VALUATION CONSULTANT Valuation of Property & Real Estate Appraisers Property valuation all over Pakistan are conducted for large and small properties, ...
  1. Valuation of Property & Real Estate Appraisers
Property valuation all over Pakistan are conducted for large and small properties, on behalf of State Bank of Pakistan and Pakistan Banks’ Association. We have been conducting valuations for various local as well as foreign banks, including NBFI.

Sadruddin Associates (Pvt.) Ltd. has been enlisted with Pakistan Banks’ Association  on all three panels (1, 2, 3) for Land, Building, Plant / Machinery and Equipments and is   authorized to evaluate a project in no recommended limit restriction for us   “ANY AMOUNT”.

Our engagement and key scope of work

We, as a valuation firm consulting a real estate appraiser specialist), conducting comprehensive valuation on current assets of various clients such as land, building, plant / machinery and vehicle etc.
We are to perform agreed-upon procedures as laid out later in this text with the purpose of:
·         As a Sadruddin Associates (Pvt.) Ltd., our engagement is mainly about valuation of fixed assets only.
·         Assessing the consistent implementation of fair market value, measurement and assessment of current assets.
·         Updating the valuations of specific classes of current assets, as list provided by the valued client.

The valuation involved the project is independent to assess fair and reasonable market value of any appointing client (Land / Building, Plant / Machinery and vehicle etc.).

Capitalization, measurement at recognition and measurement after recognition of any client is required to maintain its books of accounts and financial statements as per guidelines of International Financial Reporting Standards (IFRS).For measurement and recognition of Fixed Assets (Property, Plant and Equipment) IAS 16 is relevant standard.IAS 16 defines Property Plant and Equipment as Tangible Assets that are held by an entity.

The cost of an item of property, plant and equipment shall be recognized as an asset if, and only if:
·          It is probable that future economic benefits or service potential associated with the item will flow to the entity; and
·         The cost or fair value of the item can be measured reliably.
The criteria to capitalize the tangible assets as Property Plant and Equipment depend upon the nature of items and capitalization policies of an entity.
Measurement at Recognition
An item of property, plant and equipment that qualifies for recognition as an asset, shall be measured at its cost.
Measurement after recognition can be made either at Cost Model or Revaluation Model as per IAS 16.After recognition as an asset, an item of property, plant and equipment whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.

If an item of property, plant and equipment is revalued, the entire class of property, plant and equipment to which that asset belongs shall be revalued.
The frequency of revaluations depends upon the changes in fair values of the items of property, plant and equipment being revalued. When the fair value of a revalued asset differs materially from its carrying amount, a further revaluation is required. Some items of property, plant and equipment experience significant and volatile changes in fair value, thus necessitating annual revaluation. Such frequent revaluations are unnecessary for items of property, plant and equipment with only insignificant changes in fair value. Instead, it may be necessary to revalue the item only every three or five years.
The classes of current assets within the scope of this assignment for above are:
·         Land.
·         Building (Construction)
·         Plant / Machinery.
·         Motor Vehicle.
Preliminary and generic requirements
Appraisers’ qualification and understanding of the specific industry and asset classes

The appraiser ought to be a professional with relevant subject-matter expertise (industry, asset classes), possibly evidenced through professional certification, and substantial practical experience. Besides, the appraiser should be sufficiently independent and objective with regard to the entities and assets to be assessed.
Analytical procedures
Real estate (land, buildings)

For land we will require all information related to the parcel of land including the title deed, affection plan, development details, and any information in relation to subleases. The format will be to check against comparable transactions and compare this with the residual approach to ensure complete accuracy in the valuation.
For buildings we will apply financial modelling techniques including an examination of the legal hereditament, an analysis of the current lease structures and their effect on value.  Each property will be compared to transactions in the market as well as a financial assessment of the income generated by the property which will then be capitalised at an appropriate rate having allowed for vacancy, maintenance and obsolescence.  This dual approach will confirm the real current value of the assets.

Approach and Methodology of evaluate Land.

While preparing evaluation report different methodology being adopted to evaluate the    property particularly land. 

The following are the basis methodology adopted for land.

Regarding evaluation of land in case of Plot recent sale-purchase price, we enquired from the various property dealers/Plot Brokers in the locality and after entire satisfaction and discussion held with the area property dealers, we ascertain the present market value considering its location, size and measurement of land, frontage, depth, approach, passage to the land etc. and consider its market potential and possession of land.
For the scrutiny we obtain copies of various documents pertaining to the land such as Sale Agreement, Lease Documents, Lease Agreement Deed, Sale Deed, Allotment of Land, Confirmation Possession Letter, we also check illegal possessed if any, No Objection Certificate, Copies of all paid Challans / Dues, Copy of Form-II, Form-VII, Sketch/Map and Search Certificates. The most important we do physical inspection and enquired from chowkidar, security guard and check the boundary wall, gate, etc.
Approach and Methodology of evaluate Building.

While preparing evaluation report different methodology being adopted to evaluate the    property particularly building. 

The following are the basis methodology adopted for building.
· To obtain latest drawing with land sketch, showing with any amendment addition, new construction etc.        
· To calculate total covered area with each class of construction compare with year of construction.
· To get present value with each class of construction, we apply and calculate covered area with present cost of construction to               bring the present cost for the re-instatement value, then after apply 3% per annum depreciation on the amount calculated with the           rule of diminishing method and after application of depreciation the present market value calculated. Some time we apply more               depreciation, depending and considering the wear & tear and maintenance of the project / building.
· We also obtain account audited balance sheet for the last three years for comparing the value taken by the concerned authority              for audit point of view, depreciation taken year-wise etc.
Methodology adopted for evaluation of Plant / Machinery

To evaluate plant and machinery we physically inspect the entire plant / machinery with section-wise installation. The age, make, origin, condition etc. has been taken into account, to arrive at the present market value comparing with the invoices, custom bill of entries, packing lists, date of installation, working capacity and maintenance record etc.
While conducting evaluation the present value been computed, after application of suitable appreciation / depreciation factors. Rate of inflation and devaluation has been considered for optimum and closest approximate value of plant/machinery. For obtaining the nearest value we also take 05% to 10% installation charges and add other levies to start and complete the plant/machinery.