity in his professional dealings by ensuring that his
decisions are made ________.

a. without the presence of any bias

b. with coercion
c. with confidence
d. with undue influence of any party

Ans. (a)

33. Under the Companies (Registered Valuers and Valuation) Rules, 2017, a valuer shall
maintain records of each assignment undertaken by him and proper working papers for
a period of ______.

a. 5 years
b. 2 years or such shorter period as required in its contract for a specific
valuation
c. 3 years or such longer period as required in its contract for a specific valuation
d. 2 years

Ans. (c)

34. Under the Right to Fair Compensation and Transparency in the Land Acquisition and
Rehabilitation Act, 2013, market value is decided by the collector as per________.

a. circle rate/guidelines rates of last 5 years

b. the average of the sale price for similar type of land being acquired,
ascertained from the highest fifty per cent of the sale deeds registered during
the preceding three years in the nearest village or nearest vicinity of the land
being acquired
c. purchase price of adjoining land
d. purchase price paid by the owner at the time of purchase of land which is to be
acquired

Ans. (b)
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35. _______ means arranging or distributing lands and properties according to particular
features or characteristics, purposes, uses, etc.

a. Safety regulations
b. Zoning
c. Floor space index regulation
d. Subdivision regulations

Ans. (b)

36. The approach to valuation of rented properties depends on the _________.

a. nature and behaviour of landlords

b. category of tenants - tenant protected or not protected under the applicable rent
act
c. rent paying capacity of the tenant
d. cordial and homely relationship between landlord and tenant

Ans. (b)

a. 50 per cent
b. 60 per cent
c. 70 per cent
d. 80 per cent

Ans. (c)

38. As per the Transfer of Property Act, 1882, immovable property includes ______.

a. furniture
b. growing crops
c. grass
d. things permanently fastened to anything attached to the earth

Ans. (d)

39. A gift to two or more donees, of whom one does not accept it, is__________.

a. void as to interest which he would have taken had he accepted

b. valid as to interest which he would have taken had he accepted
c. voidable at option of donor
d. valid at option of legal heir

Ans. (a)
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40. Which of the following property may not be transferred?

a. Growing crops
b. Immovable property
c. Grass
d. An easement right without dominant heritage

Ans. (d)

41. The Hindu Succession Act, 1956 does not apply to ______.

a. a follower of the Arya Samaj

b. a Sikh by religion
c. a child both of whose parents are Jains by religion
d. a person who is a convert to Christian

Ans. (d)

42. Value is an estimate of what ______ ought to be.

a. value
b. price
c. cost
d. worth

Ans. (b)

43. The value at the end of utility period of the asset without being dismantled is called
____ value.

a. salvage
b. realisable
c. scrap
d. junk

Ans. (a)

44. An asset may not command value in the market, if it is____ .

a. useful
b. scare
c. in abundance
d. transferable

Ans. (c)
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45. Which of the following shaped plot of land may command the highest value?

a. Triangular
b. Square
c. Irregular
d. Narrow strip

Ans. (b)

b. increase demand of real estate in surrounding area
c. decrease cost of construction of buildings in surrounding area
d. decrease demand of the real estate in surrounding area

Ans. (b)

53. Which one of the following is not a characteristic of real estate market?

a. No Free flow of information

b. It is imperfect market
c. It is perfect market
d. Heterogeneity

Ans. (c)

54. Which of the following would discourage demand of real estate?

a. Occupied by protected tenant

b. Potential of capital appreciation
c. Regular income
d. Redevelopment potential of the property

Ans. (a)
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55. Which is Green Building Rating System in India for New Construction?

a. Leadership in Energy and Environment Design (LEED) India

b. The Indian Green Building Council (IGBC)
c. National Building Code (NBC)
d. Environment Protection Agency (EPA) India

Ans. (a)

56. Under rent capitalization method, value of the property increases with:

a. higher property tax

b. higher capitalization rate
c. lower capitalization rate
d. longer duration

Ans. (c)

57. In case the unexpired period of lease is too long then reversionary value would be___.

a. negative
b. zero
c. negligible
d. less than zero

Ans. (c)

58. Which among the following is not a factor affecting market rent?

a. City
b. Location
c. Type of building
d. Turnover of the lessee

Ans. (d)

59. In relation to a lease agreement, the actual rent specified in the lease is called _____.

a. contractual rent
b. effective rent
c. negotiated rent
d. standard rent

Ans. (a)
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60. In leasehold property, lessor’s interest, on a date of valuation, consists of:

a. capitalized value of rent reserved under the lease for perpetuity.

b. capitalized value of profit rent reserved under the lease for unexpired period of
lease and right of reversion of property before expiry of lease period.
c. capitalized value of rent reserved under the lease for term of lease and right of
reversion of property after expiry of lease period.
d. capitalized value of rent reserved under the lease for unexpired period of lease
and right of reversion of property after expiry of lease period.

Ans. (d)

61. A project may be accepted when cash flow indicates __________.

a. positive net present value

b. negative net present value
c. zero net present value
d. zero internal rate of return

Ans. (a)

62. The discount factor used to appraise capital investment decision is a measure of:

a. the opportunity cost of capital of the business

b. the current inflation rates
c. the opportunity cost of capital of all business in the same industry
d. the current high street interest rate

Ans. (a)

63. For which of the following property, profit method of valuation is most appropriate?

a. Vacant Land
b. Petrol pump
c. Residential Home
d. Public School

Ans. (b)

64. The market demand curve shows ____________.

a. effect on market supply of a change in the demand for a good or service.

b. marginal cost of producing and selling different quantities of a good.
c. quantity of a good that consumers would like to purchase at different price s.
d. effect of advertising expenditures on the market price of a good.

Ans. (c)
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65. Which of the following is not a source from which sale instances of immovable
property in a particular locality can be collected?

a. Sales record at the registrar’s office

b. Advertisements in newspapers
c. Auction sale information from different authorities
d. Share market

Ans. (d)

66. Market approach basically operates on the_______.

a. principle of increasing and decreasing returns

b. principle of substitution
c. principle of conformity
d. principle of contribution

Ans. (b)

67. Which of the following property is normally valued by sales comparison method?

a. service property
b. investment property
c. non-investment non-marketable property
d. an owner occupied small residential house

Ans. (d)

68. Which of the following piece of land would command higher rate of land value in the
residential zone?

a. Having frontage to depth ratio as 2.0

b. Having frontage to depth ratio as 6.0
c. Having frontage to depth ratio as 0.2
d. Having frontage to depth ratio as 0.6

Ans. (a)

69. Which of the valuation method is generally used for carrying out valuation of large
plots when sale instances of large size plots in the locality are not available?

a. Direct Sales comparison method

b. Hypothetical plotting scheme
c. Method as per Schedule – III of Wealth Tax Act
d. By direct comparing rental instances

Ans. (b)
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70. Mr. A. developed a real estate project. Gross development value of completed project is
Rs.500 crore, construction cost and other developmental costs Rs.200 crore, and
Developer’s profit is 10 per cent of value of completed project. Calculate the residual
land value?

a. Rs.250 crore
b. Rs.200 crore
c. Rs.150 crore
d. Rs.270 crore

Ans. (a)

71. In a joint venture agreement, the share of the developer is less when ______.

a. estimated Building cost is equal to the land component

b. estimated Building cost is more than the land component
c. estimated Building cost is less than the land component
d. the FSI permitted on the plot is less

Ans. (c)

72. Quick estimation of cost of construction can be carried out by_________.

a. sum of digit method

b. detail estimation
c. plinth area rate
d. discounted cash flow method

Ans. (c)

73. Actual survival life of the building before it collapses is called the _____.

a. useful life
b. economic life
c. physical life
d. residual life

Ans. (c)

74. _____is the actual service life of the building.

a. Social life
b. Physical life
c. Economic life
d. Life equal to average age of the buildings in neighbourhood

Ans. (c)
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75. Decrease in value of the property through wear and tear is called as:

a. depreciation
b. economic obsolescence
c. functional obsolescence
d. technical obsolescence

Ans. (a)

76. Asset which has become outdated mainly due to the planning and designing being
unsuitable for present day requirement of the user is an example of:

a. technological obsolescence
b. economic obsolescence
c. functional obsolescence
d. excess depreciation due to wear and tear

Ans. (c)

77. Depreciated Replacement Cost is market value of special purpose industrial plant
building subject to potential______.

a. profitability
b. cost
c. price
d. value

Ans. (a)

78. Which of the following does not reduce physical life of building?

a. Bad workmanship
b. Periodic maintenance of the building
c. Use of inferior materials
d. Neglected maintenance of the building

Ans. (b)

79. Which one of the following valuation methodologies is most appropriate for valuing a
non-income generating owner occupied residential bungalow?

a. Discounted Cash Flow Method

b. Direct Sales comparison Method
c. Profit Method
d. Hypothetical building scheme

Ans. (b)
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80. While carrying out valuation of property for bank finance, which of the following is not
to be taken into consideration?

a. Age of the building

b. Rent fetching capacity of the property
c. Economic obsolescence
d. Amount of loan

Ans. (d)

81. When the result of a combination of two or more assets or interests where the combined
value is more than the sum of the separate values is known as __________.

a. real investment value

b. liquidation value
c. synergistic value
d. hope value

Ans. (c)

82. Which of the following transaction is an arm’s length transaction?

a. Transaction between willing buyer and willing seller.

b. Transaction between parent and subsidiary company
c. Transaction between two old friends
d. Transaction between two brothers

Ans. (a)

83. While discharging a duty, a valuer has to safeguard the interest of -

a. Public
b. Client
c. Valuer himself
d. Client’s Advisor

Ans. (a)

84. Which of the following judgements recognises the concept ‘Valuation is an art, not an
exact science. Mathematical certainly is not demanded, nor indeed is it possible’?

a. K.P. Varghese vs ITO (1981) 131 ITR 597 (SC)

b. Gold Coast Selection Trust Ltd. vs Humphray (1949) 17 ITR 19
c. Rustam C Cooper vs Union of India AIR 1970 SC 564
d. Hays Will Trust vs Hays and Others (1971) 1 WLR 758

Ans. (b)
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85. In which of the following case, the concept of deduction of development cost to arrive
at market value of undeveloped land from sale instances of developed land has
evolved?

a. Subh Ram & Others vs State of Haryana & others

b. Gold Coast Selection Trust Ltd. vs Humphray (1949) 17 ITR 19
c. Rustam C Cooper vs Union of India AIR 1970 SC 564
d. Duncan Industries Ltd. vs State of UP and Others AIR 2000 SC 355

Ans. (a)

86. In context of the property insurance, which of the following is a human peril?

a. War
b. Age of the Property
c. Cyclone Facade
d. Upliftment

Ans. (a)

87. An insurance policy generally allows one to value the respective building and/or
contents by _____________.

a. internal rate of return

b. replacement cost
c. floor space index
d. ground coverage

Ans. (b)

88. A fire broke out in Hemant's factory and damaged half of the stock which was to be
shipped to a nearby cloth dealer. His fire insurance policy had the average clause in it.
Actual value of the stock: Rs.3,00,000, Sum insured for the stock: Rs.2,00,000, Loss
incurred: Rs.1,50,000 (As half the stock was destroyed). The claim amount will be Rs.

a. Rs.1,00,000
b. Rs.3,00,000
c. Rs.2,00,000
d. Rs.1,50,000

Ans. (a)

89. When insurable amount is lower than ‘value at risk’, it is called:

a. over insured
b. fair insurable amount
c. fair premium for insurance
d. under insured

Ans. (d)
529

90. Which of the following is not an essential quality of valuation report?

a. A report written with too casual tone.

b. A report is systematic and methodical
c. A report is well set out.
d. A report is concise and definite.

Ans. (a)

91. Which one of the following is a requirement of a valuation report?

a. Preparing report without inspection and collecting relevant data

b. To give report as per the value required by the client
c. To give report which can withstand the test of cross examination
d. To prepare report without market survey

Ans. (c)
92. While valuing asset where the valuer is not conversant with its features, which of the
following is the best option?

a. It is advisable to engage the services of an expert and the signed report of the
expert be made a part of valuation report
b. It is advisable to engage the services of an expert and his report need not be
made a part of valuation report
c. he can privately seek the services of such expert and need not disclose in the
report
d. It is enough to mention in report about details of expert engaged.

Ans. (a)

Attempt Questions 93 to 96 based upon the following case study: (4 x 2=8 marks)

An owner purchased a piece of land admeasuring about 350 m² and constructed a bungalow
of ground and one upper floor for his personal use some 30 years back. The bungalow is of
first-class construction having a future economic life of 40 years and has got the total built-up
area of 300 m². The owner now desires to sale the same and has received an offer of Rs.55
lakhs with vacant possession or in the alternative he has been offered a gross yearly rent of
Rs.2,00,000 for the bungalow and the plot together. There is good demand for such property
in the locality.
Value of land in the locality for similar plots = Rs.8000 per sq.m.
Present replacement cost of such a bungalow = Rs.15,000 per sq.m.
Total outgoings = 15 per cent of the gross rent
Annual sinking fund for redemption of Re. 1 at
5 per cent in 70 years = 0.0017
Amount of Re. 1 per annum in 30 years at 5 per cent = Rs.66.439
530

Year’s purchase at 3% in perpetuity = 33.33

93. What is the amount of depreciation of the bungalow?

a. 42.86 per cent

b. 11.29 per cent
c. 15.30 per cent
d. Nil

Ans. (b)

94. What will be the depreciated replacement cost of the bungalow?

a. Rs.39,91,950
b. Rs.38,11,500
c. Rs.35,12,250
d. Rs.45,00,000

Ans. (a)

95. What will be the insurable value for reinternment policy?

a. Rs.39,91,950
b. Rs.45,00,000
c. Rs.65,00,000
d. Rs.38,11,500

Ans. (b)

96. What will be the market value of the property by income approach?

a. Rs.66,66,000
b. Rs.56,66,000
c. Rs.55,00,000
d. Rs.50,00,000

Ans (b)

*****
531
Attachment - 2

CASE STUDIES APPEARED IN THE IBBI REVISED MODEL QUESTION PAPER

- B. Kanaga sabapathy
Tiruchirappalli
01.04.2019

1.0. EIGHT MARKS CASE STUDY :

Q.No. 93 to 96 - Case study :

An owner purchased a piece of land admeasuring about 350 m² and constructed a

bungalow of ground and one upper floor for his personal use some 30 years back.
The bungalow is of first-class construction having a future economic life of 40 years
and has got the total built-up area of 300 m². The owner now desires to sale the same
and has received an offer of Rs. 55 lakhs with vacant possession or in the alternative
he has been offered a gross yearly rent of Rs. 2,00,000 for the bungalow and the plot
together. There is good demand for such property in the locality.

Value of land in the locality for similar plots = Rs. 8,000 per sq.m.
Present replacement cost of such a bungalow = Rs. 15,000 per sq.m.
Total outgoings = 15 per cent of the gross rent
Annual sinking fund for redemption of Re. 1 at
5 per cent in 70 years = 0.0017
Amount of Re. 1 per annum in 30 years at = Rs. 66.439
5 per cent
Year’s purchase at 3% in perpetuity = 33.33

93. What is the amount of depreciation of the bungalow?

a) 42.86 per cent b) 11.29 per cent

c) 15.30 per cent d) Nil

Ans : (b)

94. What will be the depreciated replacement cost of the bungalow?

a) Rs. 39,91,950 b) Rs. 38,11,500

c) Rs. 35,12,250 d) Rs. 45,00,000

Ans : (a)
532

95. What will be the insurable value for reinternment policy?

a) Rs. 39,91,950 b) Rs. 45,00,000

c) Rs. 65,00,000 d) Rs. 38,11,500

Ans : (b)

96. What will be the market value of the property by income approach?

a) Rs. 66,66,000 b) Rs. 56,66,000

c) Rs. 55,00,000 d) Rs. 50,00,000

Ans : (b)

Solution :

350 m2
FF
150 m2 Age : 30 years
GF
FF
GF
150 m2

Road

Data :

Extent of plot = 350 m2

Builtup area of GF + FF = 300 m2
Age of the building = 30 years
Future economic life = 40 years
Gross yearly rent = Rs. 2,00,000
Outgoings = Rs. 15% of gross rent
Land rate = Rs. 8,000/sq.m.
Replacement rate of building = Rs. 15,000/sq.m.
Years purchase = 33.33

a) Depreciation of the bungalow

Useful life span = 70 years

Age of the building = 30 years
533

From the data given, it appears that depreciation is to be calculated by sinking fund
method.

Annual Sinking fund = 0.0017

So in 30 years it will amount to 0.0017 x 66.439
= 0.1129 or 11.29%

... the option is “b”.

b) Depreciated replacement cost

Depreciation percentage = 11.29

Replacement cost = Rs. 45,00,000
Depreciation value = 0.1129 x 45,00,000
= Rs. 5,08,050
Depreciated replacement value = 45,00,000 - 5,08,050
= Rs. 39,91,950

... the option is “a”.

c) Insurable value for reinstatement policy

Plinth area = 300 m2

Replacement cost = Rs. 15,000/m2
Replacement value for the = Rs. 45,00,000/-
purpose of insurance

... the option is “b”.

d) Market value by income approach

Gross rent = Rs. 2,00,000

Outgoings 15% = Rs. 30,000
Net income = Rs. 1,70,000
Years purchase = 33.33
Capitalised value = 1,70,000 x 33.33
= Rs. 56,66,100
say, Rs. 56,66,000

... the option is “b”.

534

2.0. ONE MARK CASE STUDY :

Q.No. 70.

Mr. A. developed a real estate project. Gross development value of completed project
is Rs.500 crore, construction cost and other developments cost Rs. 200 crore and
Developer’s profit is 10 per cent of value of completed project. Calculate the residual
land value?

a) Rs. 250 crore b) Rs. 200 crore

c) Rs. 150 crore d) Rs. 270 crore

Gross development value = Rs. 500 cr

Construction cost + development cost = Rs. 200 cr
Developer’s profit = 10%

Gross value = Rs. 500 cr

Developer’s profit 10% 500 C = 50 cr
Land & Building without profit = 450 cr
Less building value = 200 cr
... Value of land = 250 cr

The option is “a”.

Q. No.88.

A fire broke out in Hemant’s factory and damaged half of the stock which was to be
shipped to a nearby cloth dealer. His fire insurance policy had the average clause in it.
Actual value of the stock: Rs.3,00,000, Sum insured for the stock: Rs.2,00,000, Loss
incurred: Rs.1,50,000 (As half the stock was destroyed). The claim amount will be Rs.

a) Rs. 1,00,000 b) Rs. 3,00,000

c) Rs. 2,00,000 d) Rs. 1,50,000

Actual value of the stock = Rs. 3,00,000

Sum insured for the stock = Rs. 2,00,000
Loss incurred = Rs. 1,50,000
2,00,000 2
Insurance factor = =
3,00,000 3
2
Claim amount payable = x 1,50,000
3

= Rs. 1,00,000
The option is “a”.

* * * B. Kanaga sabapathy
01.04.2019
535 Attachment - 3

CASE STUDIES USEFUL TO THOSE WHO WISH TO APPEAR

FOR REGISTERED VALUER EXAMINATION

- B. Kanaga sabapathy
Tiruchirappalli

1.0. CASE STUDY 1 :

An owner purchased a piece of land admeasuring about 350 m² and constructed a

Q1. What is the amount of depreciation of the bungalow?

a) 42.86 per cent b) 11.29 per cent

c) 15.30 per cent d) Nil

Q2. What will be the depreciated replacement cost of the bungalow?

a) Rs. 39,91,950 b) Rs. 38,11,500

c) Rs. 35,12,250 d) Rs. 45,00,000

Q3. What will be the insurable value for reinternment policy?

a) Rs. 39,91,950 b) Rs. 45,00,000

c) Rs. 65,00,000 d) Rs. 38,11,500
536

Q4. What will be the market value of the property by income approach?

a) Rs. 66,66,000 b) Rs. 56,66,000

c) Rs. 55,00,000 d) Rs. 50,00,000

SOLUTION :

350 m2
FF
150 m2 Age : 30 years
GF
FF
GF
150 m2

Road

Data :

Extent of plot = 350 m2

Q1. Depreciation of the bungalow

Useful life span = 70 years

Age of the building = 30 years

From the data given, it appears that depreciation is to be calculated by sinking fund
method.

Annual Sinking fund = 0.0017

So in 30 years it will amount to 0.0017 x 66.439
= 0.1129 or 11.29%

... the option is “b”.

537

Q2. Depreciated replacement cost

Depreciation percentage = 11.29

Replacement cost = Rs. 45,00,000
Depreciation value = 0.1129 x 45,00,000
= Rs. 5,08,050
Depreciated replacement value = 45,00,000 - 5,08,050
= Rs. 39,91,950

... the option is “a”.

Q3. Insurable value for reinstatement policy

Plinth area = 300 m2

Replacement cost = Rs. 15,000/m2
Replacement value for the = Rs. 45,00,000/-
purpose of insurance

... the option is “b”.

Q4. Market value by income approach

Gross rent = Rs. 2,00,000

Outgoings 15% = Rs. 30,000
Net income = Rs. 1,70,000
Years purchase = 33.33
Capitalised value = 1,70,000 x 33.33
= Rs. 56,66,100
say, Rs. 56,66,000

... the option is “b”.

2.0. CASE STUDY 2 :

Mr. ‘X’ started construction of his 300 sq.m. building in Raipur in 1998 and completed
the same is 2000. The rate of construction of similar type of building in 1992 at Delhi
following CPWD plinth area rate was Rs. 3,200/sq.m. 30%, 60% and 10%
construction of the building were done in year - 1998, 1999 & 2000 respectively
and corresponding CPWD cost index of Raipur in those years were 142, 148 and
156 respectively. The cost index of Raipur in 2019 with respect to the base year 1992
is 482. Economic life of the building is 85 years.
538

Q1. How much expenditure Mr. ‘X’ made in year 2000 towards construction of the
building?

a) Rs. 8,52,480 b) Rs. 4,08,960

c) Rs. 14,97,600 d) Rs. 1,49,760

Q2. What is historical cost of construction of building Mr. ‘X’?

a) Rs. 14,11,200 b) Rs. 1,42,080

c) Rs. 14,97,600 d) Rs. 1,36,320

Q3. What is the replacement cost of the new building in 2019?

a) Rs. 68,48,256 b) Rs. 48,01,984

c) Rs. 46,27,200 d) Rs. 68,01,984

Q4. What is the depreciated replacement cost of the building in 2019?

a) Rs. 53,25,889 b) Rs. 37,34,503

c) Rs. 52,89,903 d) Rs. 35,98,573

SOLUTION

DATA

Building area = 300 sq.m.

Commencement of construction = 1998
Completion of construction = 2000
P.A. rate in 1992 @ Delhi = Rs. 3,200/sq.m.

Stages
1998 = 30% construction
1999 = 60% construction
2000 = 10% construction

Cost index
1998 = 142
1999 = 148
2000 = 156
2019 = 482
539

Economic life of the building = 85 years

WORKOUT DETAILS

Q1. Expenditure incurred in 2000

Plinth area = 300 sq.m.

P.A. rate in 1992 = Rs. 3,200 with base 100
Cost index in 2000 = 156
156 .
Replacement cost in 2000 = 3,200 x = Rs. 4,992/sq.m
100
Expenditure incurred in 2000 (10%)= 300 x 4,992 x 0.1 = Rs. 1,49,760/-

... The option is “d”.

Q2. Historical cost

142
1998 = 300 x 3,200 x x 30% completion = Rs. 4,08,960
100

148
1999 = 300 x 3,200 x x 60% completion = Rs. 8,52,480
100

156
2000 = 300 x 3,200 x x 10% completion = Rs. 1,49,760
100

Total = Rs. 14,11,200/-

... The option is “a”.

Q3. Replacement cost

Plinth area = 300 sq.m.

Basic rate = Rs. 3,200 with base 100
Cost index in 2019 = 482
482
Replacement rate in 2019 = 3,200 x = Rs. 15,424/m2
100
Replacement value = 300 x 15,424 = Rs. 46,27,200/-

... The option is “c”.

540

Q4. Depreciated Replacement Cost

Replacement value = Rs. 46,27,200

Year of construction of foundation = 1998
Age (2019 - 1998) = 21 years
Economic life = 85 years
Salvage valueassumed = 10%
21
Depreciation = x 90 = 22.23%
85
Depreciation value = 0.2223 x 46,27,200 = Rs. 10,28,627
Depreciated value = 46,27,200 - 10,28,627
= Rs. 35,98,573/-

... The option is “d”.

* * *
541

Pages 541 - 636

PART - XI

JUDGEMENTS

These judgements related to the topic “ Important Case - Laws”

on Principles of valuation of Real Estate (vide page 101 -
106) are given here for acadamic interest. The practising
valuers may go through these judgements in order to have a
thorough idea.
542

This page is kept vacant intentionally.

543

TEXT OF THE JUDGEMENT

“R.C. Cooper Vs. Union of India, (1970) AIR SC 564”

544

This page is kept vacant intentionally.

545

Equivalent Citation: AIR 1970 SC 564 ; 1970 SCR (3) 530

Petitioner:

Rustom Cavasjee Cooper / R C Cooper

Respondent:

Union of India

Date of Judgement: 10/02/1970

Bench:

Shah, J.C. & Sikri, S.M., Shelat, J.M. & Bhargava, Vishishtha,

Mitter, G.K. & Vaidyialingam, C.A., Hegde, K.S. & Grover, A.N.,

Ray, A.N. & Reddy, P.J. & Dua, I.D.

Background

The Preamble and various constitutional provisions of the Constitution of India obligate
the state to build an egalitarian society for the people of India. These obligations are in
detail discussed in Part IV of the Constitution under the heading Directive Principles of
State Policy. The Part IV starts with Article 37 declaring the part not enforceable in the
courts of law is however fundamental in the governance of the country. Therefore, while
making laws the Parliament must apply these provisions. State control of industries was
seen as a great means to achieve the ends of Socialism. After Independence of the
nation transport undertakings, electricity, insurance sector, oil refineries etc., were
nationalized in order to achieve the goals of Socialism.
546

Since Independence the distribution of credit in rural areas was at a great low. This was
because of the inaccessibility of banks and other financial institutions in the rural areas.
Therefore, in order to target the rural area, the government schemed a plan to target the
needy sectors. This solution they devised was Nationalization.

Earlier in 1955, Imperial bank of India was taken under the SBI Act and just in four
years its 7 subsidiaries were also amalgamated into the SBI branch. The Reserve Bank
of India also played a pro-active role in regulating the banking sector and reduced the
number of commercial banking institutions from 569 in 1951 to 89 in 1969.

The Indira Gandhi government in 1969 at the instance of the then Acting PresidentM.
Hidayatullah promulgated the Banking Companies (Acquisition & Transfer of
Undertaking) Ordinance, 1969 nationalizing the 14 banks. These 14 banks were chosen
on the basis that they had deposits exceeding 50 crores. The ordinance was
promulgated just two days before the Session of Parliament. The ordinance w.e.f. 19
July 1969 broght more than 75% banking sector under state control along with its
assets, liabilities, entire paid-up-capital.

The most horrific and controversial part of the Ordinance was the second schedule it
contained. The second schedule provided that:

1. Where an amount of compensation could be fixed by an agreement; it would

be determined by such agreement
2. Where no such agreement could be reached in the provided time, the matter
would be referred to tribunal. The compensation fixed by the tribunal will be
awarded after 10 years from the date when the agreement failed.

