Handbook On Policy, Standards and Procedure For Real Estate Valuation

Handbook on
Policy, Standards and Procedures

for Real Estate Valuation
by Banks and HFIs in India
Final Report
November, 2009
Indian Banks’ Association ( IBA )

National Housing Bank ( NHB )
School of Planning and Architecture, New Delhi ( SPA )
Handbook on Policy, Standards and Procedures for Real Estate Valuation by Banks and HFIs in India, November, 2009. 2
November, 2009
This document has been prepared by Prof.Dr.P.S.N.Rao, Professor and Head, Department of
Housing, School of Planning and Architecture, New Delhi ( SPA ) on behalf of the Indian
Banks Association ( IBA ) and National Housing Bank ( NHB ).
An IBA – NHB – SPA Initiative

CONTENTS
________________________________________________________________________
Preface
Acknowledgements
PART – A - POLICY
1.1 Purpose of Valuation and Appointment of Valuers

1.2 Criteria for Empanelment of Valuers
a) Educational Qualifications and Previous Work Experience
b) Minimum Age Requirement
c) Membership of Professional Bodies
d) Categories of Valuers
e) Registration with Government
f) References
g) Other Conditions
1.3 Duration of Empanelment
1.4 Removal
1.5 Re-Empanelment
1.6 Professional Fees
1.7 Compliance of Standards and Procedures
1.8 Independence and Objectivity
1.9 Obligations of Banks and HFIs
1.10 Continuing Education
1.11 Date of Effect
PART –B – STANDARDS
2.1 Principles, Concepts and Methods
2.2 Standard 1 Market Value Basis of Valuation
a) Introduction
b) Scope
c) Definitions
d) Statement of Standards
e) Disclosure Requirements
f) Departure Provisions
2.3 Standard 2 Bases other than Market Value
a) Introduction
b) Scope
c) Definitions
2.4 Standard 3 Valuation Reporting

a) Introduction
b) Scope
c) Definitions
2.5 Code of Conduct
2.6 Application of Standards to Secured Bank Lending
a) Introduction
b) Scope
c) Definitions
d) Application
e) Reporting Requirements
PART – C – PROCEDURES
3.1 Procedure for Call for Applications for Empanelment

3.2 Procedure for Selection of Valuers
3.3 Procedure for Annual Performance Review
3.4 Procedure for Conflict Resolution
3.5 Procedure for Internal Work Allotment Banks / HFIs
3.6 Procedure for Allotting Work to Empanelled Valuers
Annexures : 1) Format of Valuation Report ( for properties more than Rs. 5 crores )
2) Format of Valuation Report ( for properties upto Rs. 5 crores )
3) Format of Terms of Engagement for Empanelment of Valuers
4) Format of Undertaking to be Submitted by the Valuer for
Empanelment
Appendix : (i) List of Members of IBA Sub Committee on Mortgage and Valuation of
Property
(ii) List of Members of IBA Steering Committee Members

Preface
------------------------------------------------------------------------------------------
Over the last one decade, the Indian economy has witnessed many changes in
the backdrop of globalisation and liberalization, significant amongst them being
investments from outside the country. For the conduct of any economic activity, real
estate or immoveable property is a basic resource. It is a prerequisite for all activities.
Obviously, real estate markets have become extremely active in the recent past.
Housing finance markets have also become alive to the emerging scenario and mortgage
lending, particularly in the housing sector, has been gaining ground. As a consequent
outcome, the subject of immoveable property valuation has been at the centre stage of
attention. Valuation of properties is required for a variety of purposes. In the
particular case of banks in India, valuation of properties is required initially for
ascertaining loan amounts and latter to assess the value of assets periodically. Further
in the case of NPAs and under the provisions of the SARFAESI Act also, valuation is
necessary. Further, the SEBI guidelines also make valuation necessary for the purpose
of Real Estate Mutual Funds ( REMFs). As banks and housing finance institutions (
HFIs ) require the services of immoveable property valuers, they regularly empanel them
on their panels in order to get valuations done. Further, with the Valuers’ Bill on the
anvil, the importance of streamlining the valuation regime in the country cannot be
undermined.
Whilst valuation of immoveable properties is very important to conduct the
business of banks, the status of the profession of valuation still has many inadequacies
as compared to global benchmarks. Therefore, in order to assess the situation of the
valuation profession in India and develop a policy, standards and procedures for
valuation, the Indian Banks’ Association has embarked on this initiative with an
objective of developing a streamlined regime of valuation in the country, with respect to
banks in the first phase, and with respect to related larger issues of valuation at a later
date. The objective of this initiative is to take stock of various emerging issues facing
the banking sector by holding consultations with bankers, HFIs as well as the valuer
community in various parts of the country. Based on the above, it has been agreed that
there is an urgent need to develop a HANDBOOK ON POLICY, STANDARDS AND
PROCEDURES FOR REAL ESTATE VALUATION BY BANKS AND HFIs IN INDIA so that
working can be streamlined on a pan India basis across the large number of banks and
housing finance institutions.
This document has been prepared after due discussion and deliberation by the
IBA Sub Committee on Mortgage & Valuation and the Steering Group as well as with
various sections of valuers who are key stakeholders. In all, seven meetings were held
and all the emerging issues were discussed in detail. Suggestions were received from
various stakeholders and now this final report has taken shape.
This document is now placed for approval and implementation by the Indian
Banks’ Association. It is hoped that all the Banks and HFIs in India would adopt this
document in their respective Boards at an early date and initiate the implementation
steps in order to move towards a streamlined regime of real estate valuation in India.
November, 2009
( S.Sridhar )
Chairman and MD-National Housing Bank,
Chairman-Central Bank of India,
Chairman-IBA Sub-Committee on Mortgage and Valuation of Property

Acknowledgements
------------------------------------------------------------------------------------------
There are a large number of people who have played a role in contributing to the
preparation of this document. We are extremely grateful to all the persons who have
been involved in one way or the other for their valuable contributions.
First and foremost, we express our thanks to Shri S Sridhar, Chairman and
Managing Director, National Housing Bank and Central Bank of India for playing a key
role in initiating this work. Way back in early 2008, he had initiated a series of
discussions on the subject which led to the organization of our thoughts and develop a
structure to formalize various concepts. As Chairman of the Sub-Committee on
Mortgage and Valuation of Property of the Indian Banks’ Association, Shri Sridhar
played the role of a leader and motivator to inspire us and take up this monumental
task. Ably supporting Shri Sridhar was Shri N Udaya Kumar, DGM, NHB who has been
closely working with me on this project. We are very grateful to Shri Udaya for his
positive attitude and keen support, particularly in the data collection for this project as
well as other administrative matters.
Shri K.Unnikrishnan, Dy. Chief Executive of the Indian Banks’ Association
played a crucial role in mobilizing all the senior banking officials from various banks as
well as HFIs to participate in all the meetings starting from early 2008 onwards. We
express our thanks to him as well as Shri V.Ramachandran, Senior Vice President, IBA.
We are also grateful to Mr Pai and Ms Swati who took deep interest in this project and
gave us their unstinted support.
All the members of the IBA Sub-Committee on Mortgage & Valuation of Property
as well as the IBA Steering Group on Valuation have actively participated in all the
discussions and have cooperated and offered constructive suggestions at various stages
of the work. We thank all of them.
We are particularly grateful to all the office bearers of the various valuer
associations namely the Institution of Valuers, Institution of Surveyors, Institute of
Government Approved Valuers of India, Indian Institution of Valuers and Practicing
Valuers Association of India, Royal Institute of Chartered Surveyors and Centre for
Valuation Studies, Research and Training for their active support and providing key
inputs.
We are also thankful to all the banks and HFIs who have enthusiastically
responded to our survey and provided us valuable inputs to take this initiative to its
logical conclusion.
We wish to place on record and acknowledge that some portions of this
document, particularly the standards, have been developed, based on the International
Valuation Standards 2007 ( Eighth Edition ) of the International Valuation Standards
Committee.
This handbook has been prepared in the interest of the banking industry,
including the HFIs as well as in the interest of the valuation profession and the public
at large and it is hoped that over a period of time, the valuation regime in the country
would get streamlined.
November, 2009 ( Prof.Dr.P.S.N.Rao )

Professor and Head, Department of Housing
School of Planning and Architecture
Indraprastha Estate, New Delhi

PART – A
POLICY
f) References
g) Other Conditions
1.4 Removal
1.5 Re-Empanelment
1.9 Obligations of Banks and HFIs
1.11 Date of Effect

The purpose of valuation to be undertaken by banks and housing

finance institutions is to ascertain the value of the property for
• the purpose of ascertaining the amount to be given as a loan

• the purpose of periodically ascertaining the value of the
property that has been mortgaged, whether it is increasing or
decreasing over the mortgage period
• for the purpose of realizing the value of non performing assets (
NPAs ) and
• for the purpose of resumption of properties in cases of default.
In order to ascertain the value of properties for any of the above

purposes, banks and housing finance institutions may appoint
external independent valuers for undertaking valuations.
In order to ensure that the valuers empanelled with the banks and
housing finance institutions are competent and capable of
providing high quality of service, the following criteria need to be
adhered to while empanelling valuers.
It is necessary that a valuer possesses proper educational

qualifications which make him competent to carry out the task of
valuation of immoveable property. In addition, relevant work
experience is also important. Persons possessing the following
educational qualifications and work experience shall be eligible for
empanelment as valuers :
S. Educational Work Remarks

No. Qualification Experience
1 Bachelor’s degree in Civil 5 years work They must complete a 6 months
Engineering / Architecture / experience in prescribed course in Valuation
Town Planning or equivalent. the field of within a period of 5 years from
valuation after the date of their empanelment
completion of and the cut off date for the
the degree or same shall be 1st April, 2015.
equivalent
( for practicing valuers who are
above 60 years of age, they
must complete a 2 weeks
prescribed course on Valuation
within a period of 3 years of
their empanelment ).

