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WHAT IS YOUR PROPERTY REALLY WORTH – How can rent help establish a non-speculative value for your property?

Published Aug 31, 2020

Is property price-discovery still a challenge?

According to an RBI Household Savings Report 2017 – property accounts for 70% of any individual’s wealth in India. Hence its valuation and liquidity, especially in times such as these, are most important to establish and monitor.

Fundamentally, one should not look the rate per sq. ft. trend alone but should also consider the rental trend in the building or the vicinity of a similar grade building in order to clearly establish value. In residential properties, floor and carpet area can also get premium. Let’s take a complex example in Mumbai for a quick view:

Raheja Viveria – Mahalaxmi – Mumbai Fig 1 (Lease) & Fig 2 (Sale)*

* Data Source –

This project has different wings (A, B, C or D) with premium views of the city. The highest sale value recorded for a 3118 sq. ft. area (a 4bhk) in 2019 on the 29th and 30th floor is 66,000 per sq. ft. and 68000 sq. ft. respectively and the lowest sale value in 2019 for a 2262 sq. ft. area (a 3bhk) on the 14th and the 15th floor is 34,845 sq. ft. The rates mentioned are for 120% of the actual carpet area.

At the same time, the highest lease value for a 3118 area sq. ft. (a 4bhk) in 2019 on the 18th and the 38th floor is 193 and 216 per sq. ft. and the lowest value for a 2106 area (a 3bhk) in 2019 on the 14th and the 18th floor is 174 and 185 per sq. ft. Therefore, given the yields of premium residential buildings in Mumbai being in the range of 3.25%-3.5%, for a high average rent of 205 per sq. ft., the value will be 70,000 per sq. ft. and the low average rent being 175 sq. ft, the value will be 60,000 sq. ft.

Hence, adding or subtracting the premium in the value will always be difficult, therefore the annual rent (known as yield) of such properties can indicate accurate valuation. Simply put if one is getting an annual rent of 24,00,000 on a residential property, at a cap rate of 2.5%, the house value would be 9.6 Cr. At the same time – a commercial property at 7.5% cap rate the value would be 3.2 Cr. Kindly note the value doesn’t consider fit-out rent or any additional capital expenditure on a property.

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