2 days later when Parliament came in session it enacted the Banking Companies
(Acquisition & Transfer of Undertaking) Act, 1969 with the same provisions as were in
the Ordinance. Therefore, Rustom Cavasjee Cooper the majority shareholder of Central
Bank of India & Bank of Baroda filed a writ petition in Supreme Court u/a 32 for the
violation of his Fundamental Rights mentioned under articles 14, 19(1)(f) & 31(2).
547

Issues

1. Whether a shareholder can file a petition for remedy against violation ofhis
fundamental rights when the company in which the shares are held is taken
over.
2. Whether the Ordinance was properly promulgated.
3. Whether the Parliamentary Act was within Parliamentary Competence.
4. Whether the impugned Parliamentary Act was violative of Article 19(1)(f) &
31(2) of Constitution of India.
5. Whether the method of ascertaining compensation was valid.

Petitioner’s Arguments

1. The writ petition is maintainable because the petitioner has filed it for
enforcement of his Fundamental Rights and not that of company. Since
Company is not a citizen within the context of Indian Citizenship Act, 1955 and
the Constitution of India, a company cannot claim the protection of those FR’s
which are solely available to citizens of India.
2. Since in just two days the Parliament was coming in monsoon session the
President promulgated an ordinance which is in direct contravention of
condition precedent for promulgation of Ordinance[1]. Therefore, the
President’s promulgation of Ordinance is invalid and that the SC has power to
annul an invalid Ordinance.
3. The three lists under Schedule VII of the Constitution Union, State &
Concurrent List clearly demarcate the area of operation of Union Parliament,
State Legislature and areas where both can operate respectively. The
Parliament can only legislate in the matters of “Banking” as defined in the
Section 5(b)of Banking Regulation Act, 1949 by the virtue of Entry 45 of List I.
Further, the legislature by the virtue of Entry 42 of list III can only make laws
for effectuating laws under List I. Therefore, the Parliament did not possess
the required valid competence to initiate the acquisition process.
4. The impugned act of 1969 is violative of Fundamental Rights mentioned in
Article 19(1)(f) and Article 31. Therefore, the act is in direct contravention of
548

Article 13 which clearly provides that any law which is in violation of the said
provision will be unconstitutional and the courts are bound to strike it down.
5. The Schedule II of the impugned act that provides for the procedure in which
the Compensation is to be given to the shareholders is draconian in its
entirety. The said provision is too much irrational and vague. No valid law can
make a person realize the fruits of the agreement after 10 years. Such illogical
and illegal condition must be struck down.

Respondent’s Arguments

1. The writ petition is not maintainable because the petitioner is seeking the
protection of Fundamental Rights of the Company which is not a citizen as per
the Indian Citizenship Act, 1955. The rights mentioned under Article 19 are
only available to the Citizens of the nation whereas company is only a juristic
person and not a citizen.
2. The President’s power to promulgate an Ordinance u/a 123 is a subjective
power and the President cannot be asked to adduce his reasons before the
courts as to why the ordinance was promulgated.
3. The courts must see the Socialist obligations upon the state to make an
egalitarian society in which there is no sort of inequality. Therefore, the court
should, keeping in perspective these obligations, must construe the word
“Banking” under Entry 45 of List I to mean all the activities which the
respondent ought to undertake.
4. The act is not violative of Article 19(1)(f) since it falls within the provisions of
Article 31 and since in K. Gopalan v. Union of India[2]the court held that each
Fundamental Right is exclusive of one another and distinct.

Judgment

The court delivered this landmark judgment on February 2, 1970 & speaking in 10:1
majority held that the shareholder or director cannot move to the courts for the
protection of infringement of Fundamental Right’s of the company unless it is proved
that by the impugned action his rights are also violated. The majority opinion was written
549

by Justice Shah for himself and on the behalf of Grover, Vaidialingam, Mitter, Dua,
Shelat, Hegde, Reddy, Sikri and Bhargava, JJ. while justice A.N. Ray wrote the
dissenting opinion.

The major findings of the majority bench were as follows:

1. The apex court overruled the 20 years law laid down by K. Gopalan rejecting
the mutual exclusivity theory. The court held that we cannot overlook the
violation of citizens of the nation on mere technicalities. If due to state action
the fundamental rights of a citizen are violated the court is bound to prohibit
such violation. The court by holding this laid down the Effect test and
overruled the Object test. Therefore, now the courts won’t look into the objects
of the impugned act and rather they will look into the effect of the impugned
act. In case effect of such act violates the FR’s of citizens it would be violative
of Constitution and liable to be struck down.
2. Since the Ordinance was already replaced by the act of Parliament therefore,
the court held that deciding the validity of the said impugned Ordinance is
fruitless. This discussion is relevant for academic purposes only.
3. The court rejected both the Petitioner’s & Respondent’s argument on
legislative competence to acquire banking Companies. The court held that the
term Property in itself constitutes the rights, liabilities, organization etc. that
accrue to the property. The power to acquire property was held to be an
independent power of Parliament and it required no separate legislation under
List II or List III.
4. The court found the impugned act in contravention of the Article 31 since the
act failed to comply with said provision. The said provision provided that the in
case any property is acquired by the government then they have to provide
compensation to the property owner. Since there was clear violation of the
said provision therefore, the court struck down the said act.
5. However, the court upheld the validity of the act in the context of Article
19(1)(f). The court said that the act is not violative of the freedom to carry
trade & business. The justification for the said ruling that the state can always
create a partial and absolute monopoly.
550

6. But the court held the said act in clear violation of Article 14c since only these
14 banks were restrained from conducting banking business n the future while
other banks including the foreign banks were allowed to continue Banking in
India. The court this discrimination as a flagrant hostile discrimination.

Justice Ray’s opinion was the sole dissent in the judgment. However, he agreed with
the majority in two instances which were as follows:

1. That the said act is not in violation of Article 19(1)(f) i.e. freedom to carry trade
& occupation.
2. That the Parliament was competent to legislate on the acquisition of banking
and that the said law was valid as far as Legislative Competence is
considered.

Further, he held that the Ordinance promulgation power vested within the President of
India is a subjective power that cannot be challenged in courts. However, he rejected
the majority’s opinion that the shareholder can approach the apex court for the violation
of his rights which were directed against a company i.e. a non-citizen. He also affirmed
the mutual exclusivity theory as was propounded in Gopalan judgment.

Critical Analysis

The importance of this judgment is often misunderstood in the sense that it is

contradictory to Socialist ideals of the Constitution. In actuality the power of
Nationalization was upheld by the Supreme Court. The court however just expanded the
horizons of the protection of Fundamental Rights after which even a shareholder whose
rights are indirectly violated by the legislative act can approach the courts. The court
clearly held that they would not bar the remedies that exist in the Constitution for the
protection of citizens on mere trifling technicalities. The court decided not to interfere in
the Government’s objective of Socialism and provided them enough levy to achieve
them. This case is also important as it was a turning point in the interpretation of
Fundamental Rights which was later applied in subsequent SC decisions.
551

The decision should not be misunderstood because the apex court respecting the
obligations upon the respondent to make India a socialist state. Although, socialism in
retrospect had been disastrous to Indian economy and eventually led to India’s
bankruptcy. However, it was a popular philosophy at that time and the government had
every right to pick a socialist path.

The court also apart from upholding the respondent’s power to Nationalize also upheld
respondent’s competence to enact such laws. The court also relieved the Parliament
from the lengthy procedure of making such laws by first making specific laws under List
I. Thus, if now the Parliament desires to nationalize airlines then it need not first make
laws specifically under Entry 29 List I for aircrafts. Rather they can directly make laws
under the Entry 42 of List III since they expanded the meaning of “property” to mean
rights, liabilities, organization etc.

The majority bench in order to protect the rights of the citizens of the nation from such a
draconian law tried to expand the horizons of the protection. After the pronouncement of
the decision the shield was broadened and as a result now if a legislative act violates a
citizen’s fundamental rights though indirectly it will be liable to struck down. The court
did away with the object test that was used to ascertain the validity of the legislative act
& now the effects test was used in order to ascertain this validity. This was a huge
incentive in the favor of citizens of the nation. Following this decision, the apex court
again in Bennett Coleman v. Union of India[3]held that FR’s of a citizen are not last
when they associate to form a company.

The court however also succeeded in protecting the Fundamental Rights of the citizens
of the nation by holding the impugned act in violation of Article 31(2). The court held that
compensation to be awarded 10 years later that too in bonds is too much illogical and
detrimental to the affected parties. It is probable that some citizens will not be able to
realize the fruits of the agreement due to the reasons of emergency situations such as
death. The court relied on the principle laid down in State of West Bengal v. Bela
Bannarjee[4]that the word “Compensation”in Article 31(2) means full indemnification.
After the decision of Bela Bannarjeethe Parliament enacted 4th Constitutional
(Amendment) Act, 1955 which provided that inadequacy of compensation cannot be a
552

ground to challenge the acquisition of private property. Despite this the court in P.
Vajravelu Mudaliar v. Special Deputy Collector, Madras[5]affirmed the ratio of Bela
Bannarjee. However, confusion was caused when the court reversed its stance and
overruled the earlier judgments in State of Gujarat v. Shantilal Mangaldas[6] . However,
rejecting the opinion in Shantilal Mangaldas and clearing all confusion upheld the ratio
of Bela Bannarjee.

This decision is also important in the sense it was the main driving force to the bench
who sat to decide the landmark case that changed the interpretation of Right to life &
liberty i.e. Maneka Gandhi v. Union of India[7]. The mutual exclusivity theory that was
propounded by the bench in Gopalan was rejected in R.C. Cooper and it was held that
each FR is dependent on one another for its survival. This interlinking of FR’s was late r
used in Maneka Gandhi.

The court also in its judgment dwelled on the aspect of Principles of Natural Rights vis-
à-vis FR’s and held that if the statutory provision which eliminates any Principle of
Natural Rights, then the court cannot ignore such elimination and is duty bound to make
the state follow them.

Aftermath of R.C. Cooper

The Parliament in order to make its position more profitable enacted the
25th Constitutional (Amendment) Act, 1971 after the decision of R.C. Cooper that
proved contrary to its intention. Earlier the word “Compensation” in Article 31(2) was
interpreted as Parliament is liable to a just & equitable indemnification. This
interpretation was further affirmed by the apex court in Bela Bannarjee, P.
Vajravelu&finally in R.C. Cooper Therefore, to negate all these judgments and to make
their intention the law, Parliament amended the Constitution by enacting the
25th Constitutional (Amendment) Act, 1971.
553

25th Amendment

1. The parliament in order to clarify their stance that they are not bound to
adequately compensate the landowners amended Article 31(2) in case their
property is acquired by the state. The word “amount” was placed instead of
compensation in the provision.
2. Article 19(1)(f) was delinked from Article 31(2).
3. Article 31 C, a new provision was added to the Constitution to remove all
difficulties that

i. Articles 14, 19 & 31 are not to be applied to any law enacted under the fulfillment of
objectives laid down under Article 39(b) & 39(c).

ii. Any law to give effect to Article 39(b) & 39(c) will be immunized from court’s
intervention.

The word amount can be interpreted as any figure of money and that is not necessarily
an adequate, equitable amount.

Conclusion

The myth surrounding the judgment must be cleared by a thorough reading of the
judgment. In its essence the judgment everywhere upheld the legislature’s goals of
achieving the seeds of Socialism. However, at the same time the court was also
protecting the rights of citizens which were violated by the impugned act.

The judgment expanded the scope of protection of FR’s in the sense that it allowed the
shareholders to challenge the impugned act. The court when it ruled that the rights of
the citizens would not be ignored on just mere technicalities saved the rights that were
earlier violated an the affected parties had no remedy.

The use of Effect test in the decision to ascertain the validity of the act was a
commendable step taken by the judiciary to lift the veil and see behind the masks.
554

Therefore, the judgment is landmark in its every sense. This judgment was further used
in other landmark decisions such as Bennett Coleman & Maneka Gandhi which were
successful in shaping the constitution’s liberal approach.
555

TEXT OF THE JUDGEMENT

“CWT Vs. P.N. Sikand (1977) 107 ITR 922 (SC)”

556

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Commissioner Of Wealth Tax, New ... vs P.N. Sikand on 1 April, 1977

Supreme Court of India

Commissioner Of Wealth Tax, New ... vs P.N. Sikand on 1 April, 1977
Equivalent citations: 1977 AIR 1657, 1977 SCR (3) 418
Author: P Bhagwati
Bench: Bhagwati, P.N.
PETITIONER:
COMMISSIONER OF WEALTH TAX, NEW DELHI

Vs.

RESPONDENT:
P.N. SIKAND

DATE OF JUDGMENT01/04/1977

BENCH:
BHAGWATI, P.N.
BENCH:
BHAGWATI, P.N.
FAZALALI, SYED MURTAZA

CITATION:
1977 AIR 1657 1977 SCR (3) 418
1977 SCC (2) 798
CITATOR INFO :
R 1985 SC 339 (15,17)

ACT:
Wealth Tax Act 1957 (Act 27 of 1957)--S. 7 r/w ss.
i(e)(m), 3--Valuation of the lease-hold interest, when
attached with a restraint or disadvantage--"Net wealth" in
s. 2(m)--Whether 50% of unearned increase "payable" to the
lessor as per the agreement deductible out of the valuation.

HEADNOTE:
The respondent an assessee to wealth tax as an individual,
in the assessment for the assessment year 1968-69, valued
his property situate on plot No. 12, Block 39 Kautilya Marg,
Chanakyapuri in his return of net wealth @ Rs. 4,52,000 as
against the value of Rs. 6,00,000 shown by him in the previ-
ous years. The property consisted of leasehold interest in
the land together with a house built on it. The land be-
longed to the President of India and it was leased by the
President of India to one Vashesharan Devi on the terms and
conditions set out in an agreement of lease dated 30th
December, 1954 and the leasehold interest was acquired from
Vashesharan Devi by the assessee. Clause (13) of the lease
deed provided that the assessee shall not be entitled to
assign the leasehold interest in the land without obtain-

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ing the prior approval in writing of the lessor and 50 per

cent of the unearned increase in the value of the land at
the time of assignment shall be claimable by the lessor and
moreover, if the lessor so desires, he shall have pre-emp-
tive right to purchase the property after deducting 50% of
the unearned increase in the value of the land. It further
provided that "all such assignees and
transferees ...... ..shall be bound by all the covenants
and conditions herein contained and be answerable in respect
therefor". In accordance with this clause, the Architects
who are approved valuers estimated the value of the property
@ Rs. 5,82,268 and from this' figure, they deducted a sum of
Rs. 1,30,000 representing 50 per cent of the unearned in-
crease in the value of the land, which belonged to the
lessor and arrived at the value of Rs. 4,52,268/-. The
Wealth Tax Officer did not accept the estimate of the
valuation and taking the annual rental value of Rs.
1,32,000/- fetched by the property as the basis, computed
the net annual rent at Rs. 82,956/- and arrived at the
figure of Rs. 8,29,560/- as the value of the property by
applying the multiple of ten to the net annual rental value
of Rs. 82,956/-. The claim of the assessee to deduct from
the value of the property 50 per cent of the unearned in-
crease in the value of the land was rejected on the ground
that this claim was based "merely on hypothetical presump-
tions". The value of the property was, however, reduced
from Rs. 8,29,560/- to Rs. 6,00,000/- since that was the
figure accepted by the Revenue in the past assessment years.
The appeals before the Appellate Assistant Commissioner and
the Tribunal failed. On a reference, the High Court took
the view that the liability to pay 50 per cent of the un-
earned increase in the value of the land to the lessor at
the time of the assignment was a disadvantage attached to
the leasehold interest in the land and hence its value was
liable to be deducted from the value of the property in
arriving at the net wealth.
Dismissing the appeals, the Court,
HELD: (1) In determining the value of the leasehold interest
of the assessee in the land for the purpose of assessment to
wealth tax the price which the leasehold interest would
fetch in the open market, were it not encumbered or affected
by the burden of the restriction contained in clause (13) of
the leasedeed, would have to be reduced by 50 per cent of
the unearned increase in the value of the land on the basis
of the hypothetical sale on the valuation date. [427 C-D]
(2) The only way in which in a. case of this kind the
valuation u/s. 7(1)Wealth
of theTax Act can be done is by
taking the market value of the leasehold interest as if it
were unencumbered or unaffected by the burden or restriction
contained in clause (13) and deducting from it, 50 per cent
of the unearned
419
increase in the value of the land on the basis of the hypo-

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thetical sale as representing the value of such burden or

restriction. [425 A-C]
(3) The true test for determining the matter of payment
made by an assessee out of an amount received by him wheth-
er it is an application of part of the amount which belongs
to him or it is payment of an amount which is diverted
before it reaches the assessee so that at the time of re-
ceipt, it belongs to the 'payee and not to the assessee. In
the present case 50 per cent of the unearned increase in the
value of the land would be diverted to the lessor before it
reaches the hands of the assessee as part of the price.
E-F]
[425
C.I.T.v. Sitaldas Tirathdas
41 I.T.R. 367 SC; applied.
Pandit Lakshmi Kant Jha v. Commissioner of Wealth-Tax,
90Bihar
I.T.R. 97, explained.
(4) The burden or limitation attaching to the leasehold
interest must be taken into account in arriving at the value
of the leasehold interest and it can not be value ignoring
the burden or limitation The covnaent in clause (13) is
clearly a covenant running with the land and it would bind
whosoever is the holder of the leasehold interest for the
time being. It is a constituent part of the rights and
liabilities and advantages and disadvantages which go to
make up the leasehold interest and it is an incident which
is in the nature of burden, on the leasehold interest.
Plainly and indisputably, it has the affect of depressing
the value which the leasehold interest would fetch if it
were free from this burden or disadvantage. When the lease-
hold interest in the land has to be valued this burden or
disadvantage attaching to the leasehold interest must be
duly discounted in estimated the price which the leasehold
interest would fetch. To value the leasehold interest on
the basis that this burden or disadvantage were to be
ignored would be to value an asset different in content and
quality from that actually owned by the assessee. [424 B,
423 D-H]
Corrie v. MecDermott [1914] A.C. 1056, quoted with approval.
(5) When under the lease deed the lessor has a bundle of
rights which includes "something" more than the reversion,
that "something" would necessarily be subtracted from the
interest of the lessee and to that extent, the interest of
the lessee would be the leasehold interest minus that
"something". What goes to augment the interest of the
lessor would correspondingly reduce the interest of the
lessee and it cannot be taxed as the wealth of both the
lessor and the lessee. It would be includible in the net
wealth of the lessor and hence it cannot at the same time
form part of the wealth of the lessee and must be subtracted
in determining the nature and extent of the interest of the
lessee. [424 E-F]

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JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1174 of 1974.

(From the Judgment and Order dated the 4-4-1974 of the Delhi High Court in Wealth Tax Ref. No. 5
of 1972). R.M. Mehta and, P.L. Juneja, for the appellant. G.C. Sharma, M.L. Khanna, Anup Sharma,
Miss Jaswal K.K. and K.R. Jagaraja and D.K. Jain, for the respondent. The Judgment of the, Court
was delivered by BHAGWATI, J.--This appeal raises a rather difficult but interesting question of law
relating to valuation for the purpose of the Wealth Tax Act, 1957 of leasehold interest in land, when,
there is, a covenant in the lease that the lessee shall not be entitled to assign the leasehold interest
without obtaining the prior approval in writing of the lesson and the lessor shall be entitled to, claim
and recover from the, lessee a certain specified proportion of the unearned increase in the value of
the land at the time of the assignment.

13--436SCI/77 The controversy in this appeal, relates to the assessment year 1968-69, the relevant
valuation date being 31st December, 1967. The assessee is assessed to wealth tax as an individual.
His net wealth on the. valuation date included a property situate on plot No. 12, Block 39, Kauti- lya
Marg, Chanakyapuri. the property consisted of leasehold interest in the land together with a house
built upon it. The land belonged to the President of India and it was leased by the President of India
to one Vashesharan Devi on the terms and conditions set out in an agreement of lease dated 30th
December, 1954 and the leasehold interest was acquired from Vashesharan Devi by the assessee.
The premium for the grant of the lease was Rs. 24,400/- and the annual rent was fixed at Rs. 610/-,
subject to. certain variations. The terms and conditions of the lease are a little important and, so far
material, they may be reproduced as follows:

"13. the lessee shall before any assignment or transfer of the said premises hereby
demised or any part thereof obtain from the lessor or such officer or body as the
lessor may authorise in this behalf approval in writing of the said assignment or
transfer and all such assignees and transferees and the heirs of the lessee shall be
bound by all the covenants and conditions herein contained and the answerable in all
respect therefore. Provided also that the lessor be entitled to claim and recover a
portion of the unearned increase (i.e. the difference between the premium already
paid and current market value) in the value of land at the time of transfer (whether
such transfer is an entire site or only a part thereof), the amount to be recovered
being 50 per cent of the unearned increase.

The Lessor shall have a pre-emptive right to the property after deducting 50 per cent
of the unearned (torn) said."

The assessee constructed a large building on the land and the question arose as to how the leasehold
interest of the assessee in the land together with the building should be valued. This property had
been valued in the past assessment years at Rs. 6,00,000/- and the assessee had accepted this
valuation and not challenged it. But in the assessment for the assessment year. 1968-69 the assessee
valued this property in its return of net wealth at Rs. 4,52,000/- on the. basis of a certificate

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obtained from M/s Anand Apte and Jhabvala, Architects who, are approved valuers recognised by
the Department. The Architects estimated the value of the property at Rs. 5,82,268/and from this
figure, they deducted a sum of Rs. 1,30,000/- representing 50 per cent of the: unearned increase in
the value of the land, which under the terms and conditions of the lease. belonged to the lessor and
arrived at the value of Rs. 4,52,000/-. The Wealth Tax Officer did not accept the estimate of the
valuation made by the Architects and taking the annual rent of Rs. 30,000/- fetched by the
property as the basis, computed the net annual rent at Rs. 82,956/-

and arrived at the figure of Rs. 8,29,560/- as the value of the property by applying the multiple of
ten. to the annual rental value of Rs. 82,956/-. The Wealth Tax Officer rejected the claim of the
assessee to deduct from the value of the property 50 per cent of the unearned increase in the value of
the land on the ground that this claim was based "merely on hypothetical presumptions" but
reduced the value off the property from Rs. 8,29,560/- to Rs. 6,00,000/-, since that was the figure
accepted by the Revenue in the past assessment years. The assessee challenged the valuation made
by the Wealth Tax Officer in an appeal preferred before the Appellate Assistant Commissioner, but
the appeal was unsuccessful as the Appellate Assistant Commis- sioner took the same view as the
Wealth Tax Officer. The Tribunal also, in further appeal, affirmed the same view holding that "the
fact that the assessee might have to Pay 50 per cent of the unearned increase to the lessor does not
affect the valuation of the property under section 7 of the Wealth 'Tax Act" and the words used in
that section "make it clear that the estimate. which should be made by the Wealth Tax Officer is. of
the gross price" and hence no, part of the unearned increase was deductible in computing the value
of the property for the purpose of the Wealth 'fax Act. The Tribunal also upheld the rental method of
valuation of the property and finding that the valuation of Rs. 6,00,000/- adopted by the Wealth
Tax Officer was even less than eight times the annual rental value of Rs. 82,956/-, the Tribunal
declined to interfere with the valuation made by the Wealth Tax Officer.

The assessee thereupon applied to the Tribunal for making a reference to the High Court and on the
application of the assessee, the following question of law was referred by the Tribunal for the
opinion of the High Court:

"Whether on the facts and in the circumstances of the case, the Tribunal was justi-
fied in law in taking the view that 50% of the unearned increase payable to the lessor
of the land formed part of, and was not deductible out of, the valuation of the
property for the purposes of Wealth-tax Act ?"

The High Court took the view that the liability to pay 50 per cent of the unearned increase in the
value Of the land to the lessor at the time of the assignment was a disadvantage attached to the
leasehold interest in the land and hence its value was liable to be deducted from the value of the
property in arriving at the net wealth of the assessee and on this view, it answered the question in
the negative in favour of the assessee. This led to. the filing of the present appeal by the 'Revenue
after obtaining a certificate of fitness from the High Court.

It would be convenient' at the outset to refer to the relevant provisions of the Wealth Tax Act, 1957
before we .address ourselves to the question which arises for determination in the appeal, The

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Wealth Tax Act, 1957 was passed by the Parliament in exercise of the legislative power conferred
under Entry 86 of List I of, the Seventh Schedule to the' Constitution and, as pointed out by Shah, J.,
ih Sudhir Chandra Nawa v. Wealth Tax Officer, Calcutta,(1) wealth tax "is a tax imposed' on the
capital value of the assets of individuals and companies on the valuation date ...... it is imposed on
the total assets which the assessee owns" and it is levied on the value of those assets. Section 3 is the
charging section and it provides that, subject to the other provisions contained in the Act, there shah
be charged for every assessment year commencing on and from the 1st day of April, 1957 a tax_in
respect of the net wealth on the corresponding valuation date of every individual, Hindu Undivided
Family and company at the rate or rates specified in the Schedule. Thus, wealth tax is a tax on the
net wealth of the assessee on the valuation date. Net wealth is defined in section 2(m) to mean "the
amount by which the aggregate value, computed in accordance with the provisions of this Act, of all
the assets, wherever located, belonging to the assessee on the valuation date, including assets
required to be included' in his net wealth as on that date under this Act, is in excess of the aggregate
value of all the, debts owed by the assessee on the-valuation date" other than debts failing within
certain specified categories. The word 'asset' used in section 2(m) is of the widest Signifi- cation and
under section 2(e), it includes property of every description, movable or immovable, barring certain
exceptions which are not material for our purpose.- What is, therefore, necessary for the purpose
of determining the net wealth of the assessee is., first to compute the aggregate value of all assets
belonging to the assessee in accordance with the provisions of the Act and then to deduct from it the
aggregate value of all the debts, and the resultant which is obtained would be the net. wealth
assessable to tax. section 7, sub-section (1) lays down the. mode of determination of the value of an
asset for the purposes of the Act and it says that, subject to any rules made in this behalf, the value
of any asset other than cash "shall be estimated to be the price which, in the opinion of the Wealth
Tax Officer it would fetch if sold in the open market on the valuation date". Now, plainly one of the
assets belonging to the assessee in the present case was the leasehold' interest in the land together
with the building upon it and for the purpose of computing the net wealth of the assessee, it was
necessary to determine the value of this asset. The question which must, therefore, be asked in
terms of section 7( 1 ) is: what would be the price which this asset would fetch if sold in the open
market on the valuation date ? This question cannot be satisfactorily answered, unless we first
determine what is the nature of this asset: what is the interest in property, qualitative as well as
quantitative, which this asset represents ?