2 Bachelor’s degree in Civil 2 years work -

Engineering / Architecture / experience in
Town Planning or equivalent the field of
with pass in valuation after
Valuation Examination completing the
conducted by the Institution examination
of Surveyors, India (
Valuation Branch )
3 Master’s degree in Valuation 2 years work -
awarded by a recognized experience in
University in India the field of
valuation after
completing the
examination
4 Bachelor’s degree in Civil - Since the process of
Engineering / Architecture / procurement of membership
Town Planning or equivalent with these organizations
with pass in includes training as an integral
Examinations conducted by component, no further
the Royal Institute of experience requirement is being
Chartered Surveyors (RICS) prescribed.
OR American Society of
Appraisers ( ASA ) OR
Appraisal Institute ( AI ),USA
Note : Diploma Holders in Civil Engineering / Architecture or equivalent with 8 years of experience are
also eligible for empanelment and shall be permitted to undertake valuations with value upto Rs.50
lakhs only.
Evidence of previous experience needs to be provided to the bank /

housing finance institution. In case of companies undertaking
valuations, the qualifications and experience shall apply to the lead
valuer in the company.
Age is an important criteria while empanelling valuers. The

minimum age for empanelment with banks and housing finance
institutions shall be 25 years and there is no maximum age limit
for a valuer to remain on the panel.
It is important that a valuer actively participates in professional

activities in various professional bodies. It shall be necessary that
every valuer empanelled by banks / HFIs in India be a member of
any one of the undermentioned associations namely :
- Institution of Valuers ( IOV )

- Institution of Surveyors ( Valuation Branch ) ( IOS )
- Institution of Government Approved Valuers ( IGAV )
- Practicing Valuers Association of India ( PVAI )
- Centre for Valuation Studies, Research and Training ( CVSRT )
- Royal Institute of Chartered Surveyors, India Chapter ( RICS )
- American Society of Appraisers, USA ( ASA )
- Appraisal Institute, USA ( AI )

The objective of categorization of valuers is to ensure that whilst

lesser value assignments are handled by relatively junior valuers,
the senior valuers can handle higher valuations.
The empanelment of valuers therefore shall be in the following

categories :
S.No. Category of Work Experience in Value of property for

Valuer Undertaking Valuations assignment of valuation
work
1 A More than 10 years No limit
2 B More than 5 years and less Upto Rs.25 crores
than 10 years
3 C Upto 5 years Upto Rs. 1 crore*
*in case of metropolitan cities, the limit shall be Rs. 3 crores.
Note : In case of Diploma Holders, the work experience shall be 8 years and the
value of property for assignment of valuation work shall be Rs. 50 lakhs.
Valuers need to furnish proof of experience.
Registration with the central / state governments is desirable but

not compulsory. However, it may be noted that for undertaking
valuations under the SARFAESI Act, valuation has to be obtained
from Registered Valuer under the Wealth Tax Act ( Sections 34 AA
to 34 AE ). The IBA has made a representation to the Ministry of
Finance that valuation by Companies should be permitted.
Therefore, pending the above, while assigning / outsourcing
valuation work to valuers, it is necessary that banks take the
provisions of the SARFAESI Act into account and comply
accordingly.
f) References
Carrying out a reference check is extremely important in order to

verify the competence of a valuer. Valuers need to submit at least 3
reference letters and banks need to verify the quality of services
provided by the valuer in the previous instances before
empanelling the valuers on their panel. The referees shall be
either (i) bank managers where previously the valuer had done
valuations or (ii) companies for whom the valuer had previously
done valuations. The reference letter shall be on the letter head of

the bank / housing finance company / any other company where

valuations have been done and shall be duly signed by a senior
level manager / officer.
g) Other Conditions
In addition to the above, the other conditions to be fulfilled by the

valuers for empanelment are as under :
- the valuer is a citizen of India

- the valuer has not been removed / dismissed from service (
previous employment ) earlier
- the valuer has not been convicted of any offence and sentenced
to a term of imprisonment
- the valuer has not been found guilty of misconduct in
professional capacity
- the valuer is not an undischarged insolvent
- the valuer has not been convicted of an offence connected with
any proceeding under the Income Tax Act 1961, Wealth Tax Act
1957 or Gift Tax Act 1958.
- the valuer possesses a PAN Card number / Service Tax number
as applicable.
At the time of empanelment, the valuer shall give an undertaking

to this effect.
The duration of empanelment shall be for a period of five years.

However, the quality of service provided / performance of the
valuers shall be reviewed annually by the banks / housing finance
institutions. An annual performance review shall be carried out by
a committee comprising of senior officers of the bank. The
composition of the committee shall be decided by the concerned
bank / HFI. In the performance is not satisfactory, the valuer can
be depanelled at the discretion of the bank/HFI.
1.4 Removal
In extreme cases where the valuer has been found to be indulging

in unfair practices, guilty of professional misconduct, violating the
code of ethics and professional practice, he shall be removed from
the panel. The procedure to be followed by the banks / housing
finance institutions shall comprise of the following steps :
- issue of show cause notice

- hearing
- appropriate action, including removal from the panel for a period
of five years, if charges are found serious
1.5 Re-Empanelment
Valuers once removed from the panel of any bank or housing

finance institution could be re-empanelled again after a specified
period, based on the recommendations of the bank Conflict
Resolution Committee. Names of valuers removed shall be
reported to the Indian Banks’ Association which in turn shall place
the names on its caution list.
Depending on the nature of work involved and the value of the

property, the valuer and the bank / HFI may negotiate the fees.
However, the minimum fees to be paid to an empanelled valuer for
the valuation of a property will be as under :
Category of Valuer - A - Rs. 2,500.00

Category of Valuer - B and C - Rs. 1,500.00
Note : In case of Diploma Holders, the minimum fees shall be Rs.1,500.00
In case the valuer is required to undertake the valuation in a city

other than that in which the valuer normally resides, the bank /
housing finance institution shall reimburse the outstation travel
TA/DA charges as agreed to between both the parties in the
beginning itself before the valuer starts the assignment.
All valuers empanelled with any bank / housing finance institution

in India as well as banks / housing finance institutions shall
comply and abide by the standards and procedures laid down in
this document.
All valuers empanelled by banks and housing finance institutions

shall act with independence, integrity and objectivity. They shall
undertake all valuation works with an independent mind and shall
not come under any influence of anybody. The empanelled valuer
shall also not be related to any of the personnel in the bank /

housing finance institution in the department/division dealing

with valuation work directly.
1.9 Obligations of the Banks / HFIs
This document casts the following obligations on the appointing

agencies viz. the Banks / housing finance institutions as follows :
- All appointments / empanelments of valuers shall be done in

accordance with the provisions of this document and its
amendments from time to time.
- All instructions to the valuer are to be given by the bank /

housing finance institution in writing.
- Supportive documents, wherever possible, shall be provided to

the valuer before the valuation work begins. Any other
document will have to be procured by the valuer and sufficient
time for the same will be provided.
- A minimum of 3 days and a maximum of 10 days time shall

normally be given to the valuer to carry out the valuation. In
case of outstation properties or in case of large property
valuations, more time shall be given, depending on the
circumstances, on a case to case basis.
- No security deposits or any other indemnity money should be

taken from the valuers as security for the professional services
that they provide.
- Professional fees / payments to the valuers need to be paid by

the banks / housing finance institutions within 45 days of the
submission of the valuation report and its acceptance by the
banks / housing finance institutions.
- In case the valuation report submitted by the valuer is not in

order, the banks / housing finance institutions shall bring the
same to the notice of the valuer within 15 days of submission
for rectification and resubmission. In case no such
communication is received, it shall be presumed that the
valuation report has been accepted.
- All procedures as outlined in this document have to be followed

by the banks and the housing finance institutions.

