Uniform Valuation Standards Way Forward

8/12/2019 Uniform Valuation Standards Way Forward

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Part A Background

Part B Process

Part C Outcome : The Handbook

Part D Way Forward : Next Steps



Part A

Background



Significance of

Valuation Today

Evolving real estate markets

Sophistication of housing finance/ realproperty finance options / products

Foreign Direct Investment

REMFs / REITS

Bad loans recovery

Credibility and transparency in globalmarkets



Issues

Credibility

Stability

Bubble syndrome

Accuracy

Authenticity

Reliable Data based Standardised

Global acceptability



Education in the subject

of Valuation There are no set standard educational

syllabus/courses for valuation education inIndia

A few universities conduct 2 years Master’s

degree courses on Valuation In many engineering/architecture/town

planning institutes, valuation is taught as asubject

The Institution of Surveyors conducts anAICTE approved course on Valuation There is no standardised continuing

education either



Practice of Valuation

Institution of Valuers offers membership to architects, civil engineersfor becoming APPROVED VALUERS and practice valuation as a

profession

Institution of Surveyors offers membership ( based on passing an

examination ) for becoming VALUERS and practice valuation as a

profession

Income Tax Department , GoI registers valuers who are called

REGISTERED VALUERS.

Banks EMPANEL valuers based on their own criteria

Valuation is practised in various government departments viz.departments dealing with land acquisition, urban local bodies, etc.

In some states, town planning department also performs the function

of valuation ( Maharashtra )

In some states, there are separate valuation directorates



Valuer ssociations

Institution of Valuers

Institution of Surveyors ( Valuation Br.)

Institution of Government Approved

Valuers

Practicing Valuers Association of India

The Indian Institution of Valuers

Centre for Valuation Research, Studies

and Training



Standards of Practice

Valuation reports in India come in allshapes and sizes – no standardisation

For wealth tax purposes, Form O-1 is

used.

Standards are absent

The situation is almost a ‘lezeiz faire’



Indian Initiatives

The Ministry of Companies Affairs,Govt. of India has released a conceptpaper for Council of Valuation

Professionals of India Bill



Part B

Process



Meeting at NHB in Feb

2008

This was a brainstorming session

Key stakeholders were invited to raise

issues

Based on this initial meeting, the way

forward was developed



Formation of IBA Steering

Group -

The IBA already has a Sub-Committee onMortgage and Valuation of Property

The issues were discussed in this Sub-

Committee and subsequently, a SteeringGroup on Developing Valuation Standardsfor Real Estate Financing in India wasconstituted.

The IBA Steering Group had 17 memberswho closely interacted to bring out theHandbook.



Survey of Banks and HFIs

It was agreed that the first step would be toconduct a Survey of Banks and HFIs

The objective of this Survey was to reviewthe existing processes being followed by

Banks and HFIs for empanelling andconducting valuation of properties

Detailed questionnaires were circulated toseveral Banks and HFIs and information

was gathered. Existing forms and sample valuation

reports were also procured.



Survey of Valuer

Associations

There are 5 valuer associations in India

Information from all the associations

about various aspects of the profession

were gathered in a structured manner.



Preparation of

Draft Handbook

The IBA Steering Group met had several

meetings to discuss various issues and

the draft Handbook was developed.



Stakeholder discussions

The draft Handbook was discussed not

only with Banks and HFIs but also the

valuers from various Associations since

they are the key stakeholders. The points of view of the stakeholders

were discussed.



Exposure on website

In order to have wider circulation and

exposure to the Handbook, the same

was put on the IBA website for about a

month. Subsequently, the date was extended

for some more time so as to give

adequate opportunity for all to accessthe draft Handbook.



Suggestions

Around 40 suggestions were received

as a result of this.

These suggestions were again

discussed by the IBA Steering Groupand the decisions were finalised.

The final Hanbook was prepared.



Permission from IVSC

Since one of the earlier Committees of theGovernment of India had recommended thatthe Valuation Standards for India need to be intune with international standards, the

standards in the Handbook were accordinglyprepared.

The same were discussed with theInternational Valuation Standards Committee (

IVSC ) and due permission was obtained sinceinternational standards were being adapted tosuit Indian conditions. Due acknowledgementhas also been accorded to IVSC for the same.