The asset consists of leasehold interest of the assessee in the land together with the building
constructed upon it. The building, of' course, belongs to the assessee having been constructed by
him and the determination of its value should not present any difficulty, because there are
recognised methods of valuation of buildings. The difficulty, however, arises. in regard to valuation
of the leasehold interest in-the land. The leasehold interest is held by the assessee. under a
lease-deed executed by the President of India and apart from (1) 69 I.T.R. 897.

clause (13), which we have reproduced above, it is an ordinary leasedeed of the usual kind. Clause
(13 ) of the lease-deed provides that the assessee shall not be entitled to assign the leasehold interest
in the land without obtaining the prior approval in writing of the lessor and 50 per cent of the
unearned in.crease in the value of the land at the time of the assignment shall be claimable by the
lessor, and moreover, if the lessor so desires, he shall have pre- emptive right to purchase the

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property after deducting 50 per cent of the unearned increase in the value of the land. Does this
covenant merely impose a personal obligation on the lessee which ,arises on assignment of the
leasehold interest or it is a covenant running with the land ? That is a question which has a direct
bearing on the valuation of the leasehold, interest. Now, the last portion of the first paragraph of
clause (13) provides that "all such assignees and transferees .... shall be bound by all the covenants
and conditions herein contained and. be answerable in respect therefore". This means that
whenever an assignment of the leasehold interest is made by the lessee, the assignee would be
bound by all the covenants contained in the lease-deed and these would indisputably include the
covenant in clause (13 ). Clause (13 ) would equally bind the assignee and if the assignee in his turn
wants. to assign his leasehold interest in the land, he would have to obtain the prior approval in
writing of the lessor to such assignment and the lessor would be entitled to claim 50 per cent of the
unearned increase in the Value of the land. This indeed was not disputed on behalf of the Revenue.
The covenant in clause (13) is, therefore, clearly a covenant running with the land and it would
bind whosoever is the holder of the leasehold interest for the time being. It is a Constituent part of
the rights and liabilities and advantages and disadvantages which go to make up the leasehold
interest and. it is an incident which is in the nature of burden on the leasehold interest. Plainly and
indisputably it has the effect of depressing the value which the leasehold interest would fetch if
were free from this burden or disadvantage. Therefore, when the leasehold interest in the land has
to be valued, this burden or disadvantage attaching to the leasehold interest must be duly dis-
counted in estimating the price which the leasehold interest would fetch. To value the leasehold
interest on the basis that this burden or disadvantage were to be ignored would be to value an asset
different in content and quality from that actually owned by the assessee.--This was the principle
applied by the Judicial Committee in Corrie v. MacDemott,(1) an appeal from Australia, where the
question arose as to how certain land granted by the Government of Queensland to the trustees of
the Acclimatisation Society of Queensland to be used only for the purpose of the Society should be
valued on resumption by the Government. The trustees had no general power of sale but they were
by statute authorised to sell any part of the land to the local authority and to the National
Agricultural and Industrial Association. It was held by the judicial Committe that in view of this
restriction on the nature of the interest of the trustees in the land, the trustees were not entitled,
upon resumption of the land by the Government, to be paid unrestricted. freehold value of (1)
[1914] A.C. 1056.

the land but only the value of the land to the trustees under the conditions upon which they held it.
The Judicial Committee pointed out that if the owner holds the property subject to restrictions, "it is
a necessary point of enquiry how far these restrictions affect the value" and the property cannot be
valued as if it were "unrestricted in any way". The burden or limitation attaching to the leasehold
interest in the present case must, therefore, be taken into account in arriving at the value of the
leasehold interest and it cannot be valued ignoring the burden or limitation. This problem can also
be looked at from a slightly different angle and this approach too would throw some light on the true
nature of the leasehold interest required to be valued. Let us approach the question from the point
of view of the lessor. What is the nature of the lessor's interest in the land ? The lessor has
undoubtedly the reversion, but coupled with it is also the right to 50 per cent .of the unearned
increase in the value of the land at the time of assignment of the leasehold interest by the lessee as
also the pre-emptive right to the land after deducting 50 per cent of the unearned increase from the

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price obtainable by the lessee. This is the asset of the lessor which would have to be valued when the
lessor is sought to be assessed to wealth tax. The right to 50 per cent of the unearned 'increase on
assignment of the leasehold interest would certainly add to the value which the reversion would
otherwise fetch in the open market. Now, once it is granted that under the lease deed the lessor has
a bundle of rights, which includes 'something' more than the reversion, that 'something' would
necessarily be subtracted from the interest of the lessee and to that extent, the interest of the
'lessee would stand reduced. The interest of the lessee would be the leasehold interest minus that
'something'. What goes to augment the interest of the lessor would correspondingly reduce the
interest of the lessee and it Cannot be taxed as the wealth of both the lessor and the lessee. It would
be includable in the net wealth of the lessor and hence it cannot at the same time form part of the
wealth of the lessee and must be subtracted in determining the nature and extent of the interest of
the lessee.

That takes us to the question as to how the leasehold interest of the assessee with the burden or
limitation attaching under clause (13) of the lease-deed should be valued. It is clear from the
language of section 7, sub- sectiOn (1 ) that what the Revenue is required to do for the purpose of
determining the value of an asset is to assume that the asset which is to be valued is being sold in the
open market and to fix its value for the purpose of wealth tax upon that hypothesis. Now, whenever
the value of an asset has to be determined on the basis of a hypothetical_ sale, the court has
necessarily to embark upon speculations which may be quite difficult and in 'some cases, even arti-
ficial. Here the asset to be valued is the leasehold interest in the land with the burden or restriction
contained in clause (13) of the lease deed and the inquiry has, therefore, to be directed to the
question as to what is the price which this asset would fetch if sold in the open market. What would
be the realisable value of this asset ? It would indeed be difficult to speculate as to what the
leasehold interest in the land would fetch in the open marker when it is affected by the burden or
restriction contained in clause (13) of the lease deed. If the leasehold interest were free from this
burden or restriction, it' would be comparatively easy to determine its market value, for there are
recognised methods of valuation of leasehold interest, but where. the leasehold interest is cut down
by this burden or restriction and some right of interest is abstracted from it, the problem of
valuation becomes a difficult one and some method has to be evolved for resolv- ing it. The only way
it can be done in a case of this kind is by taking the market value of the leasehold interest as if it
were. unencumbered or unaffected by the burden or restriction of clause (13) and deducting from it,
50 per cent of the unearned increase in the value of the land on the basis of the hypothetical sale, as
representing the value of such 'burden or restriction.

There is also one other consideration which reinforces the adoption of this method of valuation.
When, for the purpose of valuation of the leasehold interest, it is assumed that the leasehold
interest is sold in the open market, the price received does not in its entirety belong to the assessee.
Fifty per cent of the unearned increase in the value of the land is diverted to the lessor by virtue of
the paramount title contained in clause (13) and when received by the assessee, it belongs to the
lessor. It is in truth and substance collected by the assessee on behalf of the lessor. What is received
by the assessee on his own account is only the price less 50 per cent of the unearned increase in the
value of the land and that represents the net realisable worth of the asset in the hands of the asses-
see. The Revenue contended that payment of 50 per cent of the unearned increase in the value of the

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land to the lessor is really an instance of application of the price received by the assessee and not
diversion of a part of the price by paramount title and hence the whole of the price must be taken as
the measure of the wealth of the assessee. But this contention is, in our opinion, not well founded
and cannot be sustained. The true test for determining whether a payment made by an assessee out
of an amount received by him is an application of part of the amount which belongs to him or it is
payment of an amount which is diverted before it reaches the assessee so that at the time of receipt,
it belongs to the payee and not to the assessee, has been explained by Hidayatullah, J., in C. 1. T.v.
Sitadas Tirath- das(1) in the following words:

"In our opinion, the true test is whether the amount sought to be deducted, in truth,
never reached the assessee as hi's income. Obligations, no doubt, there are in every
case but it is the nature of the. obligation which is the decisive fact. There is a
difference between an amount which a person is obliged to apply out of his income
and an amount which by the nature of the obligation cannot be said to be a part of the
income of the assessee. Where by the obligation income is diverted before it reaches
the assessee, it is deductible; but where the income is required to be applied to
discharge an obligation after such income reaches the 41 I.T.R. 367.

assessee, the same consequence, in law, does not follow. It is the first kind of
payment which can truly be excused and not the second. The second payment is
merely an.obligation to pay another a portion of one's own income, which has been
received-and is since applied. The first is a case in which the income never reaches
the assessee, who, even if he were to collect it, does so, not as part of his income, but
for and on ,behalf of the person to whom it is payable. In our opinion, the present
case is one in which the wife and children of the assessee who continued to be
members of the family received a portion of the income of the assessee, after the
assessee had received the income as his own. The case is one of application of a
portion of the income to discharge an obligation and not a case in which by an
overriding charge the assessee became only a collector' of another's income."

It is clear on the application of this test that in the present case, 50 per cent of the unearned increase
iii the value of the land would be diverted to the lessor before it reaches the hands of the assessee as
part of the price. The assessee holds the leasehold interest on condition that if he assigns it, 50 per
cent of the unearned increase in the value of the land will be payable to the lessor. That is the
condition on which he has acquired the leasehold interest arid hence 50 per cent of the unearned
increase in the value of the land must be held to belong to the lessor at the time when it is received
by the assessee and it would not be part of the net realisable worth of the leasehold interest in the
hands of the assessee. If a question is asked as to what is the real wealth of the assessee in terms of
money so far as the leasehold interest is concerned, the answer would inevitably be that it is the
price less 50 per cent of the unearned increase in the value of the land. It is difficult to see how 50
per cent of the unearned increase in the value of the land which belongs to the lessor can be
regarded as part of the wealth of the asses.see. The position would undoubtedly be different where
a payment is made by an assessee which is an application of a part of the price received by him.
Where such is the case, the whole of the price would represent the net realisable worth of the asset

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Commissioner Of Wealth Tax, New ... vs P.N. Sikand on 1 April, 1977

in the hands of the assessee and what is paid out by the assessee would be merely a disbursement
made after the price reaches the assessee as his own property. That was the position in Pardit Lakshi
Kant Jha v. Commissioner of Wealth-Tax, Bihar(1) where the question arose whether the
expenditure in connection with brokerage, commission or other expenses which would be liable to
be incurred by the assessee in effectuating a sale would be deductible from the market value of the
shares in determining their value for the purpose of assessment to wealth tax. This Court held that
in computing the value of the shares, the assessee is not entitled to deduction of brokerage and
commission from the valuation of the shares as given in,the Stock Exchange quotations or
quotations furnished by well known brokers. It was pointed out by this Court that:

(1) 90 I.T.R. 97.

"It is not... the amount which the vendor would receive after deduction of this expense, but the price
which the asset would fetch when sold in the open market which would constitute the value of the
asset for the purpose of section 7(1) of the Act". Obviously, this view 'was taken because the entire
price, when received, would belong to the assessee and payment of brokerage and commission
would be merely application of part of the price in meeting expenditure necessary for effectuating
the sale and hence it would not be deductible in ascertaining the net realisable worth of the shares in
the bands of the assessee.

We are, therefore, of the view that the question referred by the Tribunal must be answered in the
negative and it must be held that in determining the value of the leasehold interest of the assessee
in the land for the purpose of assessment to wealth tax, the price which the leasehold interest would
fetch in the open market were it not encumbered or affected by the burden or restriction contained
in clause (13) of the lease deed, would have to be reduced by 50 per cent of the unearned increase in
the value of the land on the basis of the hypothetical sale on the valuation date. The appeal
accordingly Fails and must be dismissed with costs.

S. R. Appeal dismissed.

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567

TEXT OF THE JUDGEMENT

“Wenger & Co. Vs. DVO (1978) 115 ITR 648 Delhi HC”
568

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Wenger And Co. And Ors. vs District Valuation Officer And ... on 30 August, 1978

Delhi High Court

Wenger And Co. And Ors. vs District Valuation Officer And ... on 30 August, 1978
Author: P Narain
Bench: P Narain, L Seth
JUDGMENT Prakash Narain, J.

1. By this petition under Article 226 of the Constitution of India what is challenged is a valuation
report dated July 20, 1974, submitted by the District Valuation Officer to WT/ITO, Special Circle XI,
New Delhi, in pursuance of the reference made to him by the WT/ITO under the provisions of
Section 16A of the W.T. Act, 1957. The fair market value assessed at Rs. 32,80,000 by the impugned
report is of a property known as " Wenger Building" in Block A, Connaught Place, New Delhi.

2. The aforesaid building was constructed by one Sir Sobha Singh of New Delhi on a plot of land
leased to him by the then Secretary of State for India in 1924. The lease was in perpetuity. After
constructing the building Sir Sobha Singh let out diverse portions of the building to different
persons. M/s. Wenger & Co., predecessor-in-interest of the petitioners, took on rent from Sir Sobha
Singh the following portions of the said building :

(a) Confectionary shop on the ground floor.

(b) A hall with veranda on the first floor, and

(c) A kitchen on the first floor.

3. The confectionary shop on the ground floor and the hall and veranda on the first floor bear
Municipal No. A-16. The kitchen on the first floor bears Municipal No. A-3. The rest of the building
was with other tenants. In 1956, a small space under the main staircase leading to the hall in the
tenancy of Wenger & Co. was also taken on rent by the petitioners from Sir Sobha Singh at a rent of
Rs. 100 p.m. The rent for the confectionary shop on the ground floor was Rs. 402.18 p.m., for the
hall and veranda on the first floor Rs. 625 p.m. and for the kitchen on the first floor Rs. 75 p.m. Sir
Sobha Singh sold the said building and his leasehold rights by different sale deeds to Dayal Singh
Library Trust Society and Shri Moolchand Kharaiti Ram Trust. The petitioners purchased the entire
building by two sale deeds, one executed by Dayal Singh Library Trust Society on March 9, 1962,
and the other by Shri Mool Chand Kharaiti Ram Trust executed on September 27, 1973. It may be
noticed by a deed of partnership dated June 18, 1962, between petitioners Nos. 2 to 6, a partnership
firm was constituted (petitioner No. 1). This firm took over the business of Wenger Co., which was
being previously run by a partnership constituted by petitioners 2, 3, 4 and 6.

4. By October, 1963, the position was that the owners of the building and leasehold rights were in
occupation of the confectionary shop on the ground floor, a ball with veranda on the first floor, a
kitchen on the first floor and a space underneath the staircase leading to the hall on the first floor.
The rest of the building was with tenants inducted by Sir Sobha Singh who attorney to petitioner No.
1. On April 27, 1966, Smt. Jaswant Kaur, a tenant in the flat bearing Municipal No. A-30, was
evicted through court and the possession of these premises also came to be- with petitioner No. 1. In

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1967, petitioner No. 1 after taking municipal sanction constructed a mezzanine floor on its
confectionary shop bearing Municipal No. A-16 and on the shop occupied by a tenant, M/s. Nath &
Co., bearing Municipal No. A-15. This mezzanine floor was rented out to the American Express
International Banking Corporation (Travel Division) on a rent of Rs. 6,187.50 p.m. The older
tenants continued to pay the same rent as before on account of rent restriction laws.

5. For the purposes of municipal taxes computed under the provisions of the Punjab Municipal Act,
as in force in New Delhi, the annual letting value of the aforesaid building had been fixed on the
basis of rent received by petitioner No. 1 from its tenants and the rent that was being paid to Sir
Sobha Singh when the predecessors-in-interest of the petitioners were tenants under Sir Sobha
Singh. The annual letting value of the portions let out had been fixed at Rs. 82,612.56 while the
annual letting value in the occupation of the petitioners had been fixed at Rs. 89,391.66.

6. The petitioners submitted a wealth-tax return of the partnership. The WT/ITO, Special Circle XI,
New Delhi, respondent No. 2, in exercise of the powers conferred on him by Section 16A(1)(a) of the
W.T. Act, 1957, referred the matter of valuation of the said building to the District Valuation Officer
on May 7, 1974. The District Valuation Officer, respondent No. 1, issued a notice dated June 11, 1974,
under Section 16A(4) of the W.T. Act to Shri B. M. Tandon, petitioner No, 2, indicating that while he
proposed to accept the existing annual letting value for the portions in the occupation of the tenants,
he proposed to estimate the fair market value of the portions in the occupation of petitioner No. 1 at
Rs. 27,96,000 as on March 31, 1972. Though the notice was sent in the name of Shri B. M. Tandon,
petitioner No. 1 filed objections to the proposed revision of the fair market value of the premises in
its occupation. Thereafter, the premises were inspected and the petitioners were heard by the
District Valuation Officer but he maintained the proposed valuation which he had indicated in his
notice dated June 11, 1974. The fair market value of the entire building was thus assessed by
respondent No. 1 atRs. 32,80,000 as on March 31, 1972. It is this report which is challenged before
us.

7. The grounds of challenge are that respondent No. 1 had no cogent evidence or basis in fixing the
fair market value of the portion in the occupation of the petitioners at Rs. 27,96,000. Further,
respondent No. 1 has relied on some information which he had but which was never disclosed to the
petitioners and the source of that information is still not disclosed. Alternatively, it has been
submitted that the impugned information is with regard to rents or prices of newly constructed flats
in multi-storeyed buildings near about Connaught Place and the same could not be a valid basis for
finding out the fair market value of the premises in the occupation of the petitioners.

8. The respondents have filed an affidavit sworn by Shri N.C. Jayaraman, District Valuation Officer
(respondent No. 1), by way of return to the rale nisi. It has been urged that no petition under Article
226 of the Constitution is maintainable and no writ of certiorari can be issued against the report of
respondent No. 1 because the report is not a final order. The said report, it is contended, is
submitted to the WTO who then has to pass an order under the W.T. Act making an assessment in
respect of the said building of the petitioner. Against 'the order of assessment the petitioners can
prefer an appeal. The assessment order may affect the rights of the petitioners but, it is contended,
the impugned report does not, and the order is also appealable making the writ unavailable. On

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merits, respondent No. 1 has stated that the computation of annual letting value for the purpose of
house-tax under the Punjab Municipal Act is no criterion for the purpose of fixing the valuation of
the property for the purposes of W.T. Act. Further, ij; is stated that though the report given by -the
District Valuation Officer is binding on the WTO it is not binding on the appellate authorities under
the Act and so, the report does not, in any way, affect the rights of the petitioners. He asserts that he
acted within his jurisdiction and in accordance with law. He gave opportunity to the petitioners who
not only participated in the inspection of the property but submitted oral and written arguments
against the proposed assessment by him. He states that he valued self-occupied property separately
from let out properly with restrictions placed on evictions. According to him, he ascertained the
market value keeping in view as to what price it would fetch if it was sold in open market with
possession and without possession. According to him, this was not the rent that the property would
fetch if let out to a hypothetical tenant but the price it would fetch if sold in open market to a
hypothetical buyer which was relevant. He adopted two methods to value the property. For the
owner, occupied portion he calculated the value on the basis of what were the rates prevailing for
sale of commercial flats in Connaught Place Extension Area. For the tenanted portion he capitalised
the rental value. As far as the value of land is concerned, he took note of the fact that it was a lease in
perpetuity and the building thereon would last for another 25 years. Thereafter, the land value was
added at Rs 3,200 per square yard. This land value he worked out on the basis of sale of an adjacent
property bearing No. 9-A in Connaught Place, New Delhi. That property was sold in August, 1973,
for Rs. 8 lakhs. It is constructed on 212 sq. yds. of land and is a double-storeyed structure with a
plinth area of 4,188 sq. ft. The construction was of the same specifications as the property in
question. The depreciated cost of the structure, according to respondent No. 1, was Rs. 15 per sq. ft.
After deducting the depreciated cost of structure from the total sale price, he arrived at a figure of
Rs. 7,37,180 for 212 sq. yds. of land. This works to Rs. 3,477 per sq. yard. Respondent No. 1,
however, adopted a lesser figure of Rs. 3,200 per sq. yard in the case of land of the petitioners'
property.

9. The petitioners filed a rejoinder and asserted that petition under Article 226 of the Constitution
was maintainable. They further said that the basis of fixing the market price at the rate of Rs. 275
per sq. ft. was not disclosed at the hearing and there was no material before respondent No. 1 to
adopt that. They reiterated that the whole basis of the report was conjectural and, therefore, illegal
and invalid.

10. Section 3 of the W.T. Act, 1957, provides that subject to the other provisions in the Act there
shall be charged for every assessment year commencing on and from the first day of April, 1957, a
tax in respect of the net wealth on the corresponding valuation date of every individual, Hindu
undivided family and company at the rate or rates specified in the Schedule to the Act. Every person,
if bids net wealth is liable to tax under the said Act, is required by Section 14 of the said Act to
submit return in the prescribed form to the prescribed authorities. The computation of net wealth is
to be made in accordance with certain other provisions of the Act. Section 16 provides that it the
WTO is satisfied without requiring the presence of the assessed or production by him of any
evidence that a return made by the assessed is correct and complete he shall assess the net wealth of
the assessed and determine the amount of the wealth-tax payable by him or the amount refundable
to him on the basis of such return. If he is mot satisfied with the return filed, he has to give notice to

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the assessed to appear in person or produce or cause to be produced such evidence as he may have
in support of the return. After hearing the evidence produced and such other evidence as he may
require, the WTO is to then make an assessment. Section 16A of the W.T. Act reads as under :

" 16A. Reference to valuation officer,--(1) For the purpose of making an assessment including an
assessment in respect of any assessment, year commencing before the date of coming into force of
this section under this Act, the Wealth-tax Officer may refer the valuation of any asset to a Valuation
Officer-

(a) in case where the value of the asset as returned is in accordance with the estimate made by a
registered valuer, if the Wealth-tax Officer is of opinion that the value so returned is less than its fair
market value;

(b) in any other case, if the Wealth-tax Officer is of opinion-

(i) that the fair market value of the asset exceeds the value of the asset as returned by more than
such percentage of the value of the asset as returned or by more than such amount as may be
prescribed in this behalf ; or

(ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so
to do.

(2) For the purpose of estimating the value of any asset in pursuance of a reference under
Sub-section (1) the Valuation Officer may serve on the assessed a notice requiring him to produce or
cause to be produced on a date specified in the notice such accounts, records or other documents as
the Valuation Officer may require.

(3) Where the Valuation Officer is of opinion that the value of the asset has been correctly declared
in the return made by the assessed under Section 14 or Section 15, he shall pass an order in writing
to that effect and send a copy of his order to the Wealth-tax Officer and to the assessed.

(4) Where the Valuation Officer is of opinion that the value of the asset is higher than the value
declared in the return made by the assessed under Section 14 or Section 15, or where the asset is not
disclosed or the value of the asset is not declared in such return or where no such return has been
made, the Valuation Officer shall serve a notice on the assessed, intimating the value which he
proposes to estimate and giving the assessed an opportunity to state, on a date to be specified in the
notice, his objections either in person or in writing before the Valuation Officer and to produce or
cause to be produced on that date such evidence as the assessed may rely in support of his
objections.

(5) On the date specified in the notice under Sub-section (4) or as soon thereafter as may be, after
hearing such evidence as the assessed may produce and after considering such evidence as the
Valuation Officer may require on any specified points and after taking into account all relevant
material which he has gathered, the Valuation Officer, shall, by order in writing, estimate the value

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of the asset and send a copy of his order to the Wealth-tax Officer and to the assessed.

(6) On receipt of the order under Sub-section (3) or Sub-section (5) from the Valuation Officer, the
Wealth-tax Officer shall, so far as the valuation of the asset in question is concerned, proceed to
complete the assessment in conformity with the estimate of the Valuation Officer."

11. Section 23 of the Act, inter alia, provides that any person objecting to the amount of net wealth
determined under this Act or objecting to the amount of wealth-tax determined as payable by him
under the Act may appeal to the AAC against the assessment or order, as the case may be, in the
prescribed form. The AAC is to then dispose of the appeal after giving a hearing to the assessed.
From the order of the AAC a further appeal is provided by Section 24 to an Appellate Tribunal which
again has to afford a hearing to the assessed. Section 27 of the Act provides for a reference to the
High Court by the Appellate Tribunal of any question of law arising out of its order. An appeal is
provided from the decision of the High Court by Section 29 of the Act.

12. The preliminary objection raised by the respondents to the maintainability of the petition is that
because the impugned report is not an order and an appeal is provided for against an order of
assessment, there is an alternative remedy available to the petitioners and so, a petition under
Article 226 of the Constitution is not maintainable. In our opinion, the objection cannot be
sustained. The petitioners are not coming against an assessment order. Their complaint is in respect
of a report which respondent No. 1 has submitted to respondent No. 2 and which report must be
accepted by respondent No. 2 by virtue of the provisions of Sub-section (6) of Section 16A. The
report is, no doubt, a step in the final process of assessment but the assessment order that
respondent No. 2 has to pass cannot be anything except the valuation determined by the impugned
report. If the report is based on no evidence, is arbitrary, is fanciful or is based on undisclosed
material, the writ of certiorari will be available to the petitioners. No doubt it is only after
respondent No. 1 has passed an order of assessment that the petitioners would be obliged to pay
wealth-tax, all the same in view of the provisions of Sub-section (6) of Section 16A, it cannot be said
that the impugned report does not affect the rights of the petitioners, The scheme of Section 16A is
such, that respondent No. 1 must be held to be acting not merely administratively but in somewhat
quasi-judicial manner. If that is correct, then he has to arrive at his conclusion in accordance with
norms postulated by the principles of natural justice. The petitioners are entitled to show that
respondent No. 1 has based his report on irrelevant material or that it was based on no material
germane to the issue. They are also entitled to show that Ms approach is conjectural and not
objective, It may, perhaps, be going too far to say that the proceedings before respondent No. 1 are
quasi-judicial proceedings but it may not be inappropriate to hold that the power exercised by
respondent No. 1 is a quasi-judicial power and not mere administrative power. Indeed, the dividing
line between administrative power and quasi-judicial power is gradually being obliterated. As was
observed by the Supreme Court in A. K. Kraipak v. Union of India, " The dividing line between an
administrative power and a quasijudicial power is quite thin and is being gradually obliterated. For
determining whether a power is an administrative power or a quasi-judicial power one has to look to
the nature of the power conferred, the person or persons on whom it is conferred, the framework of
the law conferring that power, the consequences ensuing from the exercise of that power and the
manner in which that power is expected to be exercised. In a welfare State like ours it is inevitable

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that the organ of the State under our Constitution is regulated and controlled by the rule of law. In a
welfare State like ours it is inevitable that the jurisdiction of the administrative bodies is increasing
at a rapid rate. The concept of rule of law would lose its validity if the instrumentalities of the State
are not charged with the duty of discharging their functions in a fair and just manner. The
requirement of acting judicially in essence is nothing but a requirement to act justly and fairly and
not arbitrarily or capriciously. The procedures which are considered inherent in the exercise of a
judicial power are merely those which facilitate if not ensure a just and fair decision. In recent years
the concept of quasi-judicial power has been undergoing a radical change. What was considered as
an administrative power some years back is now being considered as a quasi-judicial power. "

13. In the same case, the Supreme Court noticed with approval the observations of Lord Parker C.J.,
in Reg v. Criminal Injuries Compensation Board, Ex parte Lain [1967] 2 QB 864 to the following
effect " ' With regard to Mr. Bridge's second point I cannot think that Atkin L.J. intended to confine
his principle to cases in which the determination affected rights in the sense of enforceable rights.
Indeed, in the Electricity Commissioners case [1924] 1 KB 171 (CA), the rights determined were at
any rate not immediately enforceable rights since the scheme laid down by the Commissioners had
to be approved by the Minister of Transport and by resolutions of Parliament. The Commissioners
nevertheless were held amenable to the jurisdiction of this court. Moreover, as can be seen from Rex
v. Postmaster-General, Ex parte, Carmichael [1928] 1 KB 291 (DC) and Rex v. Boycott, Ex parte
Keasley [1939] 2 KB 651 (DC) the remedy is available even though the decision is merely a step as a
result of which legally enforceable rights may be affected.

The position as I see it is the exact limits of the ancient remedy by way of certiorari have never been
and ought not to be specifically defined. They have varied from time to time being extended to meet
changing conditions. At one time the writ only went to an inferior court. Later its ambit was
extended to statutory Tribunals determining a Us inter Paries. Later again it extended to cases
where there was no lis in the strict sense of the word but where immediate or subsequent rights of
citizen were affected. The only constant limits throughout were that it was performing a public duty.
Private or domestic Tribunals have always been outside the scope of certiorari since their authority
is derived solely from contract, that is, from the agreement of the parties concerned.

Finally, it is to be observed that the remedy has now been extended, see Reg v. Manchester Legal Aid
Committee, Ex parte R. A. Brand and Co. Ltd. [1952] 2 QB 413 (DC), to cases in which the decision
of an administrative officer is only arrived at after an inquiry or process of a judicial or quasi-judicial
character. In such a case, this court has jurisdiction to supervise that process.