- In case of valuations under SARFAESI Act, provisions under the

Act have to be followed.
- Where ever the value of the property is more than Rs.10 crore,
two valuers of Category A or B shall be appointed in order to get
the valuation done. In case the difference in the valuation
arrived at by both the valuers is not more than 15 percent, the
average value is considered. In case the difference is more than
15 percent, then, a third valuer, who shall be also be a senior
valuer in the A or B category, shall be appointed and the bank /
HFI shall take an appropriate considered decision on the value.
All valuers shall constantly update their knowledge base by

actively participating in various continuing education programmes
including seminars, conferences, workshops, training programmes,
capacity building programmes, etc. Banks and housing finance
institutions / IBA shall endeavour to facilitate the conduct of such
programmes from time to time and document such efforts for wider
dissemination.
1.11 Date of Effect
This document shall come into effect from 01 April 2010 onwards.
All banks and housing finance institutions shall take all necessary
steps including board approvals and capacity building measures
and prepare themselves to implement this document from the
above date.

PART –B
STANDARDS

2.2 Standard 1 - Market Value Basis of Valuation
a) Introduction
b) Scope
c) Definitions
2.3 Standard 2 - Bases other than Market Value
a) Introduction
b) Scope
c) Definitions
2.4 Standard 3 - Valuation Reporting
a) Introduction
b) Scope
c) Definitions
2.5 Code of Conduct
2.6 Application of Standards for Secured Bank Lending
a) Introduction
b) Scope
c) Definitions
d) Application
e) Reporting Requirements

Valuation is a science and an art and is based on various basic

principles, concepts and methods which every professional valuer
is familiar with by virtue of his / her training and experience over
the years.
Valuation is a multi-disciplinary subject which draws from various

core disciplines and the combined knowledge leads to the
assessment of the value of the property.
Some of the key considerations and basic domains of knowledge

which need to be reflected in the professional work of a valuer are :
- physical aspects of the property

- town planning parameters related to the property
- legal aspects of the property
- economic aspects of the property
- socio-cultural aspects of the property
- functional and utilitarian aspects of the property
- marketability of the property
- transferability of the property
- market scarcity of the type of property that is being valued
- aesthetic quality of the property
- engineering and technology aspects of the property
- environmental aspects of the property
- characteristics of the surroundings of the property
Every professional valuer shall bear in mind all the above aspects
while collecting data and conducting an analysis in order to arrive
at the value of the property.
2.2 Standard 1 - Market Value Basis of Valuation
a) Introduction
The objective of this standard is to provide a common definition

of market value and explain the general criteria relating to this
definition and to its application in the valuation of property
when the purpose and intended use of the valuation calls for
estimation of market value.
Market value is a representation of value in exchange, or the

amount a property would fetch if offered for sale in the open

market on the date of valuation under circumstances that meet

the requirements of the market value definition. In order to
estimate market value, a valuer must first determine the
highest and best use or the most probable use of the property.
That use of the property may be for continuation of the existing
use of the property or for some alternative use. These are
determined from market evidence.
Market value is estimated through application of valuation

methods and procedures that reflect the nature of property and
the circumstances under which a given property would most
likely be traded in the market. The most commonly used
methods to estimate market value are the Sales Comparision
Approach, the Income Capitalisation Approach ( including the
Discounted Cash Flow method ) and the Cost Approach.
All market value measurement methods, techniques and

procedures shall, if applicable and if appropriately and correctly
applied, lead to a common expression of market value when
based on market derived criteria. Sales comparisons or other
market comparisons should evolve from market observations.
The income capitilisation approach should be based on market
determined cash flows and market derived rates of return.
Construction costs and depreciation should be determined by
reference to an analysis of market based estimates of costs and
accumulated depreciation. With proper prudence, application
of mind and judgment, a valuer has to choose a relevant
method applicable to issues emerging and market
circumstances which together influence the market value.
The manner in which property would ordinarily trade in the

market distinguishes the applicability of the various methods or
procedures of estimating market value. It is the prerogative of
the valuer to choose the appropriate method. The valuer needs
to consider each method and see as to which is most
appropriate to the given circumstance.
b) Scope
This standard is applicable for the estimation of the value of

real estate which is supposed to be for sale in the open market
and not for estimation of value of assets as a part of a going
concern or for some other purpose.
c) Definitions

‘Market value’ is defined as follows :
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 arms-length transaction, after
proper marketing, wherein the parties had each acted
knowledgeably, prudently and without compulsion.
The term “property” is attributed to the asset under reference

and includes movable as also immovable assets. Therefore, the
word asset is replaced here by the word property.
The “estimated amount” refers to a price expressed in terms of

money in local currency payable for the property in an arm’s
length market transaction. It is the best price reasonably
obtainable by the seller and the most advantageous price
reasonably obtainable by the buyer. This estimate specifically
excludes an estimated price inflated or deflated by special terms
or circumstances such as a typical financing, sale and
leaseback arrangements, special considerations or concessions
granted by anyone associated with the sale.
“…a property should exchange …” refers to the fact that the

value of a property is an estimated amount rather than a
predetermined amount or actual sale price. It is the price at
which the market expects a transaction that meets all other
elements of the market value definition should be completed on
the date of valuation.
“…on the date of valuation…” makes the valuation estimate

time specific as of a given day and date. The market conditions
may change and therefore the value estimate may appear to be
incorrect at another day and date and shall/may not hold good
for the earlier or later day and date.
“…between a willing buyer …” refers to one who is motivated

but not compelled to purchase the property. This buyer is
neither over eager nor determined to buy at any price. This
buyer is also one who purchases in accordance with the
realities of the current market and with current market
expectations, rather than in relation to an imaginary or
hypothetical market that cannot be demonstrated or anticipated
to exist.

“…a willing seller..” is neither an over eager nor a forced seller,

prepared to sell at any price, nor one prepared to hold out for a
price not considered reasonable in the current market. The
factual circumstances of the actual property owner are not a
part of this consideration because the ‘willing seller’ is a
hypothetical owner.
“ in an arm’s length transaction” refers to a transaction wherein

parties who do not have any special relationship with each
other which may influence the value. The market value
transaction is expected to be between unrelated parties both
acting prudently and independently.
“ after proper marketing” means that the property intended to

be sold would be exposed to market in appropriate manner to
effect disposed at best price reasonably obtainable and the
“intended sale” is brought to the notice of adequate number of
potential buyers prior to the valuation date.
“ wherein the parties had each acted knowledgeably and

prudently” means that both the willing buyer and the willing
seller are reasonably informed about the nature and
characteristics of the property, its present use and potential
uses. The parties were also made aware of the pulse of the
market on the date of valuation. Both are expected to protect
their individual interests.
“without compulsion” means that both parties to the

transaction are willingly motivated by their own appetite to sell
on the one hand and to buy on the other hand without any
shadow of compulsion to influence them anywhere.
Market value is understood as the value of an asset estimated

without regard to costs of sale or purchase and without offset
for any associated taxes.
‘Highest and best use’ is the reasonably probable and legal use
which is physically and technologically possible, appropriately
supported by financial feasibility and that which results in the
highest value.
The market value of a subject property is a function of its

highest and best use. This use is the reasonably probable and
legal use which is physically possible, appropriately supported,
financially feasible and that results in the highest value. The
analysis of highest and best use for the subject property

involves the analysis of the site as it currently exists, vacant

and available for development.
It is implied that the determination of the highest and best use

takes into account the contribution of a specific use to the
community and community development goals, as well as the
benefits of that use to individual property owners. An
additional implication is that the use determined from analysis
represents an opinion, not a fact. The concept of highest and
best use represents the premise upon which the market value is
based. In this analysis, the relationship of the site and the
improvements to the area’s real estate markets and
surrounding improvements are to be considered, as well as the
physical and locational characteristics of the property. Major
considerations in estimating the highest and best use of the site
include zoning classification and locational attributes, quality
and quantity of surrounding landuse, current availability of
infrastructure and supply and demand factors affecting the real
estate market.
In estimating the highest and best use, one needs to analysis

the possible use, permissible use, feasible use and finally, the
highest and best use. The following four conditions need to be
met in estimating highest and best use; a) the use must be legal
b) the use must be probable and not speculative or conjectural
c) there must be a profitable demand for such use and d) it
must return to the land the highest net return for the longest
period of time.
In arriving at the estimate of the highest and best use, the

subject site has to be analysed a) as if it is vacant and available
for development and b) as presently improved.
In performing and reporting a market value estimate, the valuer

shall :
- completely and understandably set forth the valuation in a

manner that will be clear in all respects and not misleading
- ensure that the estimate of market value is based on market

derived data

- ensure that the estimate of market value is undertaken

using appropriate methods and techniques which are widely
acceptable
- provide sufficient information to permit those who read and
rely on the report to fully understand its data, reasoning,
analyses and conclusions and comply with the requirements
of these standards for reporting
- define the value being estimated and state the purpose and
intended use of the valuation, the effective date of valuation
and the date of the report
- clearly identify and describe the property and property rights

or interests being valued
- describe the scope and extent of the work undertaken and

the extent to which the property was inspected
- physically inspect the property oneself or have the property

inspected by a qualified valuer in the appointed valuer’s firm
- state assumptions and limiting conditions upon which the

valuation is based
- fully and completely explain the valuation bases and

approaches applied and the reasons for their applications
and conclusions and
- include a signed compliance certificate attesting to the

valuer’s objectivity, professional contribution, non-bias, non
contingency of professional fees or other compensation as
well as applicability of standards and disclosures.
Explanations :
- Market valuations are generally based on information

regarding comparable properties. The valuation process
requires that a valuer conducts adequate and relevant
research for market comparables including searches in the
office of the sub-registrar as well as other authentic sources
to perform a competent analysis and to draw well informed
and supportable judgements. On account of changing
conditions and characteristics of markets, valuers must
consider whether available data reflect and meet the criteria
for market value or not.