Coverage

Policy

Standards

Procedures

Annexures



Policy

Criteria for Empanelment of Valuers

Duration of Empanelment

Removal

Re Empanelment Professional Fees

Compliance to Standards and Procedures

Independence and Objectivity

Obligations of Banks and HFIs

Date of effect



Standards

Standard 1 – Market Value Basis of

Valuation

Standard 2 – Bases other than Market

Value

Standard 3 – Valuation Reporting

Code of Conduct

Application of Standards to SecuredBank Lending



Procedures

Procedure for Call for Applications forEmpanelment

Procedure for Selection of Valuers

Procedure for Annual PerformanceReview

Procedure for Conflict Resolution

Procedure for Internal Work Allocation inBanks / HFIs

Procedure for Aloting work to Valuers



Annexures

Format of Valuation Report ( more than Rs.5 crores )

Format of Valuation Report ( upto Rs. 5crores )

Format of Terms of Engagement forEmpanelment of Valuers

Format of Undertaking to be submitted by

the Valuer for Empanelment Application for Empanelment of Valuer with

Banks/HFIs



Adoption of Handbook by the Boards of Banks

and HFIs

All the banks and HFIs need to pass a

resolution in their respective Boards and

formally adopt the Handbook by passing

a resolution to this effect.



Distribution of Handbook to all Valuer

Associations

All persons incharge of valuation

services in various branches of the

banks/HFIs need to have a copy of the

Handbook with them. The Handbook needs to be distributed

to all the branch offices internally in

each of the banks / HFIs. For this, if needed, more copies need to

be printed as the numbers may be huge.



Placing of Handbook on IBA website

The Handbook needs to be placed in the

website of all the banks and HFIs so that

there is full transparency on the

standards being used, the processesand procedures.

One should be able to download copies

of the Handbook so that printing can beminimised.



Developing Internal Systems for

Implementation of the Handbook

Within each bank/HFI, the internalsystems for implementing the Handbookneed to be worked out.

Forms, system of maintaining records,formats of valuation reports to beentertained, committees, etc. need to be

put in place. Levels of responsibility and

accountability has also to be made clear.



Training of Key Banking / HFI Officials on new

regime based on the Handbook

Key officials need capacity building in

terms of awareness so that they are in

a position to perform their tasks in thenew regime.



Training of Valuers in a) 6 months ‘prescribed

valuation course’ and b) 2 weeks ‘prescribed

valuation course’ so as to achieve the target by

year 2015

Mandatory certification as envisaged in

the Handbook needs to be put in place.



Certificate in Valuation of Real Estate Suggested Education Programme

INTRODUCTION – Evolution of Valuation Practice, Purposes of Undertaking Valuation,

Organisations Undertaking Valuation, Private practice of Valuation as a Profession

THEORY OF VALUATION – Theories of Valuation, Economic Principles, Factors Affecting Value,

Concept of Depreciation, Types of Value.

LEGISLATION – Overview of various laws including Constitutional provisions on property and

right to ownership of property, Transfer of Property Act, Land Acquisition Act, Rent Control Act,

Apartment Act, Indian Registration Act, Stamp Duty Act, Municipal Acts, Town Planning Acts,Indian Easement Act, Laws of Succession and Wills, Indian Contract Act, Indian Arbitration Act,

Valuers’ Bill. Important Court cases and Judgements on Valuation.

STANDARDS – Necessity for Standards, International Valuation Standards Committee, Valuation

Standards in India, IBA Handbook PROCESS OF VALUATION- Approaches and Methods of Valuation, Concept of Dilapidation,

Valuation of Different Asset Classes of Properties, Case Studies of Valuation, Practical Exercises

and Report Writing. PROFESSIONAL PRACTICE- Role of Valuer , Code of Ethics and Practice, Responsibility to

Clients and Society, Professional Associations in India and abroad, Global Practices,

Governmental Interface in Regulating the Profession.



Thank you.

Prof Dr P S N Rao

eMAIL : drpsnrao@hotmail com

mailto:[email protected]

mailto:[email protected]

Uniform Valuation Standards Way Forward

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