We have as it seems to me reached the position when the ambit of certiorari can be said to cover
every case in which a body of persons of a public as opposed to a purely private or domestic
character has to determine matters affecting subjects provided always that it has a duty to act
judicially. Looked at in this way the board in my judgment comes fairly and squarely, within the
jurisdiction of this court. It is, as Mr. Bridge said, " a servant of the Crown charged by the Crown, by
executive instruction, with the duty of distributing the bounty of the Crown ". It is clearly, therefore,
performing public duties.' "

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14. Respondent No. 1 is performing a statutory duty in giving a report under Section 16A of the Act.
He is obliged by the statute to give notice to the assessed requiring him to produce or cause to be
produced on a date specified in the notice, accounts, records and other documents. If the valuation
officer does not agree with the valuation given by the assessed he has to intimate the assessed the
value which he proposes to estimate and after giving an opportunity to the assessed to contest the
proposed valuation and produce evidence in support of his contest, fix a valuation. The very nature
of proceedings, therefore, persuades us to hold that certiorari would be available against such a
report.

15. Coming now to the impugned report, as we have noticed earlier, respondent No. 1 has adopted
the rate for sale of ownership fiats of new buildings in the Connaught Place Extension Area to fix the
valuation of the owner-occupied portion of the petitioners' building. This is challenged. The
valuation fixed by respondent No. 1 and the basis adopted by him for fixing the valuation of the
tenanted portions is not under challenge, Respondent No. 1 has fixed the rate of Rs. 3,200 per
square yard for the land calling it " the reversionary value of the land ". This is challenged. We have
already noticed earlier how he had arrived at this valuation.

16. According to the petitioners the valuation should have been done on the basis of the annual
letting value fixed for the tenanted portions and self-occupied portion by the New Delhi Municipal
Committee in consonance with the principles laid down by a Full Bench of this court in Dewan
Daulat Ram Kapur v. New Delhi Municipal Committee, 2nd [1973] 1 Delhi 363. The contention is
that the fair market value is dependant on the standard rent which can be charged for the various
portions of the building and a hypothetical purchaser would keep that in view in quoting his price.
Though some portions of the building are self-occupied the major part of this portion was originally
on rent with the petitioners and, therefore, the rent that the hypothetical purchaser would be able to
get for that portion would be the same as was the standard rent. Capitalisation of the standard rent
would thus, according to the petitioners, be the best way of finding out the fair market value. As we
have noticed earlier, the standard rent and the annual letting value have been taken as the basis for
fixing the fair market value by respondent No. 1 of the tenanted portion. But that basis is not
adopted for the owner occupied portion.

17. In our opinion, that the contention of the petitioners that valuation of the self-occupied portion
should have been done on the basis of standard rent or annual letting value is not well founded. It is
a well-known fact that giving vacant possession of buildings, though previously rented out, fetches
better market price. It cannot be assumed that the hypothetical purchaser would let out the
self-occupied portions which he buys from the hypothetical seller or would let out such portions in
the condition in which he buys them. Therefore, the very premise on which the argument is founded
is faulty. In any case, respondent No. 1 rejecting this contention cannot be said to have acted in such
an unreasonable or so unconscionable a manner as to invite interference by this court.

18. As far as the basis adopted by respondent No. 1 is concerned, here again it cannot be said that
the approach was irrational, based on no material or unconscionable. It is one of the settled
principles of valuation that market value has to be ascertained by considering sales of similar
properties in the same neighborhood or similar environment. If there are no such instances of sales

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available then capitalisation of rent or making some sort of comparative evaluation of sales of other
properties is an acceptable mode of valuation. A certain amount of guesswork would be there if no
exactly similar instance of sale is available. la that case an estimate has to be made which need not
necessarily be a mathematical calculation. As we find it, the basic material relied upon by
respondent No. 1 is the sale price of a similar building in Connaught Place for Rs. 8 lakhs. The
calculation arrived at has been cross-checked by him by referring to transactions of ownership of
commercial flats in Connaught Place Extension Area and the resolutions of a conference of 200
valuers in India held at Bombay in June, 1972. The estimated rental method adopted by respondent
No. 1 was not his innovation but an accepted method.

19. The petitioners had full opportunity to give evidence of valuation and contest the proposed
valuation by respondent No. 1. They could have produced tangible evidence of what could be the fair
market value. Instead they relied only on the annual letting value. This contention was not accepted
vis-a-vis self-occupied property. In our view the method adopted by respondent No. 1 and his
approach is not only acceptable but in keeping with principles of evaluation. Thus, the report of
respondent No. 1 cannot be said to be one based merely on conjectures and surmises.

20. The result is that the petition fails and we hereby discharge the rule. In the circumstances of the
case we make no order as to costs.

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577

TEXT OF THE JUDGEMENT

“Jawajee Nagnathan Vs. Revenue Divisional Officer

(1994) SCC (4) 595 (SC)”
578

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Jaw Ajee Nagnatham vs Revenue Divisional Officer on 25 January, 1994

Supreme Court of India

Jaw Ajee Nagnatham vs Revenue Divisional Officer on 25 January, 1994
Equivalent citations: 1994 SCR (1) 368, 1994 SCC (4) 595
Author: K Ramaswamy
Bench: Ramaswamy, K.
PETITIONER:
JAW AJEE NAGNATHAM

Vs.

RESPONDENT:
REVENUE DIVISIONAL OFFICER

DATE OF JUDGMENT25/01/1994

BENCH:
RAMASWAMY, K.
BENCH:
RAMASWAMY, K.
VENKATACHALA N. (J)

CITATION:
1994 SCR (1) 368 1994 SCC (4) 595
JT 1994 (2) 604 1994 SCALE (2)298

ACT:

HEADNOTE:

JUDGMENT:

ORDER

1. The appellant is the owner of 18 gunthas of land, i.e., 2178 sq. yards, situated in Ward No. 5, Block
No. 7 in Adilabad Municipality of A.P., which was proposed for acquisition under notification issued
under Section (1) of the Land Acquisition Act and published on April 17, 1975, for a public purpose.
The Land Acquisition officer awarded compensation on the basis of letting value. On reference
under Section 18, the Additional District Judge, Adilabad in his award and decree enhanced the
market value to Rs 75 per sq. yard. Not having been satisfied, the appellant filed the appeal in the
High Court and claimed Rs 300 per sq. yard. The High Court by the impugned judgment and decree
dated 29-10-821, dismissed the appeal.

2. Shri A.K. Ganguli, the learned Senior Counsel for the appellant contended that the High Court
having accepted that the acquired lands were situated in the heart of the municipal area; the State

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580
Jaw Ajee Nagnatham vs Revenue Divisional Officer on 25 January, 1994

Bank of Hyderabad and the Andhra Bank were located on the eastern and western sides across the
roads; Gandhi Chowk Market and Ambedkar Chowk Market also existed on the National Highway
towards Nagpur each at a distance of 200 yards from the land; two cinema theatres were situated at
a distance of 50 to 60 yards from the acquired site; three cooperative consumers' stores were
situated at a short distance of 10 yards from the acquired land; the Basic Valuation Register showed
that for stamp duty the Revenue Authorities had fixed the market value in commercial area at Rs
300 (on complaints being reduced to Rs

250) and for residential area Rs 75 per sq. yard, it should have seen that the land had a very high
market value. The Revenue Authorities themselves having determined market value in that area at
Rs 300 per sq. yard for purposes of stamp duty, unless the respondent produced contra-evidence,
which was not done, the Basic Valuation Register formed foundation to determine the market value
of acquired land at Rs 300. The fixation of market value at Rs 75 per sq. yard was unjust and
arbitrary. It is also contended that the appellant is entitled to interest at 6% under the Act. The State
Act has no application to and the owner cannot be discriminated in payment only at the rate of 4%,
while other land acquired for Central Government would get interest at the rate of 6%.

3. Having given anxious consideration to the contentions we find them to be without force. Though
the District Court fixed the market value at the rate of Rs 75 per sq. yard, the State did not file any
cross-objection or appeal. So the need for the High Court to go into the question whether fixation of
the market value at Rs 75 per sq. yard was high did not arise. The High Court held that the post-
notification sale deeds were not admissible as none of the persons connected with them were
examined to establish the genuineness of the sales or of similarity of the lands acquired and those
covered in the sale transactions. It also rejected the agreements of sales finding them to be those
fabricated to inflate the market value. We cannot find fault with the approach made by the High
Court in the facts and circumstances of the case. The sales claimed to be comparable were rightly
not acted upon.

4. The High Court found that Basic Valuation Register had no evidentiary value, in that it had no
statutory basis. Therefore, the entries in the Basic Valuation Register cannot form the basis to
enhance the market 1 AIR 1983 AP 155 value. The contention of Shri Ganguli, as stated earlier was
that the Basic Valuation Register, prepared in official capacity by Revenue Department having been
acted upon to collect stamp duty and registration charges at Rs 300 per sq. yard for commercial use,
the Government cannot ask the court to adopt different standards to award market value under
Section 23(1). Having regard to the fact that the lands are situated in commercial area of the busy
town, the appellant is entitled to the market value at Rs 300 per sq. yard, Firstly, the contention that
the lands are to be treated as of commercial area cannot be accepted to be totally correct.
Admittedly, the appellant had not prepared nor got approved any lay-out demarcating as sites either
for commercial purpose or for residential purpose. The entire extent of 2178 sq. yard cannot be
treated as capable of being sold only for commercial purpose. May be the lands abutting the main
road were capable of being sold for commercial purpose. But the entire land, unless there is proof of
lay-out and demarcation for commercial purpose, cannot be treated as land available for
commercial purpose. In addition the entire land cannot be earmarked for sites unless some land is
set apart under the Building Rules for laying roads. Deduction ought equally to be made for further

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Jaw Ajee Nagnatham vs Revenue Divisional Officer on 25 January, 1994

developmental purposes. The entire land cannot be treated to be possessed of commercial value.
Under Section 24 clause sixthly of the Act, in fact, the future potential use is not relevant but
decided cases show that it may be a factor to be kept in view in an appropriate case for determining
the market value. In this case, there is no evidence on record except the Basic Valuation Register
admittedly maintained by the authorities.

5. The question, therefore, is whether the Basic Valuation Register is evidence to determine the
market value. This Court in Special Land Acquisition Officer v. T. Adhinarayan Setty2 in paragraph
9 held that the function of the Court in awarding compensation under the Act is to ascertain the
market value of the land at the date of the notification under Section 4(1). The methods of valuation
may be (1) opinion of experts (2) the price paid within a reasonable time in bona fide transactions of
purchase of the lands acquired or the lands adjacent to the lands acquired and possessing similar
advantages; and (3) a number of years purchase of the actual or immediately prospective profits of
the lands acquired. Same was the view in Tribeni Devi v. Collector of Ranchi3. It was reiterated in
catena of decisions, vide, Periyar and Pareekanni Rubbers Ltd. v. State of Kerala4. Therefore, it is
settled law that in determining the market value, the Court has to take into account either one or the
other three methods to determine market value of the lands appropriate on the facts of a given case
to determine the market value. Generally the second method of valuation is accepted as the best.
The question, therefore, is whether the Basic Valuation Register would form foundation to
determine the market value. The Indian Stamp Act, 1899 2 AIR 1959 SC 429: 1959 Supp 1 SCR 404 :
1959 Cri LJ 526 3 (1972) 1 SCC 480 :(1972) 3 SCR 208 4 (1991) 4 SCC 195 provides the power to
prescribe stamp duty on instruments, etc. Entry 44 of List 111, Concurrent List, of the VIIth
Schedule read with Article 254 of the Constitution empowers the State Legislature to amend the
Indian Stamp Act, 1899. In exercise thereof all the State Legislatures including the Legislature of
A.P. amended the Act and enacted Section 47-A empowering the registering officer to levy stamp
duty on instruments of conveyance, etc., if the registering officer has reason to believe that the
market value of the property, covered by the conveyance, exchange, gift, release of right or
settlement, has not been truly set forth in the instrument, he may refuse registering such instrument
and refer the same to the Collector for determination of the market value of such property and the
proper duty payable thereon. On receipt of such opinion, he may call upon the vendor as per the
rules prescribed, to pay the additional duty thereon. If the vendor is dissatisfied, he has been given
the right to file an appeal and further getting reference made to the High Court for decision in that
behalf. Section 47-A would thus clearly show that the exercise of the power thereunder is with
reference to a particular land covered by the instrument brought for registration. When he has
reasons to believe it to be undervalued, he should get verified whether the market value was truly
reflected in the instrument for the purpose of stamp duty; the Collector on reference could
determine the same on the basis of the prevailing market value. Section 47-A conferred no express
power to the Government to determine the market value of the lands prevailing in a particular area,
village, block, district or the region and to maintain Basic Valuation Register for levy of stamp duty
for registration of an instrument, etc. No other statutory provision or rule having statutory force has
been brought to our notice in support thereof. Whether an instrument is liable for higher stamp duty
on the basis of valuation maintained in the Basic Valuation Register, came up for consideration in
Sagar Cements Ltd. v. State of A.p.5 B.P. Jeevan Reddy, J., as he then was, considered the question
and held that the Government has unilaterally fixed the valuation of the lands, the Basic Valuation

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582
Jaw Ajee Nagnatham vs Revenue Divisional Officer on 25 January, 1994

Register had no statutory foundation and therefore it does not bind the parties. Neither the
Registrar nor the vendor is bound by it. The market value of the land for proper stamp duty has to
be determined as per the law under Section 47-A itself. That view was followed by another learned
Single Judge in P. Sasidar v. Sub-Registrar6. It is, therefore, clear that the Basic Valuation Register
prepared and maintained for the purpose of collecting stamp duty has no statutory base or force. It
cannot form a foundation to determine the market value mentioned thereunder in instrument
brought for registration. Equally it would not be a basis to determine the market value under Section
23 of the Act, of the lands acquired in that area or town or the locality or the taluk etc. Evidence of
bona fide sales between willing prudent vendor and prudent vendee of the lands acquired or
situated near about that land possessing same or similar advantageous features would furnish basis
to determine market value. The 5 (1989) 3 Andh LT 677 6 (1992) 1 Andh LT 49 Division Bench
followed, in support of its view a decision of another Division Bench in Land Acquisition Officer v.
Venkateswara Prasad7 which also decided that Basic Valuation Register cannot be relied on to
determine the market value. It would appear that in Govt. of A.P. v. Sohan Lal8 a Division Bench of
that High Court, without noticing these two binding decisions, held that the Basic Valuation
Register would form foundation to determine the market value and directed to determine the
compensation on that basis. The entire controversy was considered by yet another Division Bench in
Vasireddi Bharata Rao v. Revenue Divisional Officer9. The Division Bench, after considering the
case law disagreeing with Sohan Lal8 view as per incuriam, also reiterated that the Basic Valuation
Register maintained by the registering authority has no statutory foundation to determine the
market value and cannot form the base under Section 23(1) to determine the market value. This
Court in Gulzara Singh v. State of Punjab10 held that mutation entries of the land transactions in
the revenue records are not evidence unless the parties to the transactions have been examined in
proof of documents. In Director of Survey-cum-LAO v. Mohd. Ghouse11 relied on by Mr Ganguli,
the Division Bench of Madras High Court, relying upon the instructions issued by the Government
to determine the market value for the purpose of registration of the instrument under Section 47-A,
held that it would form basis to determine the market value under Section 23 in an appropriate case,
subject to proof of the market value. What were the instructions issued by the Government and
whether they had any statutory foundation, have not been stated by the Division Bench. If the broad
proposition of law that under Section 47-A of Stamp Act such instructions could be issued, as
contended for the appellant herein, as appears to be the view of the High Court, it is not correct law.
As we have already noted, Section 47-A being local amendment, made by each State Legislature did
not find any such statutory basis. Like A.P. Act, Tamil Nadu Act is also referable to transactions
intra vivos and not as general guidelines. If they are based on evidence inter partes it would be
consistent with Section 47-A. Accordingly we hold that the basic value of registration has no
statutory base. It cannot form any basis to determine the market value of the acquired lands under
Section 23 of the Act. The burden of proof is always on the claimant to prove, in each case the
prevailing market value as on the date of notification published in the State Gazette under Section
4(1) of the Act with reference to the sale deeds of the same lands or neighbour's lands possessed of
same or similar advantages and features executed between willing vendor and willing vendee or
other relevant evidence in the reference court. The State did not file any appeal against the award of
the reference court which 8 (1988) 2 Andh LT 306 9 (1992) 1 Andh LT 591 10 (1993) 4 SCC 245 11
(1985) 1 MLJ 116

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583

TEXT OF THE JUDGEMENT

“Chimanlal Hargovinddas Vs. SLAO, Pune

AIR 1988 SC 1652”
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585
Chimanlal Hargovinddas vs Special Land Acquisition ... on 21 July, 1988

Supreme Court of India

Chimanlal Hargovinddas vs Special Land Acquisition ... on 21 July, 1988
Equivalent citations: 1988 AIR 1652, 1988 SCR Supl. (1) 531
Author: M Thakkar
Bench: Thakkar, M.P. (J)
PETITIONER:
CHIMANLAL HARGOVINDDAS

Vs.

RESPONDENT:
SPECIAL LAND ACQUISITION OFFICER, POONA, AND ANR.

DATE OF JUDGMENT21/07/1988

BENCH:
THAKKAR, M.P. (J)
BENCH:
THAKKAR, M.P. (J)
RAY, B.C. (J)

CITATION:
1988 AIR 1652 1988 SCR Supl. (1) 531
1988 SCC (3) 751 JT 1988 (3) 106
1988 SCALE (2)43
CITATOR INFO :
R 1992 SC 666 (4)

ACT:
Land Acquisition Act -Challenging valuation and
compensation in respect of land acquired under provisions
of-Whether appellant whose land was acquired is entitled to
benefit of Central Amending Act 68 of 1984.

HEADNOTE:
The appellant not being satisfied with the compensation
offered by the Land Acquisition officer in respect of his
land placed under acquisition under the Land Acquisition
Act, applied for a reference to a civil court, for
determining the market value of the land for awarding
compensation to the appellant. The Trial Court determined
the market value of the land in question at Rs.8692 per
acre. The High Court reduced the amount of compensation
payable to Rs.4845.87 from Rs.8692 per acre. The appellant
moved this Court for relief, complaining that the High Court
had erroneously revised downwards the valuation correctly
arrived at by the Trial Court.
Allowing the appeal partly, the Court
^

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HELD: The trial Court had virtually treated the award

rendered by the Land Acquisition officer as a judgment under
appeal. The Court laid down general guidelines to be
followed in respect of methodology for valuation, in order
to capsulize the true position. [534E] F
The valuation made by the High Court had been faulted
on three grounds:
(1) The High Court should not have made a deduction of
25% in place of deduction made by the Trial Court at 20% to
account for the factor pertaining to largeness of the block
of land under acquisition. [539B]
(2) The High Court had grossly under-valued the land in
determining the market value of the appellant's land at
Rs.7000 per acre as a block. [539B-C]
532
(3) There was no warrant for pushing down or depressing
the market value of land as determined by the Trial Court in
order to deduce the 'present value' by reference to Miram's
Tables to account for the factor as regards the estimated
time lag for development reaching the block of land in
question which was situated in the interior. Besides, the
time lag of 12 years as estimated by the High Court was
excessive and unrealistic. [539C-D]
The first two grounds were devoid of merit. It was not
possible to find fault with the reasoning or conclusion of
the High Court. The High Court was regularly engaged in
valuation of the lands in different parts of the State and
was fully aware of the landscape. It had made the estimate
as regards the time lag for development to reach the
appellant's land to the best of its judgment, and having
taken into account all the relevant factors, it had arrived
at its determination. The High Court had not committed any
error or violated any principle of valuation. It was purely
a question of fact and it was not possible to detect any
error even in the factual findings recorded by the High
Court. There was no material on the basis on which the plea
of the appellant could be upheld that the valuation of
Rs.7000 per acre did not reflect the true market value or
that the land in question was undervalued. [541B-F]
The Appellant's grievance with regard to the third
ground was justified. The appellant's parcel of land in
question, situated very much in the interior, was valued by
the Trial Court at Ks. l0,866 per acre (less 20% for roads,
etc.). The High Court valued this parcel of land at Rs.7,000
per acre. It had valued the land with the best situation on
the Ganeshkhand Road at Rs.20,000 per acre. As against this,
the appellant's land was valued at Rs.7,000 per acre. This
pushing down was made to account for its situation in the
interior on the premise that development would take about 12
years to reach the appellant's land under acquisition. But
after 12 years, it would become land adjoining the developed
area and not land which could be treated as in the interior.
If the present value was to be ascertained, it should be

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ascertained on the basis of present value of land which

would fetch Rs.20,000 per acre after 12 years and not
present value of land which would fetch Rs.7,000 per acre
after 12 years. In fact the present value of Rs.20,000
payable at the end of 12 years at 8% would work out to
Rs.6942 according to Miram's Table 7, p.657 of A.K. Mitra's
Theory and Practice of Valuation 2nd Edition. The High Court
was right in valuing the land in interior at Rs.7,000 per
acre but wrong in directing that present value of Rs.7,000
payable after 12 years should be ascertained. The appellant
must be awarded compensation at Rs.7,000
533
per acre subject to deduction or allowance of 25% to account
for land required to be set apart for roads, open spaces,
etc. The appellant would be entitled to be paid compensation
for his land in question at Rs.5250 per acre (Rs.7,000 less
25%) in place of lesser amount awarded by the High Court.
[541F-H; 542A-F]
The appellant would be entitled to the benefit of the
Central Amending Act 68 of 1984 in view of section 30(2) of
the Act because these appeals were pending before this Court
on 30th April, 1982, if the view is taken that the said Act
had retrospective operation in the sense that the amended
section 23(2) and section 28 apply also in relation to an
order under appeal against an award made by the Collector or
Court between April 30, 1982 and the commencement of the
Amending Act. This must depend upon the decision of the
Constitution Bench of this Court, expected soon; the
appellant would be entitled to the benefit as above-said if
the Constitution Bench upholds the view expressed in Bhag
Singh case, (1985) 3 SCC p. 737 and overrules the view
expressed in Kamalajamanniavaru case, (1985) 1 SCC 582.
[542G-H; 543A-B]

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 272 1 & 2722 (N) of 1972.

From the Judgment and order dated 30.3.1972 of the Bombay High Court in First Appeal No.
440/62 and 577 of 1962.

Dr. D.Y. Chandrachud, S. Dutt and P.H. Parekh for the Appelant.

A.M. Khanwilkar and Ajit S. Bhasme for the Respondents. The Judgment of the Court was delivered
by THAKKAR, J. Controversy is centred on the question of valuation of the lands under acquisition.
The trial Court had correctly valued the lands and the High Court had erroneously revised the
valuation downwards-complains the original owner of the land who is the appellant in these two
allied appeals.

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588
Chimanlal Hargovinddas vs Special Land Acquisition ... on 21 July, 1988

The lands in question situated in a locality known as 'Tigris Camp' within the city limits of Poona in
Maharashtra admeasuring 15 acres and 17 Gunthas, comprised in Survey Nos. 85 and 86, were

1. By Certificate under Article 133( l)(a) of the Constitution of India as it existed at the material time.

placed under acquisition pursuant to a Notification under section 4 of the Land Acquisition Act
published on March 8, 1956. The acquisition was a part of the total acquisition of 101 acres 33
Gunthas made for a public purpose viz. for construction of the Headquarters, Poona Rural Police
Charge. The appellant was not satisfied with the compensation offered by the Land Acquisition
officer in respect of his parcel of 15 Acres 7 Gunthas and applied for a reference being made under
section 18 of the Land Acquisition Act. Two references were made to a Civil Court under section 18
of the Land Acquisition Act for determining the market value of the lands for the purpose of
awarding compensation to the appellants. The Trial Court determined the market value of 2- 1/4
acres forming part of Survey Nos. 85 and 86 at Rs.15,00 per acre. Market value in respect of the
remaining 13 acres and 7 Gunthas was determined at Rs.8692 per acre. The present dispute is
confined to valuation of 13 Acres 7 Gunthas forming part of Survey No. 85. The High Court has
reduced the total compensation payable in respect of the land in question from Rs.1,14,517
computed at Rs.8692 per acre to Rs.63,846 (which works out at Rs.4845.87 per acre) thereby
reducing the compensation awarded to the appellant by Rs.50,554 in respect of this parcel of land.

Before tackling the problem of valuation of the land under acquisition it is necessary to make some
general observations. The compulsion to do so has arisen as the Trial Court has virtually treated the
award rendered by the Land Acquisition officer as a judgment under appeal and has evinced
unawareness of the methodology for valuation to some extent. The true position therefore requires
to be capsulized.

The following factors must be etched on the mental screen:

(1) A reference under section 18 of the Land Acquisition Act is not an appeal against
the award and the Court cannot take into account the material relied upon by the
Land Acquisition officer in his Award unless the same material is produced and
proved before the Court.

(2) So also the Award of the Land Acquisition officer is not to be treated as a judgment of the trial
Court open or exposed to challenge before the Court hearing the Reference. It is merely an offer
made by the Land Acquisition officer and the material utilised by him for making his valuation
cannot be utilised by the Court unless produced and proved before it. It is not the function of the
Court to suit in appeal against the Award, approve or disapprove its reasoning, or correct its error or
affirm, modify or reverse the conclusion reached by the Land Acquisition officer, as if it were an
appellate court.

(3) The Court has to treat the reference as an original proceeding before it and determine the market
value afresh on the basis of the material produced before it.

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(4) The claimant is in the position of a plaintiff who has to show that the price offered for his land in
the award is inadequate on the basis of the materials produced in the Court. Of course the materials
placed and proved by the other side can also be taken into account for this purpose. (5) The market
value of land under acquisition has to be determined as on the crucial date of publication of the
notification under sec. 4 of the Land Acquisition Act (dates of Notifications under secs. 6 and 9 are
irrelevant).

(6) The determination has to be made standing on the date line of valuation (date of publication of
notification under sec. 4) as if the valuer is a hypothetical purchaser willing to purchase land from
the open market and is prepared to pay a reasonable price as on that day. It has also to be assumed
that the vendor is willing to sell the land at a reasonable price.

(7) In doing so by the instances method, the Court has to correlate the market value reflected in the
most comparable instance which provides the index of market value.

(8) only genuine instances have to be taken into account. (Some times instances are rigged up in
anticipation of Acquisition of land). (9) Even post notification instances can be taken into account
(1) if they are very proximate,(2) genuine and (3) the acquisition itself has not motivated the
purchaser to pay a higher price on account of the resultant improvement in development prospects.

(l0) The most comparable instances out of the genuine instances have to be identified on the
following considerations:

(i) proximity from time angle,

(ii) proximity from situation angle.

(11) Having identified the instances which provide the index of market value the price reflected
therein may be taken as the norm and the market value of the land under acquisition may be
deduced by making suitable adjustments for the plus and minus factors vis-a-vis land under
acquisition by placing the two in juxtaposition.

(12) A balance-sheet of plus and minus factors may be drawn for this purpose and the relevant
factors may be evaluated in terms of price variation as a prudent purchaser would do.

(13) The market value of the land under acquisition has there after to be deduced by loading the
price reflected in the instance taken as norm for plus factors and unloading it for minus factors (14)
The exercise indicated in clauses (11) to (13) has to be undertaken in a common sense manner as a
prudent man of the world of business would do. We may illustrate some such illustrative (not
exhaustive) factors:

Plus factors Minus factors

1. smallness of size. 1. largeness of area.

2. proximity to a road. 2. situation in the interior at a distances from the Road.

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3. frontage on a road. 3. narrow strip of land with very small frontage compared to death.

4. nearness to developed area. 4. lower level requiring the depressed portion to be filled up.

5. regular shape. 5. remoteness from

developed
locality.

6. level vis-a-vis land 6. some special

under acquistion. disadvantageous
factor which would
deter a purchaser.
7. special value for an owner
of an adjoining property
to whom it may have some
very special advantage.