- The data collected should not be accepted in an ‘as is where

is’ form without question but should also consider all
pertinent market evidence, trends, recent transactions which
are comparable as well as any other information which may
be useful in arriving at the right value of the property.
Where market data is limited or essentially non existent, the
valuer must make proper disclosure of the situation and
must state whether the estimate is in any way limited by the
inadequacy of data.
- All valuations require exercise of a valuer’s judgement but

reports should disclose whether the valuer bases the market
value estimate on market evidence or whether the estimate is
more heavily based upon the valuers judgement because of
the nature of the property and lack of comparable market
data.
- Periods of rapid changes in market condition are typified by

rapidly changing prices, a condition commonly referred to as
disequilibrium. A period of disequilibrium may continue
over a period of years and can constitute the current and
expected future market condition. In other circumstances,
rapid economic change may give rise to erratic market data.
If some sales are out of line with the market, the valuer will
generally give them less weight. It may still be possible for
the valuer to judge from available data where the realistic
level of the market is. Individual transaction prices may not
be evidence of market value but analysis of such market
data should be taken into consideration in the valuation
process.
- During periods of market transition characterized by

relatively rapidly rising or falling prices, there is a risk of
over or under valuation, if undue weightage is given to
historic information or if unwarranted assumptions are
made regarding future markets. In these circumstances,
valuers must carefully analyse and reflect the actions and
attitudes of the market and take care that they fully disclose
the results of their investigations and findings in their
reports.
- In falling markets, there may or may not be a large number

of willing sellers. Some transactions but not all, may involve
elements of financial duress or conditions that reduce or
eliminate the practical willingness of certain owners to sell.
Valuers must take into account all pertinent factors in such

market conditions and attach such weight to individual

transactions they believe proper to reflect the market.
- Liquidators and receivers are normally under a duty to

obtain the best price in asset disposals. Sales, however, may
take place without proper marketing or a reasonable
marketing period. The valuer must judge such transactions
to determine the degree to which they meet the requirements
of the market value definition and the weight that such data
should be given.
- Market Value and Fair Value – The expression market value

and the term Fair Value as it commonly appears in the
accounting standards are generally compatible. Fair Value
is an accounting concept defined in International Financial
Reporting System (IFRS) and other accounting standards
and is defined as “the amount for which an asset could be
exchanged, or a liability settled, between knowledgeable,
willing parties , in an arms-length transaction”. Fair value is
generally used for reporting both Market and Non Market
Values in financial statements. Where the Market Value of
an asset can be established, this value will equate to Fair
Value. Besides, the hypothetical exchange value concluded
by two typically motivated market participants, valuations of
property may also use measurement principles that consider
alternative economic utility or function(s) of an asset, value
attributable to unusual or a typical motivation on the part of
the parties to a transaction, or values specified by statutory
or contractual law.
Valuation reports must be clear and unambiguous and not

misleading. Valuations conducted for the purpose of estimating
and reporting market value shall meet the requirements as
stated in this document. Reports shall contain a specific
reference to the definition of market value as set forth in this
standard, together with specific reference as to how the
property has been viewed in terms of its utility or its highest
and best use and a statement of all substantive assumptions.
In making market value estimates, the valuer shall clearly

identify the effective date of valuation, the purpose and
intended use of the valuation and such other criteria as are
relevant and appropriate to ensure adequate and reasonable

interpretation of the valuer’s findings, opinions and

conclusions.
Although the concept, use and application of alternative

expressions of value may be appropriate in certain
circumstances, the valuer shall ensure that if such alternative
values are estimated and reported, they should not be
construed as representing market value.
Any departure from this standard for whatever reason shall be

clearly stated in writing in the valuation report along with the
reasons and justification for the same. The special
circumstances which have warranted a departure from
established norms needs to be adequately explained.
2.3 Standard 2 - Bases other than Market Value
a) Introduction
Most of professional valuations involve market value basis of

valuation. However, there can be many circumstances that call
for bases other than market value. It is essential that both the
valuer and the users of valuations clearly understand the
distinction between market value and bases other than market
value.
b) Scope
This standard presents and explains bases of valuation of

properties other than the market value basis.
c) Definitions
Basis of Value – A statement of the fundamental measurement

principles of a valuation on a specified date.
Fair Value – The amount for which an asset could be exchanged

between knowledgeable, willing parties in an arm’s length
transaction.
Investment Value – The value of a property to a particular

investor, or a class of investors, for identified investment or
operational objectives. This subjective concept relates specific

property to a specific investor, group of investors, or entity with

identifiable investment objectives and / or criteria.
Special Value – An amount above the Market Value that reflects

particular attributes of an asset that are only of value to a
special purchaser.
Synergistic Value – An additional element of value created by

the combination of two or more interests where the value of the
combined interest is worth more than the sum of the original
interests.
To perform valuations that comply with these standards and

report a non market value estimate, the valuer shall –
- completely and understandably set forth the valuation in a

manner that will not be misleading
- ensure that the estimate of value is based on data and

circumstances appropriate to the valuation
- comply with the requirements of Standard 3 in reporting the

valuation
- define the value being estimated and state the purpose and
intended use of the valuation, the effective date of valuation
and the date of the report
- distinguish that the value so reported is not a market value

estimate if the estimate is made on a basis other than
market value
- clearly identify and describe the property and property rights

or interests being valued
- describe the scope and extent of the work undertaken and

the extend to which the property was inspected
- state any assumptions and limiting conditions upon which

the valuation is based
- fully and completely explain the valuation basis/approaches

applied and the reasons for their applications and
conclusions and

- include a signed compliance certificate attesting to the

valuer’s objectivity, professional contributions, non bias, non
contingency of professional fees or other compensation as
well as standards applicability and other disclosures.
Explanations :
Examples of bases of value other than market value are a) fair

value b) investment value c) special value and d) synergistic
value. The additional assumptions required in applying these
basis are often more specific than those required for
establishing market value as they may relate to the
circumstances of a particular party. For this reason, a
valuation reported on one of these bases should ensure that it
cannot be construed as market value.
A basis of valuation describes the fundamental measurement

principles of a valuation. These principles may vary depending
on the purpose of the valuation. A bases of valuation is not a
statement of the method used, nor a description of the state of
an asset or assets when exchanged. Market value is the most
commonly required bases and is defined and discussed in
Standard I.
This standard defines and discusses other valuation bases

which fall into three principal categories viz.
First category - which reflects the benefits that an entity enjoys

from ownership of an asset. The value is specific to that entity.
Although under some circumstances, it may be the same as the
amount that could be realized from the sale of the asset, this
value essentially reflects the benefits received by holding the
asset and therefore, does not necessarily involve a hypothetical
exchange. Investment value falls in this category. Differences
between the value of an asset to a particular entity and the
market value provide the motivation for buyers or sellers to
enter the market place.
Second category – which reflects the price that would be

reasonably agreed between two specific parties for the exchange
of an asset. Although, the parties may be unconnected and
negotiating at arms length, the asset is not necessarily exposed
in the wider market and the price agreed may be one that
reflects the specific advantages or disadvantages of ownership
to the parties involved rather than the market at large. This

category includes Fair Value, Special Value and Synergistic

Value.
Third Category – this is the value determined in accordance with

a definition set out in a statute or a contract.
Fair Value is normally equated to Market Value. For other

purposes, Fair Value can be distinguished from Market Value.
Fair Value requires the assessment of the price that is fair
between two specific parties taking into account the respective
advantages or disadvantages that each will gain from the
transaction. Fair Value is a broader concept than Market
Value. Although in many cases, the price that is fair between
two parties will equate to that obtainable in the general market,
there will be cases where the assessment of Fair Value will
involve taking into account matters that have to be disregarded
in the assessment of Market Value.
A common application for Fair Value is for assessing the price

that is fair for the shareholding in a business, where particular
synergies between two specific parties may mean that the price
that is fair between them is different from the price that might
be obtainable in the wider market. In contrast, Market Vlaue
requires any element of Special Value, of which Synergistic
Value is an example to be disregarded.
Special Value can arise where an asset has attributes that make
it more attractive to a particular buyer or to a limited category
of buyers than to the general body of buyers in the market.
These attributes can include the physical, geographic, economic
or legal charecteristics of an asset. Market Value requires the
disregard of any element of Special Value because at any given
date, it is only assumed that there is a willing buyer, not a
particular willing buyer.
Synergistic Value can be a type of Special Value that specifically

arises from the combination of two or more assets to create a
new asset that has a higher value than the sum of the
individual assets. When Special Value is reported, it should
always be clearly distinguished from Market Value.
A bases of valuation should not be confused with assumptions

that may also be required to clarify the application of the basis
to a specific situation. Some terms that are often used to
describe a valuation are not distinct bases of value as they

describe the state of the asset or the circumstances under

which it is assumed to be exchanged, rather than the
underlying measurement objective. The value may be measured
on one of the bases defined above at 2.3 (c) or on the basis of
Market Value defined in Standard 1. Examples of such terms
that are in common use include :
- Going Concern Value

