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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
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Part A
Background
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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
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Issues
Credibility
Stability
Bubble syndrome
Accuracy
Authenticity
Reliable Data based Standardised
Global acceptability
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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
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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
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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
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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’
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Indian Initiatives
The Ministry of Companies Affairs,Govt. of India has released a conceptpaper for Council of Valuation
Professionals of India Bill
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Part B
Process
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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
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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.
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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.
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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.
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Preparation of
Draft Handbook
The IBA Steering Group met had several
meetings to discuss various issues and
the draft Handbook was developed.
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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.
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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.
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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.
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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.
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Coverage
Policy
Standards
Procedures
Annexures
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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
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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
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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
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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Thank you.
Prof Dr P S N Rao
eMAIL : drpsnrao@hotmail com