(15) The evaluation of these factors of course depends on the facts of each case. There cannot be any
hard and fast or rigid rule. Common sense is the best and most reliable guide. For instance, take the
factor regarding the size. A building plot of land say 500 to 1000 sq. yds cannot be compared with a
large tract or block of land of say l000 sq. yds or more. Firstly while a smaller plot is within the
reach of many, a large block of land will have to be developed by preparing a lay out, carving out
roads, leaving open space, plotting out smaller plots, waiting for purchasers (meanwhile the
invested money will be blocked up) and the hazards of an entrepreneur. The factor can be
discounted by making a deduction by way of an allowance at an appropriate rate ranging approx.
between 20% to 50% to account for land required to be set apart for carving out lands and plotting
out small plots. The discounting will to some extent also depend on whether it is a rural area or
urban area, whether building activity is picking up, and whether waiting period during which the
capital of the entrepreneur would be looked up, will be longer or shorter and the attendant hazards.

(16) Every case must be dealt with on its own facts pattern bearing in mind all these factors as a
prudent purchaser of land in which position the Judge must place himself.

(17) These are general guidelines to be applied with understanding informed with common sense.
The problem which has surfaced in the present appeals needs to be recapitulated. The question is
whether in scaling down the total compensation payable to the appellant from Rs.1,14,517 to
Rs.63,846, the High Court has violated any principle of valuation or adopted any faulty
methodology.

The formula evolved by the High Court may be briefly outlined. The High Court has taken into
account the market value reflected in the instances pertaining to small parcels of land cited by the
parties which on the analysis of the evidence have been considered as compar able subject to factors
of differentiation. The High Court has valued the land having best situation admeasuring 9 acres
comprised in Survey No. 86 which abuts on the Ganeshkhand Road at Rs.20,000 per acre. Having
done so the market value reflected therein has been unloaded to account for the minus factors
pertaining to the rest of the lands including the land in question. The lands comprised in Survey No.

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86 situated in the interior were valued at Rs.16,000 per acre, whereas lands abutting on Pashan
Road were valued at Rs.12,000 per acre. .

The appellant's land, which was agricultural land albeit with future potential for development as
building site, was situated far far in the interior in the midst of blocks of undeveloped land. The
formula for evaluation involved taking of three steps:

(1) The High Court formed the opinion that allowance for largeness of block deserved
to be made at 25% instead of 20% as done by the Trial Court. (2) The High Court
formed the opinion that the development would take about 12 years to reach the
appellant's land. On these premises the High Court formed the opinion that the land
of the appellant could be valued at Rs.7000 per acre as a block. (3) The High Court
directed that the market value so ascertained should be further depressed to account
for the factor as regards the waiting period of 12 years which was the estimated
period for development reaching the appellant's land. The 'present value' of the land
was accordingly deduced by depressing the valuation of Rs.7000 per acre by
reference to Miram's Tables on the basis of discount rate of 5% per annum to account
for the factor that approximately 12 years would elapse before development could
reach the appellant's land.

That is how the total compensation payable to the appellant for the block of land admeasuring 13
acres 7 gunthas was determined at Rs.63,846 which works out at approximately Rs.4,845.87 per
acre.

The valuation made by the High Court has been faulted on three A grounds:

(1) The High Court should not have made a deduction of 25% in place of deduction
made by the Trial Court at 20% to account for the factor pertaining to the largeness of
the block of land under acquisition. (2) The High Court had grossly undervalued the
land in determining the market value of the appellants' land at Rs.7,000 per acre.

(3) There was no warrant for pushing down or depressing the market value of land as
determined by the Trial Court in order to deduce the 'present value' by reference to
Miram's Tables to account for the factor as regards the estimated time lag for
development reaching the block of land in question which was situated in the
interior. Besides, the time lag of 12 years as estimated by the High Court was
excessive and unrealistic.

The first two grounds are devoid of merit. It is common knowledge that when a large block of land is
required to be valued, appropriate deduction has to be made for setting aside land for carving out
roads, leaving open spaces, and plotting out smaller plots suitable for construction of buildings. The
extent of the area required to be set apart in this connection has to be assessed by the Court having
regard to shape, size and situation of the concerned block of land etc. There cannot be any hard and
fast rule as to how much deduction should be made to account for this factor. It is essentially a

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Chimanlal Hargovinddas vs Special Land Acquisition ... on 21 July, 1988

question of fact depending on the facts and circumstances of each case. It does not involve drawing
upon any principle of law. It cannot be said that the High Court has committed any error in forming
the opinion that having regard to the facts and circumstances of the case 25% deduction was
required to be made in this connection. The High Court cannot be faulted on this score.

The more serious grievance of the appellant however is that the High Court has depressed the
market value excessively in evaluating the land in question at Rs.7,000 per acre as compared to the
land abutting on the Ganeshkhand Road valued at Rs.20,000 per acre, the land abutting in the
interior of Survey No. 86 valued at Rs.16,000, and land abutting on Pashan Road valued at
Rs.12,000 per acre. A glance at the sketch on the record shows that the appellant's land is situated
very much in the interior as compared to the other parcels of land. It is in the midst of large blocks
of undeveloped land. A hypothetical purchaser would not offer the same market value for lands with
such a situation as lands which are nearer to the developed area and abut on a road or are nearer to
a road. The development of lands which are nearer to the developed area and nearer to the road can
reasonably be expected to take place much earlier. Only after such lands are developed and
construction comes up, the development would proceed further in the interior. It would not be
unreasonable to visualize that a considerable time would elapse before development could reach the
block of undeveloped land located in the interior. Besides, the land which is situated in the interior
does not fetch the same value as the land which is nearer to the developed area and nearer to the
road. If a hypothetical purchaser opts to purchase the land situated in the interior in the midst of an
undeveloped area, he would doubtless take into account the factor pertaining to the estimated time
for development to reach the land in the interior. For, his capital would be unprofitably looked up
for a very long time depending on the estimated time required for the development to reach the land
in the interior. Meanwhile he would have to suffer loss of interest. It is, therefore, understandable
that the land in the interior would fetch much smaller price as compared to the lands situated nearer
to the developed locality. More so as all these factors are incapable of precise or scientific evaluation.
The valuer has to indulge in some amount of guess work and make the best of the situation. The
High Court having accorded anxious consideration to all these factors of uncertainty has arrived at
the valuation of Rs.7000 per acre. Says the High Court in paragraph 51 of the Judgment:

"This brings up for final consideration the plots which we have described as interior
plots in all the survey numbers and which do not have a frontage on the roads. A
lower price will have to be provided for these plots, since the plot- holders will have
to spend moneys for getting water and drainage connections which are given only
upto the Municipal Roads. Then again, in our opinion, the interior plots would not be
sold at all as long as any of the plots having a frontage on Pashan Road or Baner Road
are sold, though once such plots have been disposed of the demand for interior plots
would certainly pick up. Here again, it is impossible to be precise in fixing the value;
but in our opinion the interior plots may fairly be valued at Rs.7,000 per acre. As
stated earlier, the sales of these plots would commence after all the plots having a
frontage on Pashan Road and Baner Road are disposed of i.e. after 12 years, and we
may say that those plots would be sold within a period of about 4 years."

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Chimanlal Hargovinddas vs Special Land Acquisition ... on 21 July, 1988

It is not possible to find fault with the reasoning or conclusion of the High Court. The High Court
was day in and day out engaged in valuation of the lands in different parts of the state and was fully
aware of the landscope. There is no yardstick by which the future can be forseen with any greater
degrees of preciseness. The High Court has made the estimate as regards the time lag for
development to reach the appellant's land to the best of its judgment. Having taken into account all
the relevant factors, the High Court has arrived at the aforesaid determination. And in doing so, the
High Court has not committed any error or violated any principle of valuation. It is purely a
question of fact and it is not possible to detect any error even in the factual findings recorded by the
High Court. In fact the High Court has been extremely considerate and has approached the question
of valuation with sympathy and understanding for the land owner. The High Court did not opt for
an easy way out by taking the view that since there was no comparable instance of undeveloped
lands in the interior on the basis of which the valuation of the appellant's land could be made, the
Award made by the land Acquisition officer should remain undisturbed. The High Court has done
the best under the circumstances albeit by making recourse to some guess work which in the
circumstances of the case was inevitable. There is no material on the basis of which this Court can
uphold the plea of the appellant that the valuation at Rs.7,000 per acre does not reflect the true
market value or that the land in question is under-valued. The argument urged by the appellant in
this behalf, under the circumstances, cannot be accepted.

Turning now to the third ground, it appears that the appellant's grievance is justified. The grievance
is that there was no warrant for making any further deduction once the land was valued at Rs.7,000
as against the valuation of the best parcel of land at Rs.20,000 which was made precisely to account
for the factor pertaining to its situation in the interior. There was therefore no warrant for
ascertaining the present value of Rs.7,000 as if Rs.7,000 would be fetched after 12 years. Now the
parcel of land admeasuring 13 acres 7 gunthas comprised in Survey No. 85 which was situated very
much in the interior was valued by the Trial Court at Rs. 10,866 per acre (less 20% to account for
roads etc.). This parcel of land was valued at Rs.7,000 per acre by the High Court. The High Court
had valued the land with the best situation on the Ganeshkhand Road at Rs.20,000 per acre. As
against this the appellant's land was valued at mere Rs.7,000 per acre which reflected an unloading
by Rs.13,000 per acre which works out at 65%. This pushing down was made to account for its
situation in the interior on the premise that development would take about 12 years to reach the
land under acquisition. If the appellant's land just adjoined the land valued at Rs.20,000 per acre it
would have been valued at the same figure of Rs.20,000. It has been valued at Rs.7,000 per acre
precisely because it is so situated that development would reach the appellant's land after 12 years as
estimated by the High Court. But after 12 years it would become land adjoining to developed area
and not land which could be treated as in the interior. Therefore, if present value was to be
ascertained it should be ascertained on the basis of present value of land which would fetch
Rs.20,000 per acre after 12 years and not present value of land which would fetch Rs.7.000 per acre
after 12 years. In fact present value of Rs.20,000 payable at the end of 12 years at 8% would work
out at Rs.6942 (.3971 x 20,000 = 6942)1. The High Court was therefore right in valuing the land in
interior at Rs.7,000 per acre but wrong in directing that present value of Rs.7,000 payable after 12
years should be ascertained. The last ground is thus well founded .

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Chimanlal Hargovinddas vs Special Land Acquisition ... on 21 July, 1988

In the result appellant must be awarded compensation at Rs.7,000 per acre subject to deduction or
allowance of 25% to account for land required to be set apart for roads, open spaces etc. In other
words appellant will be entitled to be paid compensation for 13 acres 7 gunthas comprised in Survey
No. 85 at Rs.5,250 per acre (Rs.7,000 less 25% i.e. Iess 1750=Rs.5,250) in place of the lesser sum
awarded by the High Court. Appeal must be partly allowed to this extent accordingly. F The question
however remains whether the appellant is entitled to the benefit of Central Amending Act (Act 68 of
1984) providing payment of solatium and interest at enhanced rates on the ground that present
appeals were pending before this Court on 30th April, 1982. The appellants would be entitled to the
benefit thereof by virtue of section 30(2) of the Act if the view is taken that the said Act has
retrospective operation in the sense that amended section 23(2) and section 28 apply also in relation
to an order under appeal against an award made by the Collector of Court between April 30, 1982
and the commencement of the Amending Act. This must depend on the deci-

1. See Mirarm's Table 7 at 657 of A.K. Mitra's Theory and Practice of Valuation (2nd Edition)
Published by Eastern Law House.

sion of the Constitution Bench which is expected soon. The appellant Will be entitled to the benefit
of Central Amending Act (Act 68 of 1984) in case the Constitution Bench upholds the view expressed
in Bhag Singh case [1985] 3 SCC- p. 737 and overrules the view expressed in Kamalajammanniavaru
Case [1985] 1 SCC p. 582. In case the Constitution Bench affirms the view taken in
Kamalajammanniavaru Case, the appellant will not be entitled to such benefit.

Appeal is partly allowed accordingly to the aforesaid extent. Order passed by the High Court is
modified to the corresponding extent.

Having regard to the facts and circumstances of the case there will be no order regarding costs in
this Court.

S.L. Appeal allowed.

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595

TEXT OF THE JUDGEMENT

“CED Vs. Radhadevi Jalan (1968) 67 ITR 761 (Cal)”

596

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Controller Of Estate Duty, West ... vs Radha Devi Jalan. on 24 May, 1967

Calcutta High Court

Controller Of Estate Duty, West ... vs Radha Devi Jalan. on 24 May, 1967
Equivalent citations: 1968 67 ITR 761 Cal
JUDGMENT BANERJEE J. - This is a reference under section 6(3) of the Estate Duty Act, 1953.

The question of law referred to this court is :

"Did the Tribunal, on the facts and in th circumstances of the case, adopt the proper basis for
assessment of principal value of premises No. 226/1, Lower Circular Road, Calcutta ?"

The circumstances under which the above quoted question comes up for consideration are
hereinafter stated in brief : Premises No. 226/1, Lower Circular Road, Calcutta, belonged to one
Kamala Prasad Jain, who died on December 21, 1959, leaving a will by which he appointed his wife,
Sm. Radha Devi Jalan, as the executrix. In making the return under the Estate Duty Act, the
executrix, as the accountable person, showed the value of the said premises at Rs. 1,35,000. This
was apparently done on the basis of the annual value of the premises, under the Calcutta Municipal
Act, which was Rs. 13,608. The Assistant Controller of Estate Duty was of the opinion that the
annual value was too low and should not be utilised for the purpose of valuing the premises. He
formed this opinion on the basis of local inspection of the premises from outside. In the report of
local inspection, he expressed the following view :

".... It a appeared to be a first class building in an aristocratic locality and in a very good state. It is a
two-storeyed house of first-class materials with an attractive lawn in its front."

It is not disputed that the premises is in the occupation of an old tenant of the name of M. L.
Khaitan, paying a monthly rent of Rs. 1,600 therefor. It is also not disputed that the premises is
covered by a mortgage to Messrs. Bata Shoe Company Ltd.

The Assistant Controller of Estate Duty at first adopted the "land and building method" of valuation
for the purpose of evaluating the property. The calculation made by the Assistant Controller, on that
basis, is hereinbelow set out :

Rs.

"Land : 32 cottahs at the rate of Rs. 11,000 per cottah on average 3,52,000 Structure from a rough
estimate (in the absence of exact particulars) : the building stands on about half a Bigha (10

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Controller Of Estate Duty, West ... vs Radha Devi Jalan. on 24 May, 1967

cottahs), i.e., 7,200 sq ft., say, 7,000 sq. ft. Cost at the rate of Rs. 20 (for ground floor) and Rs. 15
(for first floor), i.e., Rs. 35 per sq. ft.

2,45,000 The building is in a very good of maintenance. Hence, depreciation of only 10 per cent. is
allowable 24,500 2,20,500 5,72,500 Considering, however, the fact that the house was under a
mortgage to Messrs. Bata Shoe Co. Ltd., the Assistant Controller took the valueof the property in the
round figure of Rs. 5,00,000. The Assistant Controller then proceeded to value the propery on rental
basis. In that context, he observed as follows :

Rs.

"Annual Municipal value Rs. 13,603 is clearly too low to be taken as an indication of the value of the
building ........

Rent received annually Rs. 19,200, i.e., Rs. 1,600 per monthe is also too low for a house of this size
and quality. Fair rent of the house can be taken at Rs. 3,000 per month if, not more, judging by the
prevalent rates in these areas.

Hence, fair rent estimated at Rs. 36,000 per annum.

36,000 Less : 25 per cent expenses ....

9,500 27,500 20 times which works out at ... s. 5,50,000."

From the aforesaid figure, he deducted the outstanding liablility under the mortage of the property
to Bata Shoe Co. Ltd. and arrived at the valuation of Rs. 5,00,000 for the premises. According to the
calculations by the Assistant Controller, the principal value of the property, whether estimated on
the land and building method or under the rental value method, yielded the same result.

Aggrieved by the order, the accountable person preferred an appeal before the Appellate Controller
of Estate Duty, who partly allowed the appeal with the following observation :

"In determining the market value of the property the Assistant Controller considered both the rental
aspect as well as the cost of land and cost of construction of the building aspect. Actual rent in this

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Controller Of Estate Duty, West ... vs Radha Devi Jalan. on 24 May, 1967

case is Rs. 1,600 per month or Rs. 19,200 per year. The question is whether this is a maintainable
net rental income. Here, we have to examine whether this rent of Rs. 1,600 would be maintained in
future having regard to the condition of the property, the locality and facilities available at present. I
am of the opinion that the actual rent is indeed a privileged rent, because the tenant has been
occupying the house for a number of years. Moreover, the house is mortgaged to Messrs. Bata Shoe
Company Limited, of which the tenant is a director. In this locality properties of the same type
would fetch Rs. 3,000 per month. I would, however, estimate the fair maintainable rental income of
the property at Rs. 30,000 per year. Deducting therefrom Rs. 7,500 as outgoings, the net rental
income would come to Rs. 22,000. Multiplying this by 20 times, the value of the property would
come to Rs. 4,50,000. But I would determine the value of the property at Rs. 4,00,000 having
regard to the fact that the house is tenanted and is also mortgaged. If, alternatively, we proceed on
the cost and building method, the same value would come."

In the view taken, the Appellate Controller allowed the appeal to this extent that he reduced the
principal value of the property by Rs. 1,00,000.

Dissatisfied with the order of the Appellate Controller, the accountable person preferred a second
appeal before the Appellate Tribunal. The Tribunal allowed the appeal on grounds which will appeal
from the extraction from their judgment quoted below :

"There is nothing to show that the rent was not a fair rent for the house when the tenancy was
created. It would not only be unrealistic but also contrary to law to compute the value of the house
on the basis of the rent it could have fetched if it had been let out to some other tanant on the date of
death. While the consideration might be relevant for the assessment of the bona fide annaual value
of a property under section 9(1) of the Income-tax Act, it is irrelevant for the purpose of estimating
the principal value of the property under section 36(1). In this particular case, therefore, the
valuation of the property would be the amount which a person would pay for it on the date of the
death of the last holder, viz., December 31, 1959, if he were to purchase it subject to the mortgage of
Messrs. Bata Shoe Company Limited and subject to the tenancy of the managing director of the said
company. The intending buyer must take into consideration the fact that the tenancy is an old one
and the prospect of enhancing the rent by all legal means was remote and that his eviction was
remoter still. On the basis of the realities, a fair method of estimating valuation of the property
would be the rental basis. Taking the actual rent of Rs. 1,600 per mensem as the basism 33 1/3% as
the outgoing and 17 as the years purchased, which gives a rent security of nearly 6 per cent on the
outlay, the value of the house is estimated at Rs. 2,20,000 in round figures for the purpose of
payment of estate duty."

Thus, the appeak succeeded in part and instead of a valuation of Rs. 1,35,000, as contended for by
the accountable person, the principle value of the property was determined by the Appellate
Tribunal at Rs. 2,20,000.

The Controller of Estate Duty became aggrieved by the order made by the Tribunal and obtained a
reference to this court on the question of law set out at the beginning of this juidgment.

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Mr. B. L. Pal, learned counsel for the revenue, did not dispute the proposition that, in estimating the
principal value of any property, under section 36(1) of the Estate Duty Act, the Controller may
proceed on opinion basis but that opinion must be objectively formed. His contention was that it
was the duty of the Controller to find out the price obtainable in the open market and an opinion
thus formed must bind the assessee. In order to appreciate the scope of this argument, it is
necessary for us to refer to the language of section 36(1) which reads as follows :

"The principal value of any property shall be estimated to be the price which, in the opinion of the
Controller, it would fetch if sold in the open market at the time of the deceaseds death."

According to Mr. Pal, the duty of the Controller was to determine the price that a willing purchaser
would pay to a willing seller for the property, having due regard to its existing condition and its
potential possibilities, laid out in its most advantageous manner. In making this submission, he
drew considerable inspiration from certain observations by Shelat J., in Raghubans Narain Singh v.
Uttar Pradesh Government, made in the context of determination of compensattion under the Land
Acquisition Act, 1894. He next contended that the expression "open market" meant a hypothetical
market in which everybody had a right to make an offer for purchase of the property, as contrasted
to a "limited market", in which a few were given the liberty to make bids or a "black-market" which
was a term euphemistically used to commercial transactions entered into between parties in
definance of law. In making this last submission, Mr. Pal particularly relied on the judgment of the
Supreme Court in Corporation of Calcutta v. Sm. Padma Devi. Using the above propositions as his
springboard, Mr. Pal further argued that the Tribunal was in error in sticking to the contractural
rental of several years antiquity and in failing to find out the value that the property would fetch if
sold in the open market at the time of the death of the deceased.

In out opinion, there is considerable misconception of legal position involved in the argument of Mr.
Pal. The contractual rent of Rs. 1,600 per month was payable by the tenant in respect of a building,
which at the material time was governed by the West Bengal Premises Tenancy Act, 1956 Under the
operation of the varios rent restrictions Acts, which have been operating in this State for now well
over quarter of a century, landlords have lost the right of letting out their houses at any rent they
choose and of evicting tenants on such grounds as appeal to them. Contractual relationship between
landlords and tenants have given way to statutory relationship imported by successive rent
restriction Acts and the position now is that houses may be let out only at fair rents and at no more.
If premises can no longer be let out at such rent as the landlord may expect or aspire, then however
costly the premises may otherwise be, their value have to be determined on the basis of the
limitations imposed by the statute. This consideration weighed with the Supreme Court in
Corporation of Calcutta v. Padma Debi in determining the annual value of a premises under section
127(a) of the Calcutta Municipal Act, 1923. What happened in that case was that the respondents
were the owners of premises No. 296, Bowbazar Street, Calcutta. The Corporation of Calcutta fixed
the annual value of the said premises at a sum of Rs. 14,093 and directed the same to take effect
from the second quarter of 1950-51. In fixing the annual value, the Corporation proceeded on the
basis of Rs. 1,450 as the monthly rental value of the premises. On June 20, 1950, notice of the
assessment, based on the said annual valuation, was served on the respondents. Respondent No. 1
filed an objection to the said assessment, under section 139 of the Act. Meanwhile, under the West

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Bengal Premises Rent Control (Temporary Provisions) Act, 1950, the standard rent of the said
premises was fixed by the Rent Controller at Rs. 350 per month, with effect from April, 1951, and at
Rs. 632-8-0 per month with effect from August, 1951. One of the objections raised by respondent
No. 1 was that the Corporation had no power to fix the annual valuation at a figure higher than the
standard rent.

This objection was disallowed by the Corporation. Being aggrieved by the said order, respondent No.
1 filed an appeal before the Court of Small Causes, Calcutta, which allowed the appeal and fixed the
annual valuation, for the purpose of assessment at Rs. 6,831. This was on the basis of the standard
rent of Rs. 632-8-0 per month. The Corporation of Calcutta questioned the correctness of the said
judgment by preferring an appeal to the High Court at Calcutta. The High Court, by a majority,
agreed with the Small Causes Judge dismissing the appeal. Thus, the matter went before the
Supreme Court. In dismissing the appeal, the Supreme Court observed :

"The word reasonably in the section (meaning section 127 (a) of the Calcutta Municipal Act) throws
further light on this interpretation. The word reasonably is not capable of precise definition.
Reasonable signifies in accordance with reason. In the ultimate analysis it is a question of fact.
Whether a particular act is reasonable or not depends on the circumstances in a given situation. A
bargain between a willing lessor and a willing lessee uninfluenced by any extraneous circumstances
may afford a guiding test of reasonableness. An inflated or deflated rate of rent based upon fraud,
emergency, relationship, and such other considerations may take it out of the bounds of
reasonableness. Equally, it would be incongruous to consider fixation of rent beyond the limits fixed
by penal legislation as reasonable. Under the Rent Control Act, the receipt of any rent higher than
the standard rent fixed under the Act is made penal for the landlord. Section 3 of the said Act says
that any amount in excess of the standard rent of any premises shall be irrecoverable
notwithstanding any agreement to the contrary. Section 33 (a) thereof provides, inter alia, that
whoever knowingly receives, whether directly or indirectly, any sum on account of the rent of any
premises in excess of the standard rent will be liable to certain penalties. Standard rent has been
defined in section 2 (10) (b) to mean that where the rent has been fixed if application were made
under the said section. A combined reading of the said provisions leaves no room for doubt that a
contract for a rent at a rate higher than the standard rent is not only not enforceable but also that
the landlord would be committing an offence if he collected a rent above the rate of the standard
rent. One may legitimately say under those circumstances that a landlord cannot reasonably be
expected to let a building for a rent higher than the standard rent. A law of the land with its penal
consequences cannot be ignored in ascertaining the reasonable expectations of a landlord in the
matter of rent. In this view, the law of the land must necessarily be taken as one of the
circumstances obtaining in the open market placing an upper limit on the rate of rent for which a
building can reasonably be expected to let.

It is said that section 127 (a) does not contemplate the actual rent received by a landlord but a
hypothetical rent which he can reasonably be expected to receive if the building is let. So stated the
proposition is unexceptionable. Hypothetical rent may be described as a rent which a landlord may
reasonably be expected to get in the open market. But an open market cannot include a black
market, a term euphemistically used to commercial transactions entered into between parties in

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defiance of law. In that situation, a statutory limitation of rent circumscribes the scope of the
bargain in the market. In no circumstances the hypothetical rent can exceed that limit".

The same view appears to have been expressed by the English High Court in Priestman Collieries
Ltd. v. Northern District Valuation Board. In that case, their Lordship had to interpret section 10 of
the Coal Industry (Nationalisation) Act, 1946, by which provision was made for the payment of
compensation in respect of coal mining undertakings ("transferred interests") transferred to the
National Coal Board. Section 13 of the Act provided for valuation of transferred interests, and by
sub-section (4) of that section it was provided that for that purpose the value of an undertaking
"shall be taken to be the amount which it might have been expected to realize if this Act had not
been passed and it had been sold on the primary vesting date in the open market by a willing seller
to a willing buyer..." It was also provided by sub-section (5) of the section that on the assumed sale
"... regard shall be had to all relevant circumstances including the state of things in which
transferred interests subsisted at the date of their vesting in the Board." Morris J., in delivering the
judgment of the court, observed in that context :

"In the opinion of the court, the phrase open market in section 13, sub-section (4), of the Act does
not contemplate a purely hypothetical market which is to be regarded as exempt from any
restrictions imposed by law. The section does not postulate conditions wholly divorced from
reality..... Any restriction or limitation imposed on him by the law or imposed on any willing buyer
must be recognised and taken into account."

Thus, the position in law is that if there had been no rent restriction law in operation, the Controller
could make a fair and an objective estimate of the rent which the property might have fetched if a
willing lessor wanted to let out the property to a willing lessee. The operation of the rent restriction
Acts made all the difference. In estimating the rent at which the property was capable of being let
out, the Controller was bound to take into account the restrictions imposed by the rent restriction
Acts and to arrive at the figure of fair rent accordingly. This is what the Controller and the appellate
authority both failed to do and thus erred. The Appellate Tribunal took into consideration this
aspect of the matter and, in our opinion, very rightly.

Faced with the authorities to which reference has already been made, Mr. B. L. Pal, learned counsel
for the revenue, in his fairness, did not dispute that in arriving at the figure of fair rent of the
property regard shall have to be had to the provisions of the West Bengal Premises Tenancy Act. He,
therefore, reframed his line of argument and contended that the provisions of the West Bengal
Premises Tenancy Act permitted increase in the contractual rent, agreed upon years ago and the
Tribunal should have taken that fact into consideration.

Now section 8 of the West Bengal Premises Tenancy Act, 1956, defines fair rent. Mr. Pal submitted
that clause (e) of section 8 (1) applied to the instant case. That clause reads as follows :

"Where the provisions of clause (a) or clause (b) or clause (c) or clause (d) do not apply, such rent as
would be reasonable having regard to the situation, locality and condition of the premises and the
amenities provided therein and where there are similar or nearly similar premises in the locality

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having regard also to the rent payable in respect of such premises :

Provided that in fixing such rent the Controller shall in no case allow an increase of more than 10
per cent. Over the existing rent, if any, of such premises."