- Liquidation Value(orderly liquidation and forced liquidation )
- Salvage Value
Each of these are further explained hereunder :
Going Concern Value – This describes the situation where an

entire business is transferred as an operation entity.
Alternative valuation scenarios to a going concern could include
a transfer of all the assets as a whole but following the closure
of the business or a transfer of specific assets currently used in
the business as individual items.
Liquidation Value – This describes the situation where a group

of assets employed together in a business are offered for sale
separately, usually following a closure of the business.
Although often associated with forced sale, these terms have
distinct meanings. There is no reason why assets cannot be
liquidated by an orderly sale following proper marketing.
Orderly Liquidation Value ( Realisable Value ) – it is the
estimated gross amount expressed in terms of money, that
could be typically realized from a liquidation sale, given a
reasonable period of time to find a purchaser(s) with the seller
being compelled to sell on an as is where is basis as of a
specific date. Forced Liquidation Value ( Distressed Value ) – is
the estimated gross amount expressed in terms of money that
could be typically realized from a properly advertised and
conducted public auction, with the seller being compelled
to sell with a sense of immediacy on an as is where is basis as
of a specific date.
Salvage Value – This describes the value of an asset that has

reached the end of its economic life for the purpose it was
made. The asset may still have value for an alternative use or
for recycling.

Valuation reports must be clear, unambiguous and not

misleading. Valuations conducted for the purpose of estimating
and reporting value opinion frames on bases other than market
value shall meet the requirements of the above provisions in
this document.
For valuations carried out on bases other than market value, it

is required that the purpose and intended use of the valuations
be clearly reported and that full disclosure be made on the
basis for the valuation estimate, its applicability and its
limitations.
Each valuation report prepared on a basis other than market

value shall contain a statement of contingent and limiting
conditions or similar disclosure. Notwithstanding this
provision, the valuer shall not use the statement of contigent
and limiting conditions to justify unreasonable departure from
these standards.
In performing a valuation on a basis other than market value,

the valuer shall not make assumptions that are unreasonable
in the light of facts ascertainable at the effective date of
valuation. All assumptions shall be disclosed in all reports.
When valuations are made by an Internal Valuer, there shall be

a specific disclosure in the valuation report or certificate of the
existence and nature of such relationships.

clearly stated in writing in the valuation report alongwith the
2.4 Standard 3 - Valuation Reporting
a) Introduction
The significance of a valuation report, the final stage of the

valuation process, lies in communicating the value estimate /
opinion conclusion and confirming the basis of the valuation,
the purpose of the valuation and any assumptions or limiting
conditions underlying the valuation.

The analytical processes and empirical data used to arrive at

the value conclusion should be included in the valuation report
to guide the reader through the procedures and evidence that
the valuer used to develop the valuation.
In case any judicial pronouncements are to be used for arriving

at any conclusions, the same should be properly referred to and
a detailed explanation should be given.
Similarly, in case of any conclusions are to be derived from

books, documents, reports or government circulars, proper
reference is to be made to them and a detailed explanation
should be given.
The objectives of the standard are (i) to discuss reporting

requirements consistent with professional best practice and (ii)
to identify essential elements to be included in valuation
reports.
b) Scope
The reporting requirements addressed in this standard apply to

all types of valuation reports.
Compliance with these reporting requirements is incumbent

upon both internal as well as external valuers.
c) Definitions
Valuation Report – This is a document, also referred to as a

written report, that records the instructions for the assignment,
the basis and purpose of the valuation and the results of the
analysis that led to the opinion of value. The results of a
valuation communicated to a client in writing, ( which includes
electronic communication) is called a written valuation report.
Written reports are detailed narrative documents containing all
pertinent materials examined and analyses performed to arrive
at a value conclusion or abbreviated pertinent narrative
documents, including periodic updates of value, forms used by
governmental and other agencies or letters to clients.
The valuation report should explain the analytical processes

undertaken in carrying out the valuation and present
meaningful information used in the analysis.

Valuation reports need to be in a written format. The type,

content and length of a report vary according to the intended
user, legal requirements, property type and the nature and
complexity of the assignment.
The terms valuation certificate and valuation report are used

interchangeably. Valuation certificate is usually a short letter,
though it may also take the form of a detailed report. It
includes the valuation date, purpose of the assignment, date of
certificate, assumptions upon which the valuation is based and
the name, address and qualification of the valuer. Certification
of value as used is a statement in which the valuer affirms that
the facts presented are correct, the analyses are limited only by
the reported assumptions, the valuer’s fee is not contingent
upon any aspect of the report and the valuer has performed the
valuation incompliance with ethical and professional standards.
Specifications for the Valuation Assignment – A valuer must

ensure that the analyses, information and conclusions
presented in the report fit the specifications for the assignment.
The specifications for the value assignment include the
following elements :
- an identification of the real, personal ( furniture, fixtures, etc.),

business or other property subject to the valuation and other
classes of property included in the valuation besides the
primary property category
- an identification of the property rights to be valued
- the intended use of the valuation and any related limitation

and the identification of any subcontractors or agents and their
contribution
- a definition of the basis or type of value sought
- the date as of which the value estimate applies and the date of
the intended report
- an identification of the scope and extent of the valuation and

of the report and
- an identification of any contingent and limiting conditions

upon which the valuation is based.

Compliance Statement – An affirmative statement attesting to

the fact that the valuer has followed the professional
requirements and standards in this document.
Special, Unusual or Extraordinary Assumptions – Special,

unusual or extraordinary assumptions may be any additional
assumptions relating to matters covered in the due diligence
process, or may relate to other issues such as the identity of the
purchaser, the physical state of the property , the presence of
environmental pollutants or the ability to redevelop the
property.
Every valuation report shall :
- clearly and accurately set forth the conclusions of the

valuation in a manner that is unambiguous and not misleading
- identify the client, the intended use of the valuation and the
relevant dates
- record the date as of which the value estimate applies
- record the date of the report
- record the date of inspection
- record the name and qualifications of the person who has

done the inspection
- specify the basis of the valuation, including type and definition

of value
- identify and describe the property rights or interests to be

valued
- describe the physical and legal characteristics of the property

and classes of property included in the valuation other than the
primary category
- describe the scope and extent of the work used to develop the
valuation
- specify all assumptions and limiting conditions upon which

the value conclusion is contingent

- identify special, unusual or extraordinary assumptions and

address the probability that such conditions will occur
- include a discussion on the following :
a) current and future real estate market trends to the extent

foreseeable
b) historic, current and future demand for the category of
property in the locality
c) potential and likely demand for alternative uses
d) current marketability of the property and the likelihood of
its sustainability
e) any impact of foreseeable events ( as can be ascertained
on the date of valuation )
f) extent of market based evidence to support the valuation
- include a description of the information and date examined,

the market analysis performed, the valuation approaches and
procedures followed and the reasoning that supports the
analyses, opinions and conclusions in the report
- contain a clause specifically prohibiting the publication of the

report in whole or in part or any reference thereto or to the
valuation figures contained therein, or to the names and
professional affiliation of the valuers, without the written
approval of the valuer
- include the name, professional qualifications and signature of

the valuer
- include a compliance statement that the valuation has been

performed in accordance with these standards
- the compliance statement shall confirm that
• the statements of fact presented in the report are correct

to the best of the valuer’s knowledge
• the analyses and conclusions are limited only by the

reported assumptions and conditions
• the valuer has no interest in the subject property

