Property Evaluation Methods for Real Estate

Why Market Evaluation of Property is more than Bank Evaluation ??

Bank  Property Evaluation is less than Market Property Evaluation  while Lending Home Loan.

Let's understand what all factor taken into consideration  in its Property Evaluation Report:-

Market Evaluation of Property

1) Property Evaluation depends on Circle rate of the locality where Property is located .

a) Price variation  5-8% if  property is located near to Metro or any other facility of transport.

b) Price Variation  by 5-10 %  if  property is located near IT SEZ(Special Economic Zone).

2)Age of the Construction of the Property and average Price in which apartment located in.

Note :--  Kindly make note land price and Independent house Evaluation will always be higher than Apartment in same Area as there is provision to build independent Floors  based on FAR 

3) Average bench marking against Rent of Apartment in same locality and same Reputation Builder  but that will not have significant impact but is taken into consideration for Rental ROI

if Rent in Vicinity is 10 k for 2 BHK and the apartment in evaluation consideration is having 13 k means 30 % above value then average impact on Apartment will vary between 2-5 % as it's buying price already on higher side which compensate the effect.

Let's understand  it now by example  taking into lower side margin of all  factors

Market Price Evaluation 

Avg market Price : 4500 Rs /sqft 

4500 x .05 + 4500 = 4725   ----> point  1 a

4725 x .05 + 4725 = 4961.25  -------> point  1 b 

4961.25 x .02 + 4961.25 = 5060.475  -------> Point 3  

so for 1000 sqft you need to pay  5060.475 x 1000 = Rs 5060475 Lakhs  

Bank Price Evaluation Report 

5060.475 - 5060.475 x 0.2= 4048 sq/ft  standard depreciation taking into consideration below property evaluation factors.

1000 x 4048 = 4048000

Note:- The Bank's Evaluation report is also influenced by Real Estate Market Conditions and the  negotiations made in initial purchase of Property if you buy at high Price it will not influence bank Property Evaluation Report.

a)  Age of  property external structural condition of apartment.

b) Auction expenses in case Home Loan Borrower unable to make repayments.

c) Interior in terms of  how well flat is kept in terms of internal structural finishing  excluding any Furnishing and materialistic Items  likes wood work in house as they are deprecated more and hence adds no or little value in property evaluation .

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You Must Keep 5 things in Mind while Investing in Real Estate follow Link to Know More

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Source Magic Bricks.com