Mr. Pal submitted that the Controller should have taken the fair rent of the premises at Rs. 1,600
plus Rs. 160 per month, namely, Rs. 1,760, and then capitalised the same in order to arrive at the
estimated value of the property. This argument, in our opinion, is unworthy of being unheld. The
Tribunal found that there was nothing to show that the rent was not a fair rent for the house, when
the tenancy was created. If the original rent was nor an unreasonable rent, we do not have materials
which go to show that the rental merited an increase under clause (e) of section 8 (1). Then again,
the question referred to us merely seeks our advice on the point whether the Tribunal adopted the
proper basis for assessment of the principal value of the property. The frame of the question may
not be wide enough to include the further point, namely, that even though the Tribunal might have
adopted the proper basis, namely, the basis of controlled rent, they might have made additions on
the controlled rent under clause (e) of section 8 (1), in order to arrive at the principal value of the
property. The original contractual rent which was fair, in our opinion, went through a statutory
baptism by reason of the provisions of the rent restriction Acts and that rent cannot be disturbed, in
the absence of facts which are contemplated in clause (e) of section 8 (1).

We need now notice the last branch of the argument of Mr. Pal. He contended that, on the land and
building method, the value of the property came up to Rs. 5,00,000, according to the Controller,
and to Rs. 4,00,000 according to the Appellate Controller. He submitted that the Tribunal was in
error in not taking into consideration that method of valuation and in depending upon the rental
method of valuation wholly. We are unable to uphold this contention of Mr. Pal. In the first place, he
is not strictly right in his contention that the Tribunal was oblivious of the land and building method
adopted by the Assistant Controller and the Appellate Controller. In paragraph 2 of the order of the
Appellate Tribunal that valuation was noticed. The Tribunal, however, was of the opinion that on the
basis of realities, the fair method of estimating the valuation of the property would be the rental
basis. In this opinion the Tribunal was not inherently wrong. When a person buys a property, he
does so for two purposes, (a) to obtain an annual income, (b) to obtain security for his capital. If the
property was merely a vacant land, it might be developed and made to yield such income, as it was
capable of, in a metropolitan area where some sort of scarcity for accomodation prevails. The
property was, however, burdened with a tenanted house and the income therefrom was controlled
by a statute. This control on income was bound to react on the value of the property and application
of the land and building method would not have been a proper method in the instant case. Further,
the land and building method as adopted by the Assistant Controller and the Appellate Controller
was somewhat an off-hand method. The valuation was made on a personal inspection of the
property by the Assistant Controller from outside and on his subjective opinion that it was a first
class building. The Assistant Controller was not sure of the area which this structure covered but
merely made a rough estimate of it. Wherefrom he got the per cottah land value and per square foot
rate of construction do not appear. If the Tribunal disregarded this off-hand method of valuation, we
do not find fault with the Tribunal.

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Lastly, in case of buildings, which are in possession of tenants and the tenants cannot either be
evicted or the rent payable by them enhanced, except in accordance with the provisions of the Rent
Control Act, the only appropriate method of valuation is to capitalise the annual rent by certain
number of years purchase. The method of valuing the land and the building separately and adding
up the values would be improper in such cases, because that would ignore the impact of the Rent
Control Act on the value of the land and the building. This is the view which was expressed by the
Mysore High Court in Commissioner of Wealth-tax v. V. C. Ramachandran and we respectfully agree
with the view.

The arguments made by Mr. Pal all fail. We, therefore, answer the question referred to us in the
affirmative.

The accountable person is entitled to costs of this reference.

ROY J. - I agree.

Question answered in the affirmative.

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605

TEXT OF THE JUDGEMENT

“CIT Vs. Ashima Sinha (1979) 116 ITR 26 (Cal)”

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Calcutta High Court

Commissioner Of Income-Tax vs Smt. Ashima Sinha on 20 January, 1978
Equivalent citations: (1978) 2 CompLJ 303 Cal, 1979 116 ITR 26 Cal
Author: D K Sen
Bench: D K Sen, C Banerji
JUDGMENT Dipak Kumar Sen, J.

1. The proceedings which have culminated in this appeal and the facts relevant thereto are as
follows:

Smt. Ashima Sinha, the respondent herein, sold premises Nos. 74A, 74B and 74C, Elliot Road,
Calcutta-16 (hereinafter referred to as the said property), in equal undivided share to Mst. Sayeeda
Khatun and Mst. Fatima Khatun by executing two separate conveyances both dated 10th December,
1973, for Rs. 40,000 each.

2. Statements under Section 269P(1) of the I.T. Act, 1961, in the prescribed form and verified in the
prescribed manner were duly filed by the transferees along with a copy of the instrument of transfer
disclosing the following particulars;

(a) The said property consisted of a partly two and partly three-storeyed buildings together with
one-storeyed out-houses in a total area of 6 cottahs, 5 chittacks and 25 sft.

(b) The buildings were approximately over 50 years old.

(c) The entire premises were let out to tenants.

(d) The fair market value of the undivided half part of the said property was approximately Rs.
35,000.

3. By his communication in writing dated the 13th June, 1974, the IAC, Acquisition Range-I,
Calcutta, a competent authority within the meaning of Section 269B of the I.T. Act, 1961, made a
reference to the Assistant Valuation Officer, Unit No. III, under Section 269L(1) requiring the latter
to determine the fair market value of the said property and make a report.

4. Pursuant thereto, the said Valuation Officer inspected the said property on the 26th June, 1974,
and on the 9th July, 1974, submitted his valuation report, inter alia, stating as follows :

(a) The said property was situated in a middle class residential area with all civic amenities.

(b) The buildings in the said properties were not properly maintained.

(c) The buildings were electrified and had corporation tap connection as also sewerage connection
which, however, had outlived their utility.

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(d) The building was about 60 years old and past its useful life and its future life was estimated to be
only 20 years more.

(e) The premises were fully tenanted, total rent realised being Rs. 820'37 per month.

(f) There was every possibility for extension of the property.

5. On the basis of the location of the said property and amenities avail able, the market price of the
land was determined at Rs. 20,000 per cottah, aggregating Rs. 1,26,300. The valuation of the said
property was deter mined to be Rs. 1,16,000, which according to the Valuation Officer was the fair
market price of the said property, the half share thereof being valued at Rs. 58,000.

6. The actual computation of the Valuation Officer was as follows :

Rental method of valuation Rs.

Rs.

Gross annual rent 820-37 x 12 9,844 Less outgoings

1. Municipal tax 4 x 2 (Rs. 7.69 + 161.75 + 9.42) 1,431

2. Govt. revenue payable annually Rs. 15.74 16

3. Maintenance & repair :

l/6th of (Rs. 9,844 less [1431 plus 16] ) 1,400

4. Management & collection charges :

@ 6% of (Rs. 9,844 less [1431 plus 16] ) 504 (-) 3,351 Net annual return :

6,493

Capitalised value

For 20 years' life-years @ 7% with redemption capital @ 4% = Rs. 6,493 X 9.654

=
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62,513

Less capital repair done by vendees =

L.S. =
= (-)
3,000

Total structural value on 10-12-74

=
59,513

Land

Land value on reversion --land = 6C. 5 ch. 2 sft. = 6.315 cottahs @ 20,000 per cottah

1,26,300

Salvaged value of building 10% of the estimated reproduction cost of building, i.e., @ 10% of

24,000

1,50,300

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Deferred for 20 years @ 5% Y.P. 0.3769 X Rs. 1,50,000=Rs. 56,648. Total value of the property

Rs.
Rs.

1.
Structure
59,513

2.
Land
56,648

1,16,161

1,16,000

7. On the 24th August, 1974, the competent authority initiated proceedings for acquisition of the
said property under Section 269C of the Act after recording his reasons for such initiation stating,
inter alia, that on the basis of the report of the Valuation Officer the fair market value of the
property exceeded the apparent consideration by 45% (i.e., more than 25%).

8. On the same date, i.e., the 24th August, 1974, the competent authority issued and had duly
published a notice under Section 269D(1) of the Act inviting objections against the proposed
acquisition under Section 269E.

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9. Objections were preferred both by the transferees as also the transferor against the proposed
acquisition. It was, inter alia, contended on behalf of the transferees that-

(a) The valuation by the said Valuation Officer, was not correct and was based on guess without
evidence.

(b) The estimation of the value of the land at Rs. 20,000 per cottah was erroneous and without any
evidence.

(c) The said property was not situated in a middle class residential area. There was a bustee covering
10 bighas on its south and on its east. A valuation report of H. Sarkar, chartered engineer and
valuer, was enclosed in support of the objection.

10. The objections of the transferor, inter alia, were as follows :

(a) The said property was incorrectly described as being located in a middle class residential area.
Even the tenants in the property were of lower income group.

(b) The only method of valuation of the said property, a fully tenanted premises, was the rental
method.

(d) The property being fully developed and tenanted and rent restriction legislation being in force,
valuation of the said property by the land and building method would be inappropriate.

11. At the hearing of the objections under Section 269F of the Act instances of contemporaneous sale
of the property in the neighbouring area were cited on behalf of the transferee as follows :

1. 93, Elliot Road ...

Registered on 23-3-69 Price--Rs. 1,01,000 Area--15 C. 5 ch. 25 sft.

Two storied 1/6th self-occupied and

the remaining portion tenanted.

2.
82, Elliot Road
...
Regd. 16-5-69-- Rs. 1,35,000
Area 12C. 3 ch. 18 sft.
4 storied, fully tenanted.

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86, Elliot Road

...
Regd. 6-11-71--1/3rd
sold--Rs. 30,000-- Total 9C. 11 ch. 17 sft.

12. The transferee also relied on and filed another valuation report of the said H. Sarkar date

13. On hearing the said objections and after obtaining the approval of the CIT, the competent

14. The competent officer upheld the reversionary method of valuation applied by the Valuation
Officer accepting that the building in the said property was a very old structure and had a future life
of only 20 years, whereafter it would have to be demolished and the land would revert back to the
owner as vacant land. It was also accepted that the purchase had been made on that basis and also
as the vacant land would become available for further construction. The competent officer rejected
the valuation report of H. Sarkar. Comparing the sale on the 31st March, 1974, of a corner plot
measuring 53.8 cottahs situated at the junction of Elliot Road and Acharya Jagadish Chandra Bose
Road for Rs. 15,00,000, i.e., at the rate of Rs. 28,000 per cottali, the competent authority held that
the proper consideration had not been truly stated in the instrument of transfer.

15.For the purposes of wealth-tax the said property had been last assessed at Rs. 65,000. The
competent authority noted that even on such admitted valuation the transaction resulted in a
substantial capital gain and, therefore, he concluded that the transaction was designed to facilitate
concealment, of further liability to capital gains tax.

16. Being aggrieved by the above order of the competent authority the transferor preferred an appeal
to the Income-tax Appellate Tribunal. In the said appeal, the following further facts were elicited on
behalf of the transferor :

(a) The transferor had purchased the said property on the 4th March, 1952, in a court auction for
only Rs. 45,100.

(b) Earlier, the property had been leased out on a total rent of Rs. 104.16 per month. After the expiry
of the said earlier lease in June, 1971, new tenants were inducted at an enhanced total rental of Rs.
820 per month.

(c) The husband of the transferor was murdered on the 31st January, 1971, in the disturbances
prevailing at that time resulting in nervous breakdown of the transferor.

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(d) Being a lady and residing away from the said property, the transferor could not manage the said
property and had no other alternative but to sell the same at the best price available,

(e) At the time of the sale, rents aggregating Rs. 8,251 were in arrears which were assigned by the
transferor in favour of the transferee for only Rs. 6,188.

17. On the basis of the aforesaid it was submitted that the consideration for the transfer was the fair
market value of the said property and had been correctly shown in the instrument of transfer and, in
any event, was the actual amount involved in the transfer.

18. It was contended further that the property having been sold without reservation there was no
question of any reversionary interest being valued as was done by the Valuation Officer. The
property was fully tenanted. The tenants could neither be evicted nor their rent enhanced by reason
of restrictive legislation and, therefore, the appropriate and the only method of valuation of the said
property was to capitalise the annual rent by a number of years' purchase. It was contended that the
proper multiple to be applied was 12 and if this was done the value of the property would be much
less than the consideration shown in the instrument of transfer.

19. On the other hand, it was contended on behalf of the revenue that, admittedly, the property was
about 60 years old and, therefore, the addition of the reversionary value of the land was fully
justified. It was also submitted that the total built-up area in the property was 5,510 square feet
which was fetching a rent of only Rs. 820 per month, i.e., at the old rate of 15p. per square foot
which was not reasonable. Therefore the valuation of the said property on the basis of yield would
not be justified. It was further contended that of 4,547 square feet, the total area, 1,264 square feet
had been left vacant indicating that there was scope for further development of the property and for
this reasons also, the valuation of the said property on yield basis would not be justified.

20. The transferor contended in reply that under the municipal requirements for the area, one-third
of the total area in the premises had to be left open and, therefore, there was no question of any
further development of the said property. It was also submitted that the yield of the property was
not on the basis of old rates of rent as the property had been let out to new tenants in 1971.

21. After consideration of the respective submissions, the Tribunal, following a decision of this court
in CED v. Radha Devi Jalan [1968] 67 ITR 761 (Cal), held that by reason of the provisions of the rent
control statutes, the only proper method of valuation was by application of a multiple to the net
yield of the property which the Tribunal determined to be 121/2. The Tribunal also held that the said
property having been sold in two undivided half shares, a further deduction of 10% would have to be
made. On the above basis, the fair market value of the property on the date of the transfer was found
to be less than Rs. 80,000 which was the value mentioned in the instrument of transfer.
Accordingly, the Tribunal allowed the appeal and set aside the order of acquisition passed by the
competent authority.

22. The present appeal before this court has been preferred by the CIT, West Bengal II, under
Section 269H of the Act against the said order of the Appellate Tribunal.

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23. Mr. B.L. Pal, learned counsel for the appellant, has urged before us the following grounds from
the memorandum of appeal:

(a) The Tribunal erred in holding that the only proper method of determining the fair market value
of the property was by applying a multiple to the net yield from the property.

(b) The Tribunal erred in rejecting the method of the Valuation Officer being the reversionary
method of valuation inasmuch as the said property had an additional economic life of 20 years.

(c) The Tribunal failed to take into consideration that the total area of land was 4,547 square feet out
of which 1,264 sq. feet had been left vacant on which there could be further development of the
property.

(d) The Tribunal erred in proceeding on the basis that the proper multiple should be only 121/2.

24. Mr. Pal contended that the fair market value of the said property could be determined by
applying more than one method and if the valuation was made by applying only the yield method,
the result would be incorrect. If in valuing a property on the method known as the "land and
building" method a higher valuation than that obtained by following the method known as "yield or
rental method was obtained, the same must be accepted as correct. Even if the "yield or rental"
method was applicable it would be necessary to check the result arrived at by applying the other
methods including the "land and building" method.

25. Mr. Pal next contended that where the land was hot fully developed or where the return from the
land was controlled and not commercial then value determined solely on the basis of "yield or
rental" method would be incorrect or misleading. Mr. Pal submitted that in the instant case the said
property included vacant land measuring 1,264 sq. ft. which provided scope for further development
of the property.

26. Mr. Pal next submitted that in the instant case the rent or yield from the said property was only
15p. per square foot which was neither the reasonable nor commercial rent for a building in the
locality. Accordingly, the method followed by the Tribunal, i.e., the yield or rental method, was
wholly inapplicable in the instant case.

27. Mr. Pal next submitted that the method applied by the Valuation Officer, i.e., "reversionary
method", which was based partly on the "yield or rental" method and partly on the "land and
building" method was applicable in the instant case as the property had an available economic life of
20 years.

28. Mr. Pal finally submitted that, in any event, "yield or rental" method applied in the instant case
has not been correctly computed inasmuch as the Tribunal had applied a multiple of only 121/2
which was very low. On a higher and proper multiple being applied even on the "yield and rental"
method the valuation could be computed at a much higher figure.

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29. In support of his contentions Mr. Pal cited the following:

(a) Parks "Principle and Practice of Valuation", 4th Edn., pp. 37, 38 : "When land is fully developed
by buildings erected thereon, when the property is let at a rent from which the fair rent can be
ascertained, and when the rent has been proved and is likely to be maintained for years to come,
then the rental method of valuation should be applied to determine the market value of the
premises...When a property is valued on the rental basis, the result is the value of the land and
buildings taken together and cannot afterwards be apportioned...This does not mean the land and
building method cannot be employed to check a valuation done by the rental method. It simply
states that after capitalisation of the rent you cannot deduct the depreciated value of the buildings
on the land, and say that the result is the definite value of the land."

(b) Rustom Cavasjee Cooper v. Union of India [1970] 40 Comp Cas 325 (SC). In this decision, the
Supreme Court considered the vires of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1969. One of the main questions involved was whether "compensation" in such
an acquisitive statute would in consonance with Article 31 of the Constitution be a just equivalent in
money of the property acquired or whether the said expression did not mean a just equivalent and
the court cannot go into the propriety or adequacy or reasonableness of compensation under the
said article of the Constitution. The Supreme Court held that the law providing for acquisition must
either fix the compensation or specify the principles on which and the manner in which the
compensation is to be determined. Mr. Pal relied on the following from the majority judgment of the
Supreme Court at page 383 :

"The important methods of determination of compensation are: (i) market value determined from
sales of comparable properties, proximate in time to the date of acquisition, similarly situate, and
possessing the same or similar advantages and subject to the same or similar disadvantages. Market
value is the price the property may fetch in the open market if sold by a willing seller unaffected by
the special needs of a particular purchaser ; (ii) capitalization of the net annual profit out of the
property at a rate equal in normal cases to the return from gilt-edged securities. Ordinarily value of
the property may be determined by capitalizing the net annual value obtainable in the market at the
date of the notice of acquisition ; (iii) where the property is a house, expenditure likely to be
incurred for constructing a similar house, and reduced by the depreciation for the number of years
since it was constructed ; (iv) principle of reinstatement, where it is satisfactorily established that
reinstatement in some other place is bona fide intended, there being no general market for the
property for the purpose for which it is devoted (the purpose being a public purpose) and would
have continued to be devoted, but for compulsory acquisition. Here compensation will be assessed
on the basis of reasonable cost of reinstatement; (v) when the property has outgrown its utility and
it is reasonably incapable of economic use, it may be valued as land plus the break-up value of the
structure. But the fact that the acquirer does not intend to use the property for which it is used at the
time of acquisition and desires to demolish it or use it for other purpose is irrelevant; and (vi) the
property to be acquired has ordinarily to be valued as a unit. Normally an aggregate of the value of
different components will not be the value of the unit.

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These are, however, not the only methods. The method of determining the value of property by the
application of an appropriate multiplier to the net annual income or profit is a satisfactory method
of valuation of lands with buildings, only if the land is fully developed, i.e., it has been put to full use
legally permissible and economically justifiable, and the income out of the property is the normal
commercial and not a controlled return, or a return depreciated on account of special
circumstances. If the property is not fully developed, or the return is not commercial, the method
may yield a misleading result."

30. Mr. R.N. Dutt, learned counsel for the respondent, drew our attention to the undisputed facts of
the instant case noted earlier and cited the following decisions in support of the order of the
Tribunal:

(a) CED v. Radha, Devi Jalan [1968] 67 ITR 761 (Cal). Here certain premises were being valued for
assessment of estate duty. The said premises were in the occupation of an old tenant who was
paying a monthly rent of Rs. 1,600. The Appellate Tribunal estimated the valuation of the property
on rental basis. On a reference it was contended before this court that the Tribunal should have
determined the real value of the property on the basis of what the property would fetch if sold in the
open market at the relevant time. This court rejected the contention and upheld the order of the
Tribunal with the following observations (at pp. 765-766):

"The contractual rent of Rs. 1,600 per month was payable by the tenant in respect of a building,
which at the material time was governed by the West Bengal Premises Tenancy Act, 1956. Under the
operation of the various rent restriction Acts, which have been operating in the State for now well
over quarter of a century, landlords have lost the right of letting out their houses at any rent they
choose and of evicting tenants on such grounds as appeal to them. Contractual relationship between
landlords and tenants have given way to statutory relationship imported by successive rent
restriction Acts and the position now is that houses may be let out only at ' fair rents ' and at no
more. If premises can no longer be let out at such rent as the landlord may expect or aspire, then
however costly the premises may otherwise be, their value have to be determined on the basis of the
limitations imposed by the statute." It was further observed (at pp. 769-770) as follows :

"When a person buys a property, he does so for two purposes, (a) to obtain an annual income, (b) to
obtain security for his capital. If the property was merely a vacant land, it might be developed and
made to yield such income, as it was capable of, in a metropolitan area where some sort of scarcity
for accommodation prevails. The property was, however, burdened with a tenanted house and the
income therefrom was controlled by a statute. This control on income was bound to react on the
value of the property and application of the land and building method would not have been a proper
method in the instant case."

(b) J.N. Bose v. CWT . Here it was held by this court in the context of the W.T. Act, that there are
different methods of valuation of immovable property and which one would be suitable for a
particular property would depend upon the particular features thereof.

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(c) CED v. Bijoy Kumar Khandelwal [1977] 108 ITR 864 (Gau). In this case, the Tribunal in
determining the market value of a property under Section 36 of the E.D. Act, 1953, held that the
gross rental value was the proper method to be applied to ascertain the market value of the property
concerned. The Assam High Court held that the Tribunal did not commit any error of law by
computing the valuation on the rental method in preference to the other methods.

31. We do not accept the contention of Mr. Pal that the said property was not fully developed. Out of
a total area of 4,547 sq. ft only 1,264 sq. ft. had been left open. No evidence was led to show if this
1,264 sq. ft. was in the form of one regular plot or consisted of accretions of open spaces
unconnected with each other. The property has been sold to two persons in undivided equal shares.
The vacant land in each share will not exceed 632 sq. ft., i.e., an area less than one cottah. The
requirement of the Corporation of Calcutta is that one-third total of an area should be left vacant;
therefore, the available area for development in the instant case would be only about 200 sq. ft, in
each undivided share. In our view, the scope for future development of the said property is
negligible.

32. In R. C. Cooler [1970] 40 Comp Cas 325 (SC), the Supreme Court was considering what would be
a fair compensation where property was being acquired compulsorily and not what would be the fair
market value when such property was being voluntarily transferred by the owner for a
consideration. The Supreme Court held that application of the "yield or rental" method to value
vacant business premises in urban areas on the basis of estimated rental would lead to misleading
results and would not ensure adequate compensation. The following observations of the Supreme
Court (at p. 387) make the position clear :

"Under Explanation 2, Clause (1), 'ascertained value' in respect of buildings which are wholly
occupied on the date of the commencement of the Act is twelve times the amount of the annual rent
or the rent for which the building may reasonably be expected to be let from year to year reduced by
certain specific items. This provision, in our judgment, does not lay down a relevant principle of
valuation of buildings. In the first place, making a provision for payment of capitalised annual rental
at twelve times the amount of rent cannot reasonably be regarded as payment of compensation
having regard to the conditions prevailing in the money market. Capitalization of annual rental
which is generally based on controlled rent under some State Act at rates pegged down to the rates
prevailing in 1940 and on the footing that investment in buildings yields 81/3 per cent. return
furnishes a wholly misleading result which cannot be called compensation. Value of immovable
property has spiralled during the last few years and the rental which is mostly controlled does not
bear any reasonable relation to the economic return from property...There is in the present
conditions considerable value attached to vacant business premises in urban areas. True
compensation for vacant premises can be ascertained by finding out the market value of comparable
premises at or about the time of the vesting of the undertaking and not by capitalising the
rental--actual or estimated. Vacant premises have a considerably larger value than business
premises which are occupied by tenants. The Act instead of taking into account the value of the
premises as vacant premises adopted a method which cannot be regarded as relevant. Prima facie,
this would not give any reliable basis for determining the compensation for the land and buildings."'

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33. Moreover, we find that the rent restriction legislation do not generally apply to premises in
which the Government is interested either as a tenant or as a landlord. Therefore, when the
Government acquires property, the fact that there are tenants in the property is irrelevant for the
purpose of computing compensation as the Government is not restricted from removing such
tenants. Therefore, in determining compensation payable for property acquired by the Government
valuation of the property on the basis of actual yield would be unfair to the owner.

34. The discussion in Parks' Principle and Practice of Valuation cited by Mr. Pal does not advance
the case of the revenue any further. According to Parks a fully developed and tenanted property
fetching a steady rent has to be valued by the "yield or rental" method. No doubt "land and building"
method might be applied even in such a case to check the value arrived at by the former method but
it is not the opinion of Parks that in such cases the result arrived at by "land and building" method
must be accepted in preference to that obtained by the " yield and rental " method.

35. The said property, therefore, is a property fully developed and let out to tenants in its entirety.
The quantum of rent realised has been duly ascertained and such rent is likely to be maintained for
years to come. The method indicated in Parks' Valuation at p. 37 clearly applies to such facts and, in
our opinion, the Tribunal has rightly applied the "yield or rental method" for the valuation in the
instant case.

36. We entirely agree with the principles laid down in Radha Devi Jalan [1968] 67 ITR 761 (Cal) and
find that the Tribunal has correctly applied the same in the instant case. If a statutory control is
imposed on a commodity, restricting the price, or transfer, or distribution of the same then, in our
opinion, the commodity ceases to be a commercial commodity as understood in common parlance
and becomes a controlled commodity and its effective value is its controlled value and not an
imaginary commercial value. If the State chooses to impose statutory control in respect of terms and
conditions for tenancies in properties and such control is statutorily enforced then during the
subsistence of such control such properties would necessarily have a value which is controlled. The
State cannot then turn round and say that for other purposes the properties would have a notional
commercial value. To hold otherwise would be to ignore the realities.

37. We have failed to understand either the principles or the logic of the "reversionary" method of
valuation as applied by the Valuation Officer of the department in the instant case. After following
the "yield or rental" method and having arrived at a figure the Valuation Officer has added to it the
value of an imaginary reversion in future. We invited Mr. Pal to cite any authority which has
approved or even indicated this method but he was unable to do so. It is stated in Parks' Valuation
(at p. 38) that when a property is valued on rental basis the result is the value of the land and
building taken together which cannot afterwards be apportioned. In the method adopted by the
Valuation Officer the value of the land is taken twice, being included in the amount arrived at by the
"yield or rental" method and again under the "reversionary" method. This is an entirely novel
approach but in our view erroneous.

38. The only other point to be considered is whether the Tribunal applied a proper multiplier, i.e.,
121/2 times. In our opinion, this point is academic. The Valuation Officer applied the rental method

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and computed the capitalised value of the said property at Rs. 62,513 by applying a multiplier of
only 9.654. The assessee's valuer has applied a multiple of 121/2 which was accepted by the
Tribunal. The appellant has no reasons to be aggrieved that a multiplier higher than that suggested
by its own valuer has been applied.

39. Apart from the report of the Valuation Officer no other relevant evidence was available before
the competent authority or the Tribunal in support of the case of the revenue. No comparable
figures of other sales were brought on record. The vacant land sold on the 31st March, 1974, at the
rate of 28,000 per cottah was situated at the junction of Elliot Road and Acliarya Jagadish Chandra
Bose Road. There cannot be any comparison between that property and the property with which we
are concerned.

40. For the reasons given above, it cannot be said that the Tribunal erred in choosing an accepted
method of valuation, namely, the "yield or rental" method in preference to other methods.

41. Accordingly, the appeal fails and is dismissed. The respondent will be entitled to costs. Interim
orders will continue for a period of 8 weeks from date.

C.K. Banerji, J.