• the valuation was performed in accordance with an

ethical code and standards
• the valuer has satisfied professional education

requirements
• the valuer has experience in the location and category of

the property being valued
• the valuer or his representative who is also a valuer has

made an inspection of the property.
- When valuation reports are transmitted electronically, a valuer

shall take reasonable steps to protect the integrity of the data
and text in the report and to ensure that no errors occur in
transmission. Software should provide for security of
transmission.
- The origin, date and time of the sending as well as the

destination, date and time of receipt should be identified.
Software should allow confirmation that the quantity of data
and text transmitted corresponds to that received and should
render the report as ‘read only’ to all except the author.
- The valuer should ensure that the digital signature is

protected and fully under the valuer’s control by means of
passwords, hardware devices or other means. A signature
affixed to a report electronically is considered as authentic and
carries the same level of responsibility as a written signature on
a paper copy report.
- The format of presentation of the valuation report shall be as

shown in the annexure of this document.
- For all valuation reports, sufficient documentation must be

retained in the work file to support the results and conclusions
of the valuation and must be held for a period of at least five
years after completion.
- The report should be written in English language and should

convey a clear understanding of the opinions being expressed
by the valuer and also be readable and intelligible to someone
with no prior knowledge of the property. It should demonstrate
clarity, transparency and consistency of approach and should

reflect an independent, unbiased and fair view of the

circumstances.
If a valuer is involved in a valuation assignment in a capacity as

an independent consultant, the valuer should disclose the same
in writing.
The valuer shall disclose the regulatory framework and any

departure required, if any, from these standards, to comply with
local legislation, regulation or custom.

clearly stated in writing in the valuation report alongwith the
2.5 Code of Conduct
All valuers empanelled with banks and housing finance

institutions shall strictly adhere to this code of conduct :
• to express an opinion only when it is founded on adequate

knowledge and honest conviction
• to refrain from misrepresenting qualifications or work

experience
• to treat all information procured during the course of the

business as confidential
• to observe integrity and fair play in the practice of the

profession
• to refrain from undertaking to review the work of another

valuer of the same client except under written orders from
the bank or housing finance institution and with knowledge
of the concerned valuer
• to give unbiased valuation report conforming to standards

and conforming to the objective opinion of the property and

not to attempt merely to accommodate the interests of the

client
• to steer clear of situations where interests and duty clash
• to conduct oneself in such a manner which will not prejudice

the professional status or reputation of the profession
• to follow this code as amended or revised from time to time
2.6 Application of Standards for Secured Bank Lending
a) Introduction
The objective of this application is to provide a framework for

valuation of properties that are placed as security for procurement
of a loan. It is necessary for valuers to consistently apply the basic
valuation concepts and standards and provide a clear and objective
opinion on the value of the property concerned.
b) Scope
This application covers situations where valuation is required of

properties which are or are proposed to be held as security for
lending by way of mortgage.
c) Definitions
Market value – The definition of market value is as defined in

Standard I of this document.
Mortgage – This term is generally understood to be a pledge of an

interest in property as security or collateral for repayment of a loan
with a provision for redemption on full repayment. In the event the
borrower defaults, the lender has the right to recover the loan by
disposing the property pledged through a due process of law.
d) Application
In performing valuations of properties for lending purposes,

valuers will normally adopt the ‘market value’ of such property in
accordance with the standards given in this document.

However, it the cirucmstnces are such that a departure from

‘market value’ basis is justified, the same shall be clearly stated
and explained alongwith the alternative basis used.
The valuation opinion arrived at shall be reported as per the

provisions of this document on Valuation Reporting.
Loans from banks and financial institutions are secured by specific

property. Valuers need to have a general understanding of the
requirements of such institutions and possibly the structure of
loan terms and agreements.
Explanations
- The manner in which the property would ordinarily trade in

the market will determine the applicability of the various
approaches to assessing the Market Value. Based upon
market information, each approach is to be used.
- All valuation methods should be based on market

observations. Construction costs and depreciation, wherever
applicable, should be determined by reference to an analysis
of market based estimates of costs and depreciation.
- When a lender desires a valuation on a basis other than

Market Value, the Standard 2 in this document needs to be
applied.
- Investment Properties – Income producing properties are

usually valued as individual properties. Lending institutions
may at times like to have a property assessed as part of a
portfolio of properties. In such instances, the distinction
between the value of the individual property, assuming it is
sold individually, and its value as part of the portfolio,
should be clearly expressed. While the valuer may comment
on the expected demand and marketability of the property
over the life of the loan, it is normally outside the scope of
the valuation exercise to advise on the ability of a tenant to
meet future lease obligations.
- Owner Occupied Properties – Such properties valued for

lending purposes will normally be valued on the assumption
that the property is transferred unencumbered by the
owner’s occupancy ie. the buyer is entitled to full legal
control and possession. This does not preclude
consideration of the existing owner as part of the market,

but it does require that any special advantage attributable to

the owner’s occupancy, which may be reflected in a
valuation of the business, be excluded from the valuation.
- Leases Between Related Parties – Where property offered as

security is subject to a lease to a party connected to the
borrower, the valuer should consider that the lease creates a
more favourable income stream than would be obtainable on
a letting to an unconnected third party in an arm’s length
transaction and the lender should be alerted and it may be
appropriate to disregard the existence of the lease in a
valuation of the property as security.
- Special concessions – Developers of properties often give

incentives such as assured rental income guarantee, fitting
out costs, absorption of part of initial loan costs, etc. Such
price inflations by special considerations or concessions are
to be ignored in assessing the Market Value.
- Specialised properties – Such properties may have limited

marketability and significant value only as part of a
business. For loan security purposes, such properties will
normally be valued on a vacant possession basis and a
valuation based on highest and best alternative use is
applicable. The valuer should alert the lending agency as to
the risks involved, if any, in lending to specialized properties.
- Trade Related Properties – Some properties where the

property is approved and purpose designated for a particular
use ( such as hotels or cinemas, for instance ) is usually
valued based on profitability but excluding personal
goodwill. In such cases, the lender should be made aware by
the valuer the difference in value that may exist between an
operating concern and a non operating concern where the
business is closed. If the income from a property is critically
dependant on a tenant or tenants from a single sector or
industry or some other factor, which could cause income
instability in future, the valuer should address the same
suitably. In some cases, an assessment of the value of the
property based on an alternative use, assuming vacant
possession may be appropriate.
- Development Properties – Properties held for redevelopment

or sites intended for development of buildings should be
valued taking into account existing and potential
development possibilities. Assumptions as to planning and

other factors must be reasonable and validated by market

behavior and clearly stated. The approach to the valuation
of development properties will depend on the state of
development of the property at the date of valuation and may
take into account the degree to which the development is
pre-sold. The valuation approach may need to be discussed
with the lender prior to undertaking the valuation. The
valuer must make a reasoned estimate of the development
period from the date of valuation, evaluate the market
behavior during the period of development, consider risks
involved during development and highlight any other factors
which may have an effect on the value of the property.
- Forced sales – Lending institutions may request valuations

on a forced sale or liquidation for disposal of the security. As
the impact of a constraint on the price obtainable will
depend upon the specific circumstances under which the
sale takes place, it is not realistic for the valuer to speculate
on a price that could be obtained without knowledge of the
reasons for the constraint or the circumstances under which
the property might be offered for sale. Assumptions made in
such a situation should be clearly stated and valuer should
draw the lender’s attention to the fact that the opinion is
valid only at the valuation date and may not be relied upon
in the event of a future default, when both market conditions
and sale circumstances may be very different.
e) Reporting Requirements :
In reporting market value for lending security purposes, the valuer

shall make all disclosures as required under the standard on
Valuation Reporting.
f) Departure Provisions :
In following this application, any departures must be in

accordance with provisions in the standard on Valuation
Reporting.

PART – C
PROCEDURES
3.5 Procedure for Internal Work Allocation in Banks/HFIs
3.6 Procedure for Allotting Work to Empanelled Valuers

All banks and housing finance institutions shall have a year round
system of receiving applications from intending valuers seeking
empanelment.
All such applications shall be received in the prescribed format and

kept in a list.
The application format shall be always available on the website

and should be easily downloadable.
As and when the requirement arises, the number of valuers

required shall be empanelled and once empanelled, the valuer
shall be on the panel for perpetuity unless and until removed or
dismissed.
All applications shall be accompanied by relevant documents to

substantiate the educational qualifications and experience, etc.
Two passport size photographs shall also have to be provided by

the applicant.
All applicants shall be received by the Branch Manager for

processing.
Based on the requirement of valuer services, applications shall be

scrutinized in terms of their ‘criteria for empanelment’ as described
in this document and a list shall be drawn up. From this list, the
required number shall be empanelled while the remaining
applicants shall remain on the wait list. At a latter date, when the
need for empanelling more valuers arises, valuers from this panel
shall be empanelled.

Whilst the duration of empanelment is for perpetuity, every year,

the performance of the valuers shall by reviewed by the bank /
housing finance institution.
In order to carry out the performance review, every bank and

housing finance institution shall constitute a committee called
Annual Valuation Review Committee, comprising of senior officers
along with at least one independent knowledgeable person of
repute. This committee shall review the performance of the valuers
and recommend continuity or removal, as the case may be.
There are bound to be a variety of conflicts when hundreds of

valuers are empanelled by various banks and housing finance
institutions across the country.
In every bank / HFI, there shall be a Bank Valuation Conflict

Resolution Committee for addressing all conflicts and arriving at an
amicable solution. The composition of this committee shall be
decided by the respective banks / HFIs. In case of any misconduct
by any valuer, the bank or housing finance institution shall
have the prerogative to recommend removal of the valuer from the
panel. The steps involved in the process will be as given
hereunder :
- Issue of Show Cause Notice – the valuer shall be given due

opportunity to show cause as to why action should not be
initiated against him or her.
- Hearing - the valuer shall be given an opportunity to be

heard so that his / her point of view is made known.
- Deliberation by the Committee - the matter shall be

deliberated by the concerned Conflict Resolution Committee
In case the Committee opines that the charges against the

valuer are serious, the valuer may be removed from the
panel and depending on the seriousness of the case, he may
be empanelled once again after a gap of 5 years.
The committee may also consider imposition of suitable fines

depending on the severity of the case against the valuer.
Names of all such valuers shall be placed in a caution list of

the IBA.

