Few Techniques to Determine the Real Value of the Commercial Property in Mumbai


Mumbai is the financial hub of India. As more international and national businesses are making this city as the base of their operations, the commercial property here is in high demand. But, it is no hidden fact that the prices of property in Mumbai are always skyrocket high. Whether you intend to buy the commercial property, it is imperative that you self-adjudge the real value instead of relying blindly on any seller, broker or agent. This will ensure that you do not enter into any fraudulent or loss-bearing deal.

There are various techniques to determine the fair or real value of commercial property in Mumbai then give your office space for rent. Before you begin the calculations, you would need various financial documents such as profit and loss statement, income statement, sales and purchase statement and any other evidence that could affect the price. You would also need to understand what factors affect the price of that property – location, size, infrastructure, layout, transport connectivity, amenities and security.

Now you can begin the assessment of property using any of the following techniques:

Comparative Method

Let’s say; you wish to buy a laptop. You do your research on the prices – you check online and even visit physical electronic goods stores to get the idea. You do not buy the first laptop that you come across. The same logic applies to commercial property valuation as well. You should compare similar properties based on their current market rate, rental value and capital value.

Cost Method

The cost method is useful when there is no other similar property. In simple words, there is not enough market evidence to compare the property in Mumbai. Such properties are very rare to buy and sell. This approach requires you to consider the following parameters:

  • The value of an equivalent parcel of vacant land.
  • The replacement cost of the land improvement or constructing a building.
  • The loss in value from depreciation.

Income Method

This method is based on the assumption that the property is bought for an investment purpose and will yield income/cash flow in the future. It works on the similar principle of bond or equity market. The income is usually in the form of rent. Hence, it is also known as gross rent multiplier method. The income is derived after deducting all expenses such as repairs & maintenance, insurance, taxes, parking, administrative and other operating costs.

Residual Method

This is another common technique to estimate the real value of commercial property in Mumbai. It is determined on the basis of the potential to develop the land further and what value can be earned from it. For instance, the agricultural plot can be sold to build malls, or existing building on land can be cleared to construct a new property or reuse for another purpose.

The real value computation of a commercial property is a number-crunching game. You have to take into account real estate market trends as well as the historical, current and future prices.

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