42. I agree.

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TEXT OF THE JUDGEMENT

“CIT Vs. Anupkumar Kapoor & others

(1980) 125 ITR 684 (Cal)”
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Calcutta High Court

Commissioner Of Income-Tax vs Anup Kumar Kapoor And Ors. on 28 July, 1978
Equivalent citations: 1980 125 ITR 684 Cal
Author: C Banerji
Bench: D K Sen, C Banerji
JUDGMENT C.K. Banerji, J.

1. This appeal arises out of proceedings for acquisition under Chapter XXA of the I.T. Act, 1961.

2. The relevant facts are shortly as follows :

By a deed of conveyance dated the 4th April, 1973, Jayanta Nath Ghosh, the respondent No. 3, sold
to Anup Kumar Kapoor and Adarsh Lal Chopra, the respondents Nos. 1 and 2, respectively, the
premises No. 8, Jagadish Chandra Bose Road, Calcutta (hereinafter called the said property) for Rs.
1,80,000.

3. Statements under Section 269P(1) of the I.T. Act, 1961 (hereinafter called "the Act"), in the
prescribed form and verified in the prescribed manner were duly filed by the transferees disclosing,
inter alia, the following particulars:

(a) The said property comprised of a partly one and partly two-storeyed building together with
one-storied cut-houses having a total land area of 1 bigha 5 cottahs 3 chittaks and 4 sft.

(b) The buildings were more than 100 years old.

(c) The property was let out to tenants.

(d) The estimated fair market value of the property was Rs. 1,80,000.

4. By a letter dated the 3rd August, 1974, the IAC Acquisition, Range I, Calcutta, the competent
authority within the meaning of Section 269A(b) read with Section 569B of the Act, referred the
matter under Section 269L(1)(a) of the Act to the Valuation Officer, Unit-III, to determine the fair
market value of the said property and to submit a report.

5. Thereupon, the said Valuation Officer inspected the said property on the 6th September, 1975,
and submitted his valuation report to the competent authority, inter alia, as follows:

(a) The locality was a good residential-cum-commercial locality.

(b) The main building was a traditional load-bearing brick-built double storeyed one with terraced
roofing on wooden beams and bargas having sanitary, water and electricity connections.

(c) The out-house to the rear side of the main building was a single storeyed brick-built load-bearing
one with terraced roofing on wooden beams and bargas.

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(d) The out-houses facing the road were single storeyed brick-built building with A.C. Sheet/C.I.
Sheet/country tiled roofing on wooden frames.

(e) The buildings were more than 100 years old and had already outlived their economic life and
their estimated future life was 25 years,

(f) The buildings were in a bad state of repairs.

(g) The buildings were let out to 14 tenants at an aggregate rent of Rs. 1,176 per month.

(h) The property was ideal for construction of a multi-storeyed building which could go up to 12
storeys without any set back and must have been purchased by the transferees, for that purpose
either after removing the tenants by paying compensation or by accommodating them in the new
building and even if the tenants could not be removed, constructions could start in stages,
constructing at the first stage on the vacant land measuring 115ft. X 45ft.

(i) The appropriate method of valuation of the said property was value of the land plus the break-up
value of the buildings minus the amount of compensation.

(j) As there was no approved rate for such compensation and in view of the restrictions under the
Rent Control Act, valuation of the said property was made by applying rental method for the
expected future life of the buildings adding thereto the reversionary value of the laud. The market
price of the land was thus determined at Rs. 23,000 per cottah and of the entire land of 1 bigha 5
cottahs 3 chittacks and 4 sq, ft. at Rs. 5,79,370.

6. The valuation of the said property was, however, made at Rs. 2,73,000 computed as under:

Valuation by rental method Rs.

Rs.

Gross rental income 1,176 X 12 = 14,112 p.a. Outgoings

(i) Municipal tax 198 X 8 1,584

(ii) Repairs & maintenance @ 1/6 on gross rent less tax, i.e., on Rs. 12,528 2,088

(iii) Collection & management @6% on 12,528

(iv) Electricity charge 10 X 12

(v) Land revenue 4.14 Total outgoings 4,548.14 Say 4,548 4,548 Net return ...

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9,564 Having regard to the security of the rental income, this type of property should, in my
opinion, be capitalised @ 7% security at the material time. Therefore, YP for 25 years @ 7% allowing
for redemption of capital at 4% Capital value 10,637 1,01,732 Land value reversion
Land-- 25.19 cottahs The value of 25.19 cts. of land comes to 25.19 X 23,000 P.K.

5,79,370

Deferred for 25 years at 5% Y.P. 0.2953 X 5,79,370 = 1,71,087

Total value of the property-- 1,01,732 plus 1,71,087

2,72,819

Say
2,73,000

7. The said Valuation Officer in determining the market value of the land of the said property took
into consideration the value of the land at 47, Shakespeare Sarani, on 29th August, 1964, at Rs.
27,468 per cottah and observed that since the beginning of 1973 speculation of residential flats in
multi-storeyed buildings has sent the price of land soaring very high.

8. On the 29th September, 1973, the competent authority, under Section 269C of the Act, recorded
his reasons for initiation of proceedings for acquisition of the said property, inter alia, stating that
on the basis of the said valuation report of the Valuation Officer the value of the said property
exceeded the apparent consideration by 51% and directed issue of notice under Section 269D of the
Act.

9. On the same date, i.e., 29th September, 1973, a notice under Section 269D(1) of the Act was
issued inviting objections against the said proposed acquisition in terms of Section 269E of the Act

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which was published in the Gazette of India on the 13th October, 1973. Copies of the said notice
were also served on the transferor and the transferees in terms of Section 269D(2) of the Act.

10. Objections were filed by both the transferees and the transferor against the proposed acquisition.

11. The transferees contended, inter alia, that:

(a) Initiation of the proceedings for acquisition was bad in law having been made after the expiry of
the time prescribed.

(b) The consideration for the purchase was commensurate with the capitalised value on the basis of
the annual municipal value of the said property.

(c) The buildings were very old and the said property was in the occupation of very old tenants and it
was very difficult to evict them in view of the rent control and other legislations safeguarding the
interests of tenants and thus the consideration paid for the purchase of the property was its fair
market value.

12. The transferor contended, inter alia, as under :

(a) The valuation of the property at Rs. 1,14,000 has been determined in the wealth-tax assessment
of the transferor since the assessment year 1966-67 and up to the assessment year 1972-73, on the
basis of rental income.

(b) Certificate under Section 230A(1) was duly issued to the transferor by the ITO after due enquiry
before registration of sale of the property at Rs. 1,80,000.

(c) The property was occupied by 13 tenants.

13. At the hearing of the said objections a valuation report by Mr. S.R. Banerjee, chartered engineer,
dated the 18th April, 1975, and a copy of the said deed of conveyance dated the 4th April, 1973, were
filed before the competent authority on behalf of the transferees.

14. In the course of hearing of the said objections, the competent authority supplied to the
transferees a copy of the valuation report of the said Valuation Officer and the transferees also filed
before the competent authority further objections contending, inter alia, as follows :

(a) The valuation of the said property should be on rental method.

(b) In the income-tax assessment of the transferor for the assessment year 1973-74, the capital gains
which accrued to the transferor on sale of the said property had been assessed on the basis of Rs.
1,80,800 at which the said property was sold.

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(c) Premises No. 47, Shakespeare Sarani, was not a comparable unit being a vacant land with the
advantage of immediate construction of a multi-storeyed building and was so utilised by the
purchaser while the instant property was fully tenanted and developed and on account of rent
restriction legislations the tenants could not be evicted.

(d) The valuation of land made by the Valuation Officer was based on no evidence and on
conjectures and surmises.

(e) The locality in which the said property was situate was not a good residential locality at all and
was surrounded by motor car repairing, and other machine shops, cobblers, mistries and workers in
machine shops, a neglected tank and an old abandoned cemetry.

(f) The buildings in the said property did not outlive their economic life as stated by the Valuation
Officer.

(g) The speculation of the Valuation Officer that the property must have been purchased for
construction of a multi-storied building was baseless.

(h) No construction could be made on the vacant land of US ft. x 45 ft. as under the building
regulations of the Corporation of Calcutta 50% of the total land of the said property had to be kept
vacant.

(i) The basis of valuation of the Valuation Officer that the said property would become vacant after
25 years and further development could be made thereafter was wholly imaginary.

15. The transferees also cited as a comparable unit the sale of premises No. 9, Acharya Jagadish
Chandra Bose Road, a property adjacent to the said property, having an area of 1 bigha 4 cottahs 4
chittacks and 12 sq. ft. sold in August, 1969, at a price of Rs. 98,000.

16. After hearing the said objections the competent authority held that the proceedings for
acquisition of the said property were validly initiated and after obtaining the approval of the
Commissioner of Income-tax made an order for acquisition of the said property under Section
269F(6) of the Act.

17. In making the said order, the competent authority held that the transferor had undervalued the
said property by giving its valuation at Rs. 1,14,000 in his wealth-tax assessments and evaded
wealth-tax for all the years which was obvious from the admitted consideration of Rs. 1,80,000 and,
by disclosing Rs. 1,80,000 as the sale price of the property in his income-tax returns for the year
1973-74, he also evaded tax on capital gains by undervaluing the said transaction.

18. The sale of premises No. 9 Acharya Jagadish Chandra Bose Road, for Rs. 98,000 cited by the
transferees as a comparable unit was distinguished by the competent authority on the ground that
the said transactions took place at a time when the City of Calcutta was in a very disturbed condition
due to political unrest by certain extremist elements and the said sale was made apparently at a

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gross under valuation. The competent authority relied as comparable units the sale of premises No.
47, Shakespeare Sarani, and also two other sales of vacant plots of land from his own records, one in
April, 1974, near the junction of Royd Street and Acharya Jagadish Chandra Bose Road, about 300
yards from the said property, at more than Rs. 24,000 per cottah and the other in September, 1974,
at a distance of about 400 yards to the south of the said property at Rs. 55,000 per cottah. The
competent authority rejected the valuation report of Mr. S. R. Banerjee and upheld the valuation
made by the Valuation Officer observing that the Valuation Officer could value the building at scrap
value and add thereto the total value of the land computed by him at Rs. 5,79,370 but instead he
tried to be very modest in his estimate and took the value deferred for 25 years. On the basis of the
said comparable units relied on from his own records, the competent authority held that the value of
the land of the said property was more than Rs. 25,000 but less than Rs. 55,000 and that the
consideration for the transfer of the said property as agreed to between the parties had not been
truly stated in the said instrument of transfer with the object as referred to in Section 269C(1)(a), (b)
of the Act and the fair market value of the said property exceeded by more than 25 per cent, of the
apparent consideration.

19. The transferees made an application before the competent authority for correction of certain
mistakes in the said order which was refused.

20. Both the transferor and the transferees appealed to the Income-tax Appellate Tribunal against
the said order of the competent authority for the acquisition of the said property.

21. Both the said appeals were heard together by the Tribunal and were disposed of by a common
order.

22. Apart from the above-noted contentions that were urged before the competent authority that the
said property was sold by the transferor at the fair market value, the transferees relied on a further
fact before the Tribunal that in Title Suit No. 524 of 1966 instituted by India Cable Co. Ltd., one of
the tenants of the said property against Jayanta Nath Ghosh, the transferor in the City Civil Court,
Calcutta, a decree had been passed on the 25th July, 1969, declaring that the said India Cable Co.
Ltd. was entitled to use the open space in the said property and thus the transferees were not in a
position to demolish the structures or construct any multi-storeyed building as observed by the
competent authority. The valuation report of the Valuation Officer and the order of the competent
authority were supported and sought to be upheld on behalf of the revenue. The Tribunal held that
there was no procedural defect in the initiation of the said proceedings for the acquisition of the said
property. The Tribunal further held that the property being fully tenanted, the appropriate method
of valuation of the said property would be to capitalize only the rent by a certain number of years of
purchase as laid down by this court in CED v. Radha Devi Jalan [1968] 67 ITR 761 and the valuation
made by the Valuation Officer under the land and building method was bad in law. The Tribunal
further found that the sale instance cited on behalf of the transferees made it apparent that the said
property could not have been sold for a consideration more than what was stated in the deed of
conveyance dated the 4th April, 1973. The Tribunal also noted that in the income-tax and wealth-tax
assessments of the transferor the value of the said property was determined at Rs. 1,80,000 and at
Rs. 1,48,344, respectively. The provisions of Section 52(2) of the Act were not invoked by the ITO to

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enhance the quantum of capital gains. A certificate under Section 230A of the Act was issued to the
transferor before the registration of the said deed of conveyance without any objection. The Tribunal
also noted that the wealth-tax assessment of the transferor for the assessment year 1971-72 was
revised by the CWT and the WTO valued the said property at Rs. 1,48,344 by giving effect to the said
order of the CWT.

23. The Tribunal held that the conditions for initiation of the proceedings for acquisition of the said
property and that the fair market value of the said property exceeded the apparent consideration by
more than 15% were not satisfied. The order of the competent authority was therefore cancelled and
the appeals were allowed.

24. Being aggrieved by the said order of the Tribunal, the Commissioner, W. B.-II, has preferred this
appeal under Section 269H of the Act.

25. At the hearing, Mr. Pranab Pal, learned counsel for the respondents Nos. 1 and 2, raised a
preliminary objection that the appeal was time-barred. The said order of the Tribunal was received
by the appellant on the 3rd October, 1975, while the appeal was preferred on the 3rd December,
1975, after the expiry of 60 days from the date of service of notice of the said order of the Tribunal as
provided in Section 269H of the Act as will appear from the statements made in para. 9 of the
petition of the appellant for admission of the appeal and the notice of motion taken out.

26. Mr. Ajit Sengupta, the learned counsel for the appellant, submitted that the appeal was not
time-barred as the date, 3rd October, 1975, mentioned in para. 9 of the petition was a mistake which
should be 4th October, 1975.

27. In view of the dispute between the parties as to the date of receipt of the said order of the
Tribunal by the appellant, we directed the appellant to make a formal application for correction of a
mistake in para. 9 of the said petition, if any, and to satisfy this court that the appeal was not
time-barred.

28. On 21st July, 1978, the appellant made the said application and from the records produced
before us, we were satisfied that the copy of the said order of the Tribunal was received by the
appellant on the 4th October, 1975, and the appeal was, therefore, not time-barred and we,
therefore, directed the appellant to make necessary correction in para. 9 of the petition, which has
since been made.

29. At the hearing before us, Mr. B. L. Pal, learned counsel for the appellant, limited his arguments
and contentions only on grounds Nos. 6, 8 and 12 of the grounds of appeal.

30. Mr. B. L. Pal contended that the entire property was not tenanted but only the buildings were
occupied by the tenants and the land which was lying vacant could, therefore, be built upon. He
relied on the valuation report of the Valuation Officer. Mr. Pal further contended that, inasmuch as
the entire property was not tenanted, the said Valuation Officer, therefore, applied the correct
method of valuation considering the future life of the buildings. The valuation was, therefore, made

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on rental method for the estimated life of the buildings and thereafter on the reversionary value of
the land after the buildings had outlived their natural life. He next contended that the sale instance
in 1969 cited by the transferees could not be relied upon and was rightly rejected by the competent
authority inasmuch as, due to political disturbances in Calcutta, the value of land and buildings at
the relevant time had considerably gone down. The sale instances relied on by the competent
authority were better comparable units and represented more or less the value of land and buildings
prevailing in 1973. Mr. B, L. Pal submitted that the rental or yield method accepted by the Tribunal
for valuing the said property was wholly wrong and inapplicable to the instant case.

31. In support of his contentions Mr. B. L. Pal relied on the following passages from Parks on
Valuations, 4th Edn., at pages 37 and 38 :

"When land is fully developed by buildings erected thereon ; when the property is let at a rent from
which the fair rent can be ascertained ; and when the rent has been proved and is likely to be
maintained for years to come, then the rental method of valuation should be applied to determine
the market value of the premises.......

When a property is valued on the rental basis, the result is the value of the land and buildings taken
together and cannot afterwards be apportioned......

This does not mean the land and building method cannot be employed to check a valuation done by
the rental method... ...after capitalisation of the rent you cannot deduct the depreciated value of the
buildings on the land, and say that the result is the definite value of the land."

32. Mr. B.L. Pal also cited a decision of the Supreme Court in Rustom Cavasjee Cooper v. Union of
India [1970] 40 Comp Cas 325 (SC). One of the questions involved in this case was whether
compensation payable under the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1969, meant a just equivalent in money of the property acquired or did not mean such just
equivalent and if the court could go into the propriety or adequacy or reasonableness of the
compensation under Article 31 of the Constitution. The Supreme Court held that a statute which
provided for acquisition must either fix the compensation or specify the principles on which and in
the manner in which the compensation was to be determined. The following principles laid down by
the majority judgment at page 383 was relied on :

"The important methods of determination of compensation are 3 (i) market value determined from
sales of comparable properties, proximate in time to the date of acquisition, similarly situate, and
possessing the same or similar advantages and subject to the same or similar disadvantages. Market
value is the price the property may fetch in the open market if sold by a willing seller unaffected by
the special needs of a particular purchaser; (ii) capitalization of the net annual profit out of the
property at a rate equal in normal cases to the return from gilt-edged securities. Ordinarily, value of
the property may be determined by capitalizing the net annual value obtainable in the market at the
date of the notice of acquisition ; (iii) where the property is a house, expenditure likely to be
incurred for constructing a similar house, and reduced by the depreciation for the number of years
since it was constructed; (iv) principle of reinstatement, where it is satisfactorily established that

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reinstatement in some other place is bona fide intended, there being no general market for the
property for the purpose for which it is devoted (the purpose being a public purpose) and would
have continued to be devoted, but for compulsory acquisition. Here compensation will be assessed
on the basis of reasonable cost of reinstatement; (v) when the property has outgrown its utility and
it is reasonably incapable of economic use, it may be valued as land plus the break-up value of the
structure. But the fact that the acquirer does not intend to use the property for which it is used at the
time of acquisition and desires to demolish it or use it for other purpose is irrelevant; and (vi) the
property to be acquired has ordinarily to be valued as a unit. Normally, an aggregate of the value of
different components will not be the value of the unit.......

These are, however, not the only methods. The method of determining the value of property by the
application of an appropriate multiplier to the net annual income or profit is a satisfactory method
of valuation of lands with buildings, only if the land is fully developed, i.e., it has been put to full use
legally permissible and economically justifiable and the income out of the property is the normal
commercial and not a controlled return, or a return depreciated on account of special
circumstances. If the property is not fully developed, or the return is not commercial, the method
may yield a misleading result."

33. Mr. Pranab Pal, the learned counsel for the transferees, contended that the entire property was
tenanted. He relied on the decree dated 25th July, 1969, passed by the learned judge, 4th Bench,
City Civil Court, Calcutta, in Title Suit No, 524 of 1966 (Indian Cable Co. Ltd. v. Jayanta Nath
Ghosh) granting a permanent injunction restraining the defendant, his agents, servants and/or
factors from making any construction or digging earth or making holes whatsoever or raising any
wall in the plaintiff's tenancy at 8, Lower Circular Road (Acharya Jagadish Chandra Bose Road),
Calcutta-17, or any part thereof and/or doing anything in any way changing the nature or character
of the said tenancy and/or encroaching upon its tenancy rights and not to enter in or upon the open
space (vacant land) including the lawn to the north of the main building and out-houses up to the
northern boundary of the said premises which was noted and considered by the Tribunal. Mr.
Pranab Pal, therefore, submitted that in view of the said injunction no construction was possible on
any part of the vacant land in the said property. In any event, under the building regulations under
Calcutta Municipal Act, 1951, not less than 50% of the land had to be kept vacant in the area where
the said property was situated. The question of the land lying vacant and the feasibility of
construction thereon were neither mooted by the revenue before the competent authority nor did
the competent authority consider the same nor did it proceed on that basis. This was a pure question
of fact and could not be raised by the revenue in this appeal. Mr. Pranab Pal submitted that the
Tribunal in arriving at its conclusions considered all the facts and materials placed before it. It
considered not only the instance of sale in 1969 but also of sales in 1964 and 1974 as well as the
wealth-tax assessments and computation of capital gains tax in the income-tax assessment of the
transferor.

34. Mr. Pranab Pal drew our attention to the undisputed facts in this case already noted by us
earlier, and cited the following decisions in support of the order of the Tribunal.

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(a) CED v. Radha Devi Jalan [1968] 67 ITR 761 (Cal) relied on by the Tribunal. Here, a certain
property was being valued for assessment of estate duty which was in the occupation of an old
tenant paying a monthly rent of Rs. 1,600. The Appellate Tribunal held that the fair method of
estimating the valuation of the property was the rental basis. The revenue came up in a reference
before this court and contended that the Tribunal should have determined the real value of the
property on the basis of what the property would fetch if sold in the open market at the relevant
time. This court, in rejecting such contention and upholding the order of the Tribunal, observed at
pages 765 and 766 as under :

"The contractual rent of Rs. 1,600 per month was payable by the tenant in respect of a building,
which at the material time was governed by the West Bengal Premises Tenancy Act, 1956. Under the
operation of the various rent restriction Acts, which have been operating in the State for now well
over quarter of a century, landlords have lost the right of letting out their houses at any rent they
choose and of evicting tenants on such grounds as appeal to them. Contractual relationship between
landlords and tenants have given way to statutory relationship imported by successive rent
restriction Acts and the position now is that houses may be let out only at 'fair rents' and at no more.
If premises can no longer be let out at such rent as the landlord may expect or aspire, then, however
costly the premises may otherwise be, their value have to be determined on the basis of the
limitations imposed by the statute."

It was further observed at pp. 769-770 as follows:

"When a person buys a property, he does so for two purposes, (a) to obtain an annual income, (b) to
obtain security for his capital. If the property was merely a vacant land, it might be developed and
made to yield such income, as it was capable of, in a metropolitan area where some sort of scarcity
for accommodation prevails. The property was, however, burdened with a tenanted house and the
income therefrom was controlled by a statute. This control on income was bound to react on the
value of the property and the application of the land and building method would not have been a
proper method in the instant case."

(b) J. N. Bose v. CWT . Here, it was held by this court in the context of the W.T. Act that there were
different methods of valuation of immovable property and the one suitable for a particular property
would depend upon the particular features thereof.

(c) CED v. Bijay Kumar Khandelwal [1977] 108 ITR 864 (Gauhati). In this case, the Assam High
Court confirmed the order of the Tribunal in determining the market value of a property under
Section 36 of the E.D. Act, 1953, that the gross rental value was the proper method to be applied to
ascertain the market value of the property concerned.

(d) Smt. Bani Roy Chowdhury v. Competent Authority . Here, the validity of proceedings for
acquisition of the property of the petitioner initiated under Section 269D(1) of the I.T. Act, 1961, by
the competent authority was challenged by the petitioner in a writ petition under Article 226 of the
Constitution.

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Commissioner Of Income-Tax vs Anup Kumar Kapoor And Ors. on 28 July, 1978

The following observations made by this court were relied on (p. 121) :

"As stated above the scheme of the provisions of this new Chapter is to counteract the evasion of tax
in certain cases. It is to be appreciated that the competent authority has to take note of the said fact
and proceed on that basis. It is not that in any and in every case wherever the apparent
consideration is less than the real market value that it must form its reason to believe in the manner
as provided in Clauses (a) and (b) of Subsection (1) of Section 269C of the Act. It has to take a
rational view of the matter. In the process of the formation of its belief it would be one of the most
vital factors for it to consider whether or not the transaction was so entered into with the object of
evading taxes and it is incumbent upon it to record its reasons for arriving at the belief. Merely
quoting the section would not do. The relevant factors which led him to believe must be recorded."

35. We are unable to accept the contentions of Mr. B. L Pal that the said property was not fully
developed or was not fully tenanted. It is undisputed that the total land area of the property is 1
bigha 5 cottahs 3 chittaks and 4 sq. ft. According to the Valuation Officer of the revenue the land
which was lying vacant was 115 ft. x 45 ft. corresponding approximately to 7 cottahs 3 chittaks.
There is no evidence to show whether this vacant land was one contiguous plot or divided into
several plots unconnected with each other. On a simple arithmetical calculation the developed or
built up area of the said property covered by the main building and the out-houses was
approximately 18 cottahs. Under the prevailing building regulations of the Corporation of Calcutta
in the area where the said property is situated 50% of the total land has to be left open in
constructing a building. Thus, at least, over 12 cottahs of land had to be left open but the land left
open being approximately 7 cottahs 3 chittaks was less than the requirement under the said building
regulations. In our view, there is, therefore, no scope for development of the said property either
immediate or in the near future, so long as the existing building and outhouses remained and so
long as the tenants did not vacate, who are, no doubt, protected under the rent control legislations.

36. In Rustom Cavasjee Cooper [1970] 40 Comp Cas 325 (SC), the Supreme Court was dealing with
the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969, and considered what
would be the fair compensation where the property was compulsorily acquired and not what would
be the fair market value when the same was voluntarily transferred by the owner for consideration,
The Supreme Court observed that the application of the yield or rental method in valuing a vacant
business premises in urban areas on the basis of the estimated rental income would lead to
misleading results and would not ensure adequate compensation. In that context, the Supreme
Court, at page 387 of the report, observed as follows:

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prevailing in 1940 and on the footing that investment in buildings yields 8J per cent. return
furnishes a wholly misleading result which cannot be called compensation. Value of immovable
property has spiralled during the last few years and the rental which is mostly controlled does not
bear any reasonable relation to the economic return from property. If the building is partly occupied
by the bank itself and partly by a tenant, the ascertained value will be twelve times the annual rental
received, and the rent for which the remaining part occupied by the bank may reasonably be
expected to be let out. By the Act the corresponding new banks take over vacant possession of the
lands and buildings belonging to the named banks. There is in the present conditions considerable
value attached to vacant business premises in urban areas. True compensation for vacant premises
can be ascertained by finding out the market value of comparable premises at or about the time of
the vesting of the undertaking and not by capitalising the rental--actual or estimated. Vacant
premises have a considerably larger value than business premises which are occupied by tenants.
The Act instead of taking into account the value of the premises as vacant premises adopted a
method which cannot be regarded as relevant. Prima facie, this would not give any reliable basis for
determining the compensation for the land and buildings."

37. The discussions in Parks on Valuations cited by Mr. B.L. Pal does not in any way advance the
case of the revenue. According to Parks if a property is fully developed and tenanted and is fetching
a rent which is likely to be maintained for years to come, its valuation should be made by applying
the "rental" method. The "land and building" method might, however, be applied even in such a case
only to check the valuation arrived at by the "rental" method but it is not the opinion of Parks that
the result arrived at by "laud and building" method in such a case is to be accepted in preference to
that arrived at by the "yield or rental" method. On the contrary, the opinion of Parks is that in
valuing a property the depreciated value of the building cannot even be deducted from its valuation
arrived at by the rental method.

38. The said property is fully developed and let out to tenants in its entirety. There is no dispute as
to the quantum of rent realised which has been duly ascertained and such rent is likely to remain
unaltered for years to come. The method indicated in Parks on Valuations at page 37, therefore,
clearly applies to the facts of this case and, in our opinion, the Tribunal rightly applied the "yield or
rental method" for valuation in the present case.

39. We find that the Tribunal had correctly applied in this case the principles laid down in Radha
Devi Jalan [1968] 67 ITR 761 (Cal) with which we are in entire agreement.

40. Tenancies in Calcutta are statutorily controlled by the rent control legislations and its impact on
the valuation of tenanted properties cannot be ignored. In our view, it would be unreasonable if not
absurd to value such property on the basis of a notional market value in disregard of such control.
Whether the transferees purchased the said property with an idea of construction of a multistoreyed
building therein in future or for some other purpose was wholly immaterial in determining the
market value of the said property on the date of its purchase by the transferees.