3.5 Procedure for Internal Work Allocation in Banks/HFIs :
All banks / HFIs shall take necessary steps to develop internal

work allocation procedures so that the appointment of valuers,
maintenance of registers, computerization of operations,
committees, etc. can be carried out smoothly. They shall also
nominate on senior officer as the Nodal Officer for all valuation
related matters for coordination internally as well as with the IBA.
3.6 Procedure for Allotting Work to Empanelled Valuers :
Every bank / housing finance institution shall maintain a Register

of Valuation Work Outsourcing. Work shall be offered to valuers
based on their performance and if for any reason, a valuer does not
take up the work, the same should be recorded and then the work
allotted to another valuer.

ANNEXURE
ANNEXURE – 1
Format of Valuation Report

( for all properties of value more than Rs. 5 crores )
S.No. Chapter Content
I Introduction 1. Name of Valuer

2. Date of Valuation
3. Purpose of Valuation
4. Name of Property Owner/s
5. Name of Bank/HFI as applicable
6. Name of Developer of the Property
( in case of developer built properties )
II Physical 1. Location of the property in the city
Characteristics 2. Municipal Ward No.
of the Property 3. Postal address of the property
4. Area of the plot/land ( supported by a plan )
5. Layout plan of the layout in which the property is
located
6. Details of Roads abutting the property
7. Demarcation of the property under valuation on a
neighbourhood layout map
8. Description of Adjoining properties
9. Survey no. if any
10. Details of the building/buildings and other
improvements in terms of area, height, no. of floors,
plinth area floor wise, year of construction, year of
making alterations/additional constructions with
details, full details of specifications to be appended
alongwith building plans and elevations
11. Plinth area , Carpet area and Saleable area to be
mentioned separately and clarified
12. Any other aspect
III Town Planning 1. Master plan provisions related to the property in

Parameters terms of landuse,
2. Planning area/zone,
3. Development controls,
4. Zoning regulations,
5. FAR/FSI permitted and consumed,
6. Ground coverage,
7. Transferability of development rights if any, Building
bye-law provisions as applicable to the property viz.
setbacks, height restrictions, etc.
8. Comment on surrounding landuses and adjoining
properties in terms of usage.
9. Any other aspect
IV Legal Aspects Description of legal aspects to include:

of the Property 1. Ownership documents,

2. Names of Owner/s
3. Title verification,
4. Details of leases if any,
5. Tenureship in terms of freehold or leasehold,
Restrictive covenants if any,
6. Agreements of easements if any,
7. Notification for acquisition if any,
8. Notification for road widening if any,
9. Heritage restrictions if any.,
10. All legal documents, receipts related to electricity,
water tax, property tax and any other building taxes
to be verified and copies as applicable to be enclosed
with the report,
11. Comment on transferability of the property
ownership,
12. Building plan sanction, illegal constructions if any
done without plan sanction/violations.
13. Any other aspect
V Economic 1. Details of ground rent payable,

Aspects of the 2. Details of monthly rents being received if any,
Property 3. Taxes and other outgoings,
4. Property insurance,
5. Monthly maintenance charges,
6. Security charges, etc.
7. Any other aspect
VI Socio-cultural Descriptive account of the location of the property in terms of

Aspects of the the social structure of the area, population, social
Property stratification, regional origin, age groups, economic levels,
location of slums / squatter settlements nearby, etc..
VII Functional and Description of the functionality and utility of the property in
Utilitarian terms of :
Aspects of the 1. Space allocation,
Property 2. Storage spaces,
3. Utility of spaces provided within the building,
4. Car parking facilities,
5. Balconies,
6. Any other aspect
VIII Infrastructure a)Description of aqua infrastructure availability in terms of

Availability 1. Water supply,
2. Sewerage/sanitation,
3. Storm water drainage,
b)Description of other physical infrastructure facilities viz.
1. Solid waste management,
2. Electricity,
3. Roads & Public transportation connectivity,
4. Availability of other public utilities nearby,
c)Social infrastructure in terms of
1. Schools,
2. Medical facilities,
3. Recreation facilities in terms of parks and open
spaces.
IX Marketability Analysis of the market for the property in terms of
of the Property
1. Locational attributes
2. Scarcity,
3. Demand and supply of the kind of subject property.

X Engineering Description of engineering and technology aspects to include

and Technology
Aspects of the 1. Type of construction,
Property 2. Materials and technology used,
3. Specifications,
4. Maintenance issues,
5. Age of the building
6. Total life of the building,
7. Extent of deterioration,
8. Structural safety
9. Protection against natural disasters viz. earthquakes,
10. Visible damage in the building if any,
11. Common facilities viz. lift, water pump, lights,
security systems, etc.,
12. System of airconditioning,
13. Provision for fire fighting,
Copies of plans and elevations of the building to be included.

XI Environmental 1. Use of environment friendly building materials, Green
Factors building techniques if any,
2. Provision for rain water harvesting,
3. Use of solar heating and lighting systems, etc.,
Presence of environmental pollution in the vicinity of
the property in terms of industries, heavy traffic, etc.
XII Architectural Descriptive account on whether the building is modern, old

and aesthetic fashioned, etc., plain looking or with decorative elements,
quality of the heritage value if applicable, presence of landscape elements,
property etc.
XIII Valuation Here, the procedure adopted for arriving at the valuation has
to be highlighted.
The valuer should consider all the three generic approaches of

property valuation and state explicitly the reasons for
adoption of / rejection of a particular approach and the basis
on which the final valuation judgement is arrived at.
A detailed analysis and descriptive account of the approaches,

assumptions made, basis adopted, supporting data ( in terms
of comparable sales ), reconciliation of various factors,
departures, final valuation arrived at has to be presented
here.
XIV Declaration I hereby declare that :
a) The information provided is true and correct to the

best of my knowledge and belief.
b) The analysis and conclusions are limited by the

reported assumptions and conditions.
c) I have read the Handbook on Policy, Standards and

Procedures for Real Estate Valuation, 2009, fully
understood the provisions of the same and followed
the provisions of the same to the best of my ability
and this report is in conformity to the Standards of
Reporting enshrined in the above Handbook.
d) I have no direct or indirect interest in the property

valued.

e) I / my authorized representative by the name of

…………………….who is also a ‘valuer’, has inspected
the subject property on …………
f) I am a ‘valuer’ as per the provisions of the above

referred Handbook in Category …… and fulfill the
education, experience and other criteria laid out
therein.
g) I abide by the Code of Conduct as provided by the

above referred Handbook.
Name and address of the Valuer

…….......…………………………………………………………..
………………………………………………………………………
………………………………………………………………………
Name of Valuer Association of which I am a bonafide member
in good standing …………………………………….
Membership Number …………………………………………..
Signature of the Valuer …………………………………
Date ………………...Tel.No…………………………………...
Mobile no………………………….………………………………
e-MAIL …………………………………..…………………
Enclosures : -Layout plan of the area in which the property is located

-Building plan
-Floor plan
-Photographs of the property being valued
-Any other relevant documents/extracts

ANNEXURE – 2
Format of Valuation Report
( for all properties of value upto Rs. 5 crores )
1 Customer Details
Name Apl.No.
Case Type
2 Property Details
Address
Nearby Landmark
3 Document Details
Layout Plan Yes/no Name of Approving Auth. Approval
No.
Building Plan Yes/no Approval
No.
Construction Permission Yes/no Approval
No.
Legal Documents Yes/no List of Documents
4 Physical Details
Adjoining East West North South
Properties
Matching of Boundaries Yes / no Plot Yes/no Approved Type of Plotted /
demarcated Landuse Property Flat
No. of rooms Living / Dining Bed rooms Toilets Kitchen
Total no. of Floor on Approx. Residual Type of
floors which the age of the age of the structure –
property is property property RCC
located framed /
Stone / BB
masonary
5 Tenure / Occupancy Details
Status of Tenure Owned / Rented No. of years of occupancy Relationship
of tenant to
owner
6 Stage of construction
Stage of construction Under construction / completed If under construction, extent of completion
7 Violations if any observed
Nature and extent of violations
8 Area Details of the Property
Site area Plinth area Carpet Saleable Remarks
area area
9 Valuation
( mention the Valuation as per Government Approved Rates also )

10 Assumptions /
Remarks
11 Declaration 1) The property was inspected by the undersigned on…………………..

2) The undersigned does not have any direct/indirect interest in the above property.

3) The information furnished herein is true and correct to the best of our knowledge.
12 Name,address Date of
& signature of valuation
Valuer Signature of the Valuer
13 List of
Documents
enclosed
14 List of Photos
enclosed
ANNEXURE – 3
Terms of Engagement for Empanelment of Valuers
Empanelled valuers shall be engaged by the banks / HFIs on the

following terms :
- Commencement of Work – the valuer shall commence the valuation work

after a letter of appointment is issued to the valuer by the bank/HFI
- Time for undertaking the work – the time for completing the work shall
be as prescribed in the Handbook on Policy, Standards and Procedures
for Real Estate Valuation by Banks and HFIs in India, 2009 issued by
the Indian Banks’ Association and the National Housing Bank.
- Duties of the Valuer- the valuer shall perform his duties as described in
the above Handbook
- Assistance by Bank/HFI officials – the valuer shall be provided support

as described in the above Handbook
- Confidentiality and Non Disclosure – the valuer shall maintain

confidentiality of the work being undertaken and shall not disclose
information to any other person other than the person who has issued
the appointment letter to the valuer.
- The valuer shall ensure that the employees of his organization also follow
the policy of confidentiality and non disclosure.
- The Bank/HFI shall procure from the owner and provide to the Valuer,
copies of key documents such as the sale letter/sale deed/water
bill/electricity bill/particulars of the owner/rental agreement/lease
deed/plans of the building as applicable, alongwith the Appointment
Letter to the Valuer. All other documents have to be procured by the
Valuer.

- The valuer shall complete the assignment within the stipulated time
period as agreed to in the Appointment Letter.
- In case the Valuer takes up the assignment but does not deliver the
Valuation Report in a reasonable amount of time even after three
reminders, the bank shall take necessary steps to recommend the case
for adjudication by the Conflict Resolution Committee and in the
meanwhile, appoint another Valuer to undertake the assignment.
- In case the Valuer takes up the assignment but is not in a position to

deliver due to any genuine reason, hardship or contingency, the Valuer
shall inform the Bank/HFI of the same and some extension of time may
be given to the valuer to complete the assignment.
- The Valuer shall not sub-contract the work to any other Valuer but shall
carry out the work himself.
- Payment to the Valuer for providing valuation opinion shall be governed

as per provisions as laid down in the Handbook and as revised from time
to time.
- All communications between the Bank/HFI and the Valuer shall be in

writing / e-mail.
- Both the parties ie. The Bank/HFI as well as the Valuer shall fully abide
by the policy, standards and procedures laid down in the Handbook.
- In case of any disagreement/dispute which cannot be resolved amicably

between the Bank/HFI and the Valuer shall be referred to the Conflict
Resolution Committee of the Bank/HFI. Such a referral can be made
either by the Bank/HFI or the Valuer.

ANNEXURE – 4
Format of Undertaking to be Submitted by the Valuer for
Empanellment
UNDERTAKING
I, ...................................................................................son /
daughter of ………………………………………………... do hereby
solemnly affirm and state that
- I am a citizen of India,
- I have not been removed / dismissed from service/ employment
earlier,
- I have not been convicted of any offence and sentenced to a
term of imprisonment,
- I have not been found guilty of misconduct in professional
capacity,
- I am not an undischarged insolvent,
- I have not been convicted of an offence connected with any
proceeding under the Income Tax Act 1961, Wealth Tax Act
1957 or Gift Tax Act 1958 and
- My PAN Card number / Service Tax number as applicable is
………………….
Dated :…………………………….
Signature……………………………….
Name…………………………………….
Address………………………………….

…………………………………………….
…………………………………………….
…………………………………………….
Appendix – 1
IBA Sub-Committee on
Mortgage and Valuation of Property
Convenor
Shri S Sridhar
Chairman & Managing Director
Central Bank of India
and
National Housing Bank
Members
Shri D C Jain Shri Nandan Srivastava
Chief General Manager – Head Audit General Manager
IDBI Bank Bank of Baroda
Shri D S Anandamurthy Shri S N Mishra

General Manager General Manager
Canara Bank Indian Overseas Bank
Shri Rakesh Sethi Ms. Annuradha Rao

Dy. General Manager Dy. General Manager
Bank of India State Bank of India
Shri Sudhir Jade

Chief Manager
Bank of India
Shri M S Rao Shri Ashish Mehrotra

Chief Law Officer Business Head & Vice-President
Union Bank of India Citibank N A
Shri Santosh G Nair Shri Abhay Sakare

Vice – President & Business Head Dy. General Manager
HDFC Bank Ltd. ICICI Home Finance Company
Limited

Indian Banks’ Association
Shri K Unnikrishnan Shri V Ramchandran

Dy. Chief Executive Sr. Vice-President
Appendix – 2
IBA Steering Group on

‘Project on Developing Valuation Standards
for Real Estate Financing in India’
Steering Group Members
Shri P K Ramaswamy Iyer Shri Rajkumar S Chouhan

Dy. General Manager Asst. General Manager
Bank of Baroda Bank of India
Shri T Surendranathan Shri P Narasimha Rao

Asst. General Manager Asst. General Manager
Canara Bank Indian Overseas Bank
Shri P S Joshi Shri Harish Kaushik

Asst. General Manager Asst. General Manager
Union Bank of India State Bank of India
Shri M C Rustagi Shri Abhay Sakare

Asst. General Manager Dy. General Manager
Punjab National Bank ICICI Home Finance Company Limited
Shri Rahul Kelkar Shri N Udaya Kumar

Asst. Vice-President Dy. General Manager
HDFC Bank Ltd. National Housing Bank
Prof. Dr. P S N Rao Shri Sanjay Joshi

Professor & Head (Department of Housing) Dy. General Manager
School of Planning and Architecture, NDelhi HDFC
Shri Naresh Girdhar Shri Rajeev Sathe

Dy. General Manager Chief Operating Officer
Deutsche Postbank Home Finance Ltd. Dewan Housing Finance Corporation Ltd.
Ms. Bharti Mannan

Asst. General Manager
LIC Housing Finance Ltd.
Indian Banks’ Association
Shri K Unnikrishnan Shri V Ramchandran

Dy. Chief Executive Sr. Vice-President

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Handbook on

Policy, Standards and Procedures

Indian Banks’ Association ( IBA )

An IBA – NHB – SPA Initiative

1.1 Purpose of Valuation and Appointment of Valuers

An IBA – NHB – SPA Initiative

3.1 Procedure for Call for Applications for Empanelment

An IBA – NHB – SPA Initiative

An IBA – NHB – SPA Initiative

November, 2009 ( Prof.Dr.P.S.N.Rao )

An IBA – NHB – SPA Initiative

An IBA – NHB – SPA Initiative

1.1 Purpose of Valuation and Appointment of Valuers

The purpose of valuation to be undertaken by banks and housing

• the purpose of ascertaining the amount to be given as a loan

In order to ascertain the value of properties for any of the above

1.2 Criteria for Empanelment of Valuers

a) Educational Qualifications and Previous Work Experience

It is necessary that a valuer possesses proper educational

S. Educational Work Remarks

An IBA – NHB – SPA Initiative

2 Bachelor’s degree in Civil 2 years work -

Evidence of previous experience needs to be provided to the bank /

b) Minimum Age Requirement

Age is an important criteria while empanelling valuers. The

c) Membership of Professional Bodies

It is important that a valuer actively participates in professional

- Institution of Valuers ( IOV )

An IBA – NHB – SPA Initiative

The objective of categorization of valuers is to ensure that whilst

The empanelment of valuers therefore shall be in the following

S.No. Category of Work Experience in Value of property for

*in case of metropolitan cities, the limit shall be Rs. 3 crores.

Valuers need to furnish proof of experience.

e) Registration with Government

Registration with the central / state governments is desirable but

Carrying out a reference check is extremely important in order to

An IBA – NHB – SPA Initiative

the bank / housing finance company / any other company where

In addition to the above, the other conditions to be fulfilled by the

- the valuer is a citizen of India

At the time of empanelment, the valuer shall give an undertaking

1.3 Duration of Empanelment

The duration of empanelment shall be for a period of five years.

In extreme cases where the valuer has been found to be indulging

- issue of show cause notice

An IBA – NHB – SPA Initiative

Valuers once removed from the panel of any bank or housing

1.6 Professional Fees

Depending on the nature of work involved and the value of the

Category of Valuer - A - Rs. 2,500.00

Note : In case of Diploma Holders, the minimum fees shall be Rs.1,500.00

In case the valuer is required to undertake the valuation in a city

1.7 Compliance of Standards and Procedures

All valuers empanelled with any bank / housing finance institution

1.8 Independence and Objectivity

All valuers empanelled by banks and housing finance institutions

An IBA – NHB – SPA Initiative

housing finance institution in the department/division dealing

1.9 Obligations of the Banks / HFIs

This document casts the following obligations on the appointing

- All appointments / empanelments of valuers shall be done in