41. The Valuation Officer of the revenue in valuing the said property followed the "yield or rental"
method and, having arrived at a figure, he added to it the value of an imaginary future reversionary

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value of the land. We have not been able to appreciate and understand either the principle or logic
behind this "reversionary" method of valuation applied by the said Valuation Officer. Mr. B.L. Pal
was also unable to place before us any authority in support of such a method. The passage cited by
Mr. B. L. Pal from page 38 of Parks on Valuations shows that when a property is valued on rental
basis the result is the value of the land and building taken together which cannot afterwards be
apportioned. The Valuation Officer under the method adopted by him, has taken the value of the
land twice, once in arriving at the figure by the "yield or rental" method and again in applying the
"reversionary" method. This in our view was wholly wrong.

42. The competent authority in coming to his conclusions did not rely on any relevant evidence
except the report of the said Valuation Officer. No comparable units of other sales were brought on
record by him. The vacant land at No. 47, Shakespeare Sarani, sold on 29th August, 1964, at the rate
of Rs. 27,468 per cottah or the instances of sales of. two other vacant plots of land in 1974, one near
the crossing of Royd Street and Acharyya Jagadish Bose Road at more than Rs. 24,000 per cottah,
and the other at a distance of about 400 yards to the south of the said property at Rs. 55,000 per
cottah; could hardly be said to be comparable units with the said property having an old building
and out-houses wholly tenanted and subject to the rent control legislation, while all the said alleged
comparable units were vacant lands with prospects of immediate development.

43. For all the above reasons, it cannot be said that the order of the Tribunal was perverse being
inconsistent with the evidence on record or contradictory to it or was arrived at without considering
or ignoring any material fact.

44. We had occasion to deal with a similar case in Income-tax Appeal No. 5 of 1976 instituted CIT v.
Ashima Sinha (since ), where similar arguments were advanced by the parties and the valuation
report of the Valuation Officer was also made on similar lines. We have taken the same view in that
appeal as in this appeal and the said appeal was dismissed by us on the same reasonings and
grounds as in this case.

45. The appeal, therefore, fails and is dismissed with costs. Interim orders passed herein will
continue for a period of eight weeks from date.

Dipak Kumar Sen, J.

46. I agree.

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637

Pages 637 - 640

PART - XII

LIST OF REFERENCE BOOKS

638

This page is kept vacant intentionally.

639

PART - XII

LIST OF REFERENCE BOOKS

S.no. Name of the book Author

1 Elements of valuation of immovable Mr. R.K. Gandhi

properties 108, Shyam Kamal - ‘A’ bldg,
Tejpal road, Opp. Rly. station,
Vile parle (East), Mumbai - 400 057.
Mob : 98214 26811.
Mail : kcgandhico@gmail.com

2. Real estate valuation in practice Mr. Kirit P. Budhbhatti

Shri Shiv Sadan,
318, Nanda Patkar Road,
Vile - Parle (East), Mumbai - 400 057.
Ph : 022 - 26104415 / 26128958.
Mail: kirit_budhbhatti@budhbhatti.com

3. Valuation principles and Procedures Mr. Ashok Nain

Dew Drops Education Pvt. Ltd.
27 - B, Dr. Rajendra road,
Kolkata - 700 020.
Ph : (91) (33) 2235 0922, 2235 3864.
Mail : ashnain2009@gmail.com

4. • Mastering real estate valuation Mr. Syamales Datta

• Valuation of Real property 55 / B, Ramsita Ghat street,
• Advanced valuation for secured Bhadrakali, Hooghly,
lending by banks and financial West Bengal - 712 232.
institutions Mail : syamalesdatta@yahoo.in

5. Property valuation by income Mr. Mahendra Kakule

approach Caculo House,
Near Aquem Post Office,
Margao, Goa - 403 601.
Mob : 98224 85550.
Mail : mcaculo@gmail.com
640

6. Undertsnading capital gain tax made Mr. Sudhir H. Gondane

simple and easy for valuers Plot no. 3, Anand Nagar, Atrey layout,
Near Datta Meghe Polytechnic,
Nagpur - 440 022.
Mob : 99704 29849.
Mail : sudhirgondane52@gmail.com

7. Writing a report - Real estate valuation Mr. P.T. Hardikar

759 / 16, Deccan Gymkhana Colony,
Basics in Real estate valuation Pune - 411 004.
Mob : 70280 51455.
Mail : pthardikar@yahoo.com

8. • Valuation of immovable property Mr. N.K. Rajkumar

No. 6A, 2nd cross, Ashok nagar,
• Valuation for Taxation Tumkur - 572 102. Karnataka.
Mob : 98440 66471. Mail :
nkrajkumar.valuer.tmk@gmail.com

9. Principles & Practice of Valuation Mr. D.N. Banerjee

Mr. John A. Parks Eastern Law House Private Ltd.
54, Ganesh Chunder Avenue,
Kolkatta - 700 013.
Ph : (033) 2215 - 1989 / 2301.
Mail : elh.cal@gmail.com
Web : www.elh.co.in

10. • Theory and Practice of Valuation Mr. Roshan H. Namavati

• Valuation in Court Jain Book Agency,
• Professional Practice C - 9, Connaught, New Delhi - 110 001.
(Estimating and Valuation) Ph : 3320806, 3321663.

11. Practical valuation - Volume 1 to 25 Mr. B. Kanaga sabapathy

No. 1, Prestige flats; 6, Reynolds road,
Cantonment, Tiruchirappalli - 620 001.
Mob : 97918 74829.
Mail : bkvaluer@gmail.com
Web : www.bkanagasabapathy.com

* * *
641

MODEL QUESTION PAPER FOR VALUATION EXAMINATION IN THE

ASSET CLASS: LAND AND BUILDING
(BASED ON REVISED SYLLABUS WITH EFFECT FROM 1st JUNE 2020)

1. When proportionate change in price is equal to proportionate change in quantity

demanded of any commodity, then such demand is called:
a. unitary elastic demand
b. relatively elastic demand
c. relatively inelastic demand
d. cross elasticity

Ans.(a)

2. A market which has only one seller selling a homogeneous product to many buyers is
known as:
a. oligopoly
b. monopoly
c. perfect competition
d. monopolistic competition

Ans.(b)

3. Theories of factor of production consider _____ to be the reward for the entrepreneur.
a. rent
b. interest
c. profit
d. capital

Ans.(c)

4. The frequency at which one unit of currency is used to purchase domestically produced
goods and services within a given time period is known as:
a. velocity of money
b. speed of money
c. momentum of money
d. count of circulation of money

Ans. (a)

5. If a person has an income of Rs.30,000 and his consumption is Rs.10,000, then his
propensity to save is:
a. 1.33
b. 0.33
c. 0.67
d. 1.50

Ans.(c)
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6. Investment does not depend significantly upon the __________.

a. demand
b. level of income
c. progress of technology
d. expectation of the entrepreneur

Ans. (b)

7. Which of the following is not a characteristic of the informal economy?

a. Easy entry
b. No taxes
c. Predominantly micro
d. Regulated businesses

Ans. (d)

8. In double entry system, accounts are primarily classified into ___________.

a. receiver account & giver account
b. income account & expenses account
c. real account & nominal account
d. personal account & impersonal account

Ans. (d)

9. For a real estate construction company, which of the following is not part of Profit and
Loss statement?
a. Revenue from apartment sales
b. Interest paid to lenders
c. Cash deposited in bank
d. Depreciation expense

Ans.(c)

10. Difference between selling price and variable cost per unit can be classified as______ per
unit.
a. contribution margin
b. interest margin
c. rent margin
d. profit margin

Ans. (a)

11. Which chapter of the Constitution of India is non-justiciable in a court of law?

a. Preamble
b. Fundamental rights
c. Fundamental duties
d. Directive Principles of State Policy

Ans. (d)
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12. A contract to perform the promise, or discharge the liability, of a third person in case of
default is known as:
a. Contract of indemnity
b. Contract of guarantee
c. Contingent contract
d. Quasi contract
Ans.(b)

13. In case of a ___________, the duty is one imposed by the law and is owed to the
community at large.
a. contingent contract
b. cecile agreement
c. government tender
d. tort
Ans.(d)

14. A Tort is right:

a. in rem
b. in personam
c. in recission
d. in novation
Ans. (a)

15. With reference to the Arbitration and Conciliation Act, 1996, if the parties fail to
determine number of arbitrators, which statement holds true?
a. The arbitral tribunal shall consist of sole arbitrator only.
b. The civil court shall take the cognizance of the matter.
c. The arbitral tribunal shall consist of a judge not less than the rank of a High Court
Judge.
d. The arbitral tribunal shall consist of a judge not less than the rank of a District Judge.
Ans.(a)

16. With reference to auction sale, select the correct statement:

a. Auctioneer can accept payment by means of a bill of exchange
b. Auctioneer cannot sell goods on credit or accept payment by means of bill of
exchange
c. Auctioneer shall mandatorily accept payment of purchase price by means of cheque
d. The auctioneer can sell goods on credit as he deems fit

Ans. (b)

17. Mr. X desires a Court give judgment that he is entitled to certain land in the possession of
Mr. Y, by reason of facts which he asserts, and which Mr. Y denies, to be true. Select the
correct statement.
a. Mr. Y must prove the existence of the facts
b. There is no burden on either to prove the facts
c. Mr. X must prove the existence of the facts
d. The Registrar of the property concerned shall prove the possession
Ans.(c)
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18. As per section 36 of the Insolvency and Bankruptcy Code, 2016, the liquidator shall hold
the liquidation estate:
a. as an agent of debtor
b. as an agent of committee of creditors
c. as a fiduciary for the benefit of all the creditors
d. as a fiduciary for the benefit of all the stakeholders

Ans.(c)

19. Section 231 (2) of the Companies Act, 2013 empowers a tribunal to __________, if it is
satisfied that the compromise sanctioned under section 230 cannot be implemented
satisfactorily, and the company is unable to pay its debts as per the scheme.
a. wind up the company
b. restructure the debt
c. call for rearrangement
d. replace the management

Ans.(a)

20. Under SARFAESI Act 2002, a lender should approach which of the following agency, to
file an application for enforcement of its security interest?
a. Debt recovery tribunal
b. High court
c. National company law tribunal
d. District Court

Ans.(a)

21. When value of variables are associated with weights, then the mean obtained is said to be
_______.
a. weighted arithmetic mean
b. harmonic mean
c. standard mean
d. geometric mean
Ans.(a)
22. The patterns of change within a year that tend to repeat from previous period is called
________.
a. irregular variation
b. seasonal variation
c. secular trend
d. cyclical fluctuation
Ans.(b)

23. Technology that permits safe, efficient, and inexpensive clean-up of contaminants in
property tends to minimise _________ in asset value.
a. gain
b. loss
c. fluctuations
d. uncertainty
Ans.(b)
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24. Which planning provision is required around the battery limit for an industry having
odour problem?
a. No development zone
b. Green belt
c. Special permission zone
d. Industrial regulation zone

Ans.(b)

25. In which of the following Act, provisions for health and safety in industries are covered?
a. The Environment Protection Act
b. The Forest Act
c. The Factories Act
d. The Industrial Dispute Act

Ans.(c)

26. Which of the following is not a conduct most people associate with ethical behaviour?
a. Bribing
b. Negotiating
c. Advocating
d. Lobbying

Ans. (a)
27. As an independent valuer, the valuer should not charge________fee.
a. professional
b. success
c. mandate
d. legal

Ans. (b)

28. Professional independence is a subset of which one of the following pairs of

fundamental principles?
a. Integrity and due diligence
b. Integrity and objectivity
c. Due diligence and professional competence
d. Objectivity and due diligence

Ans. (b)

29. Which of the following would not be included in Valuer`s Engagement Letter?
a. Timeline of the engagement
b. Management`s responsibilities with respect to financial records and accuracy of
information
c. Terms of payment
d. Management representation

Ans. (d)
646

30. What is the date of assessing value for the assets under the Land Acquisition Act,2013?
a. Date of proposal
b. Date of public hearing
c. Date of impact assessment
d. Date of notification

Ans. (d)

31. Which of the following factor is not affecting valuation of property as per the general
building rules and regulations?
a. Size of rooms
b. Population in the area
c. Height of building
d. Land use and Zoning

Ans. (b)

32. Which of the following is the main reason for enactment of Rent Control Act in India?
a. Avoid exploitation of Tenants
b. To manage supply and demand
c. Easy availability of Dwellings
d. For betterment of economy

Ans. (a)

33. Which of the following is true with reference to Easement?

a. It is a possessionary right
b. It is a non possessionary right
c. It is related to movable and immovable properties
d. It is a licence not a right

Ans. (b)

34. Which of the following is not a means of transfer, under the Transfer of Property
Act,1882?
a. Sale of Plot
b. Gift of land
c. Mortgage of plot
d. Hypothecation of Land

Ans. (d)

35. Which of the following is not the basic type of lease, under leasing of immovable
properties?
a. Building lease
b. Standard Lease
c. Sub Lease
d. Occupational Lease

Ans. (b)
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36. The Hindu Succession Act, 1956 does not apply to a ______.
a. follower of the Arya Samaj
b. Buddhist by religion
c. child both of whose parents are Jains by religion
d. person who has converted to Christianity

Ans.(d)

37. In the absence of a Will, a person’s heirs can access control of the deceased person’s
assets after obtaining a ___________.
a. Inheritance claim
b. Succession certificate
c. Birth records
d. Family records

Ans.(b)

38. Which of the following is true with reference to valuation of bridges, roads and other
infrastructure projects?
a. These have value-in-exchange
b. These have value to the owner
c. These have value-in-use
d. These have value to the user

Ans. (c)

39. Which of the following factors is not physical factor but affects the valuation of a subject
property?
a. Damages to the building
b. Gross Domestic Product
c. Property location
d. Neighbourhood properties

Ans.(b)

40. While valuation of real-estate properties, dual rates are used generally
for______properties.
a. Freehold
b. Leasehold
c. Tenants occupied
d. Property with a claim dispute

Ans.(b)

41. Which of the following is not conforming to the definition of annuity?

a. Interest on fixed deposit
b. Yield on G- sec
c. Return on one year term fixed deposit
d. Annual return on investment
Ans. (c)
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42. To what amount will Rs. 1 invested at 6 per cent compound interest accumulate in 4
years?
a. Rs. 0.982
b. Rs. 1.263
c. Rs.1.350
d. Rs.1.500

Ans.(b)

43. A fund formed by setting aside an annual recurring amount for a given period of time to
recoup capital invested in a landed property is called ____.
a. sinking fund
b. demolition fund
c. replacement fund
d. maintenance fund

Ans.(a)

44. A proposed development of four lane highway along a city suburban area _____.
a. decreases supply of land for development in area along the road
b. increases demand of land in the area along the road
c. decreases demand of land in the area along the road
d. increase cost of construction in the area

Ans.(b)

45. Which of the following would have effect on development potential and values of
properties?
a. Floor space index
b. Ownership pattern
c. size and height of rooms
d. provision of utility services in a building

Ans.(a)

46. Demand for real estate in a specific location is not influenced by which of the following?
a. Price of housing
b. Demand for automobiles
c. Cost of borrowing
d. Consumer’s preference

Ans.(b)

47. Which of the following is not an objective for a green building code?
a. Water conservation
b. Energy efficiency
c. Cost of construction
d. Dependence on virgin material

Ans. (c)
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48. Which of the following does not represent correct meaning of properties, considered for
valuation of properties, under income approach?
a. Unoccupied property
b. Owner occupied property
c. Building under construction
d. Rent fetching property

Ans. (c)

49. Which of the following is not true with reference to wealth, in valuation of property?
a. Wealth is material thing
b. Wealth consists of useful things owned by person
c. Property is benefit of wealth
d. All goods which satisfy human wants are wealth

Ans. (d)

50. In case the unexpired period of lease is too long then reversionary value would be___.
a. negative net present value
b. zero
c. negligible
d. less than zero

Ans.(c)

51. Which of the following is not correct about ‘surrender of lease’?

a. Premature termination by lessee
b. Unilaterally terminated by a lessee
c. Terminated with the consent of the lessor
d. It can happen post expiry of the lease

Ans.(d)

52. An investor purchases a property for Rs. 1 crore and then spends another Rs.20 lakh to
redevelop the property in order to earn a higher rent, bringing the total cost to Rs.1.2
crore. The property is expected to produce a net operating income of Rs.10 lakh. Its
unlevered yield is ____.
a. 6.25%
b. 8.33%
c. 10.0%
d. 12.0%

Ans. (b)

53. A project requires an investment of Rs.10 lakh and has an NPV of Rs.16 lakh. What is its
profitability index?
a. 1.0
b. 1.6
c. 0.6
d. 3.2

Ans.(b)
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54. Which of the following would be a least suitable approach to value a specialized
property?
a. cost of replacement,
b. income expected from the property
c. profit-producing qualities of the property
d. sales-comparison

Ans.(d)

55. In order to carry out valuation of immovable properties, under market approach, the
fundamental requirement is that the property should be ______________________
a. Investible
b. Transferable
c. Marketable
d. Non-investible

Ans.(c)

56. Use of sales comparison approach to valuation requires__________.

a. information from sufficient sales of similar properties
b. sufficient income from the property
c. data on cost of acquisition
d. information regarding title of property

Ans. (a)

57. In a adjustment grid model exercise assignment of weightages to factors is best done on
the basis of:
a. Relative importance of factors to the local people
b. Relative importance to the valuer
c. Valuer’s intuition and knowledge
d. Valuer’s judgement of value

Ans.(a)

58. Size, shape, plot area, frontage and depth, vista, orientation, soil type, topography etc. are
characteristics of land, are ______ factors that affect the value of a subject land.
a. legal
b. cultural
c. physical
d. economic

Ans (c)

59. Which method of valuation is best used to estimate fair market value of land of large size
on the basis of sale of smaller plots?
a. Adjustment grid method
b. Hypothetical plotting method
c. Hedonic sales
d. Belting method
Ans.(b)
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60. In its simplest form, the residual method yields the maximum purchase of a site as
______
a. Expected price of the developed property –(expected development costs +
allowance to cover risk and profit)
b. Expected income from property – development cost
c. Expected cost of development + profits
d. expected development costs + allowance to cover risk and profit
Ans. (a)

61. A real estate JV agreement does not include which of the following factors:
a. Distribution of profits
b. Capital contribution
c. Management and control
d. Insurance

Ans. (d)

62. Which of the following valuation approach generally considered, which gives true
investment made by the person with reference to immovable properties?
a. Income
b. Cost
c. Market
d. Development

Ans.(a)

63. In valuation of immovable properties, bad workmanship in construction of building

affects which of the following life of building?
a. Economic life
b. Life to due to obsolescence
c. Physical life
d. Life due to legal constraints

Ans.(c)

64. Asset which has become outdated mainly due to the planning and designing being
unsuitable for present day requirement of the user is an example of:
a. technological obsolescence
b. economic obsolescence
c. functional obsolescence
d. excess depreciation due to wear and tear

Ans. (c)

65. In valuation of buildings, depreciation is reduction in ______________ with passage of

time.
a. Price
b. Value
c. Worth
d. Cost

Ans.(b)
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66. Which of the following is true with reference to reproduction cost, under cost approach
of valuation of immovable properties?
a. It is not derived using cost inflation index
b. It is derived with same utility
c. It is derived with different material of construction
d. It is derived with the same material of construction

Ans.(d)

67. In which of following methods, valuer adjusts prices paid for comparable assets with
subject assets to estimate value?
a. Depreciated replacement cost method
b. Discounted cash flow
c. Rule of thumb method
d. Sales comparison method
Ans. (d)

68. Which of the following approach-property combination is not a practical valuation

possibility?
a. Income capitalization approach – house on lease
b. Sales comparison approach - Owner occupied
c. Cost approach –Public school
d. Income capitalization approach – owner occupied bungalow
Ans.(d)
69. Which of the following statements is true in relation to obligation of insured on
notification of a claim?
a. To defend the insurer
b. To indemnify the insurer
c. To investigate and settle potentially covered claim
d. Ensure liability for the damage is covered by the policy

Ans. (d)
70. Section 247(2) of the Companies Act 2013, any valuation undertaken should not be
carried out using a method that is _______.
a. an internationally accepted valuation methodology
b. adopted by any valuation professional organisation
c. specified by Reserve Bank of India, Securities and Exchange Board of India or any
other statutory regulatory body
d. customized to client needs
Ans. (d)
71. Which of the following statement is not true with reference to fair value measurement
under Ind AS 113?
a. Fair value represents an exit price and is not an entry price
b. Fair value is market based measurement and not an entity specific measurement
c. Estimation of fair value based on Highest and best use premise
d. Fair value measurement is adjusted for transaction costs
Ans. (d)
653

72. Valuer may generally be invited under following capacity in Court:

a. to cross examine the valuer of the other side
b. to take the examination in chief of valuer of the other side
c. to question the advocate of the other side
d. to appear as an expert witness in court

Ans. (d)

73. The Supreme Court observed that this value is “unaffected by the special needs of a
particular purchaser” in _________ case.
a. R.C. Cooper Vs. Union of India (1970)
b. CWT Vs. P.N. Sikand (1977)
c. Wenger & Co. Vs. DVO (1978)
d. Jawajee Nagnathan Vs. Revenue Divisional Officer (1994)

Ans. (a)

74. In which case did the Supreme Court hold that the factor can be discounted by making
deduction by way of allowances at an appropriate rate ranging approximately between
20% to 50%, while deriving land rate of large plot of land from sale instances of small
plot of land.
a. Chimanlal Hargovindas Vs. Special Land Acquisition Officer (1988)
b. CED Vs. Radhadevi Jalan (1968)
c. CIT Vs. Ashima Sinha (1979)
d. CIT Vs. Anupkumar Kapoor & others (1980)

Ans.(a)

75. Which of the following is not an essential feature for contract of sale?
a. Presence of two parties
b. Sale of goods
c. Consideration in terms of price
d. Unconditional contract

Ans. (d)

76. Which one of following peril is an add-on cover in a standard fire insurance policy?
a. Earthquake
b. Aircraft damage
c. Riots
d. Storm

Ans. (a)
77. When amount of insurance is less than the value of machinery damaged a loss payable is
as per ______.
a. sum insured
b. reinstatement value
c. condition of average
d. indemnity value

Ans. (c)
654

78. Which of the following tasks are not covered within the scope of Valuers’ functions?
a. To advise individual clients and corporate firms on effective strategies for buying
properties
b. To verify revenue
c. To conduct marketing work to make the property attractive to potential purchasers
d. To appear as an expert witness in court

Ans. (c)
79. An asset is officially appraised and priced on _____.
a. verification date
b. valuation date
c. report date
d. effective date

Ans. (b)

80. Which one of the following is a requirement of a valuation report?

a. Preparing report without inspection
b. To give report as per the value required by the client
c. To give report which can withstand the test of cross examination in a court
d. To prepare report without consideration of valuation maxims

Ans.(c)

Attempt Questions 81 to 90 based upon the following case studies.

I. An owner purchased a piece of land measuring about 350 m² and constructed a bungalow
of ground and one upper floor for his personal use some 30 years back. The bungalow is
of first-class construction having a future economic life of 40 years and has got the total
built-up area of 300 m². The owner now desires to sale the same and has received an
offer of Rs.55lakhs with vacant possession or in the alternative he has been offered a
gross yearly rent ofRs.2,00,000 for the bungalow and the plot together. There is good
demand for such property in the locality. Other information is as follows:

Value of land in the locality for similar plots = Rs.8000 per sq.m.
Present replacement cost of such a bungalow = Rs.15,000 per sq.m.
Total outgoings = 15 per cent of the gross rent
Annual sinking fund for redemption of Re. 1 at
5 per cent in 70 years = 0.0017
Amount of Re. 1 per annum in 30 years at 5 per cent= Rs.66.439
Year’s purchase at 3% in perpetuity = 33.33
(4x2 = 8 marks)
81. What is the amount of depreciation of the bungalow?
a. 42.86 %
b. 11.29 %
c. 15.30 %
d. Zero

Ans. (b)
655

82. What will be the depreciated replacement cost of the bungalow?

a. Rs.39,91,950
b. Rs.38,11,500
c. Rs.35,12,250
d. Rs.45,00,000

Ans. (a)

83. What will be the insurable value for reinternment policy?

a. Rs.39,91,950
b. Rs.45,00,000
c. Rs.65,00,000
d. Rs.38,11,500

Ans. (b)

84. What will be the market value of the property by income approach?
a. Rs.66,66,000
b. Rs.56,66,000
c. Rs.55,00,000
d. Rs.50,00,000

Ans (b)

II. A business man purchased a plot of 1000 Sq.mt. in a posh locality of a city in the year
1987 for a price of Rs. 30,00,000. In the year 1988, he constructed a residential bungalow
having 300 Sq.mt. built up floor area at ground level and 100 Sq.mt. built up area at first
floor level at the cost of Rs. 14,00,000. Prevalent replacement cost of similar bungalow
as on today is Rs. 30,000 per Sq.mt. Prevalent land price in the locality at present is Rs.
60,000 per Sq.mt. Age of building is 30 years and the total life of the building is 60
years.
(6x2 = 12 marks)
85. What will be the depreciation amount of the bungalow by adopting straight line method
of depreciation and considering scrap value at 10 %?
a. Rs.60,00,000
b. Rs.54,00,000
c. Rs.45,00,000
d. Rs.12,00,000

Ans . (b)

86. What will be the depreciation amount of the bungalow by adopting constant percentage
method of depreciation?
a. Rs.54,00,000
b. Rs.47,37,600
c. Rs.60,00,000
d. Rs.54,46,000

Ans. (b)
656

87. What will be the market value of the land at present?

a. Rs.240,00,000
b. Rs.600,00,000
c. Rs.480,00,000
d. Rs.410,00,000

Ans. (b)
88. What will be the total market value of the bungalow property for the bank loan purpose?
a. Rs.600,00,000
b. Rs.666,00,000
c. Rs.612,00,000
d. Rs.566,10,000

Ans (b)

89. What is the balance economic life of the building?

a. 60 years
b. 30 years
c. 15 years
d. 45 years

Ans. (b)

90. Which of the following will not be considered for the estimation of present market value
of above property?
a. Deprecation
b. Current Replacement cost of the building
c. Economic obsolescence
d. Current land rate

Ans. (c)
*****
01.09.2020

B. KANAGA SABAPATHY
Price list of books authored by him (soft copy)

01. Practical Valuation Vol. 01 - General topics - Rs. 450/-

02. Practical Valuation Vol. 02 - General topics - Rs. 450/-
03. Practical Valuation Vol. 03 - General topics - Rs. 450/-
04. Practical Valuation Vol. 04 - General topics - Rs. 450/-
05. Practical Valuation Vol. 05 - General topics - Rs. 450/-
06. Practical Valuation Vol. 06 - General topics - Rs. 450/-
07. Practical Valuation Vol. 07 - General topics - Rs. 450/-
08. Practical Valuation Vol. 08 - General topics - Rs. 450/-
09. Practical Valuation Vol. 09 (Valuation of Apartments) - Rs. 450/-
10. Practical Valuation Vol. 10 (Leasehold properties) - Rs. 450/-
11. Practical Valuation Vol. 11 (Court judgements) - Rs. 650/-
12. Practical Valuation Vol. 12 (Valuation for Banks - Part I) - Rs. 450/-
- Practical Valuation Vol. 13 (Fair rent in Tamilnadu) (Obsolete) - Rs. ---
13. Practical Valuation Vol. 14 (Valuation for Banks - Part II) - Rs. 450/-
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15. Practical Valuation Vol. 16 (1000 questions & opinions) - Rs. 900/-
- Practical Valuation Vol. 17 (Valuation formats) (Obsolete) - Rs. ---
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20. Practical Valuation Vol. 23 (Legal status of a valuer-15 judgements)- Rs. 200/-
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