The value of anything means its worth or utility as also the qualities inherent in the thing on which its utility or worth depends. The simple definition by Hadley is ‘Price is a fact and value is an estimate of what the price ought to be’.
The term ‘Fair Market Value’ implies the estimated price which it would fetch if sold in the open market. It implies that it is a price that a willing purchaser would pay to a willing seller for a property without any distress sale or purchase or pressure of any kind having due regard to its existing condition with all its existing advantages and potential possibilities when laid out in its most advantageous position.
Market value is the warranted price expressed in terms of money which the property is estimated to bring at a given time and place where buyers and sellers act without conclusion and with full knowledge of all the uses to which the property is adapted and for which it is capable of being used. The warranted price is further contingent on seller’s ability to convey title with all rights inherent in the property and allows sufficient time for the transaction to mature normally under cash or cash equivalent terms of sale.
Valuation of anything is an estimate of the value, of that thing in terms of money. The fundamental principle of the valuation of the property is the present worth to a present owner or to a foreseeable purchaser for future productive services. Such future return may be the realisation of fair rent of the estimated properties, use of the property by the owner himself for his mental gratification and the pleasure of having its ownership determined on monetary value.
Also Read: Cost, Price & Value: Differences
Can two similar properties have the same value?
It should be noted that no two properties can be precisely similar in all their status and condition. There must be always a difference, though of varying degrees and no hard and fast rule can be laid down as to the allowances to be made for such difference.
It is not possible to lay down uniform set of rules for deciding the market value on account of the following facts:
a) No two properties are alike,
b) They may have different potentialities,
c) They may have different adverse factors,
d) They may have different nature of occupancy i.e. it may be owner occupied or tenant occupied,
e) Varying nature of demand and supply, and
f) Varying impact of legal restrictions.
“Valuation is an art, not an exact science. Mathematical certainty is not demanded nor indeed it is possible. It is for the valuer to express in money value attributed by them to the asset, their estimate and this is a conclusion of fact to be drawn from the evidence before them”.
In respect of immovable property, there is no fixed market, such as the market for share or for other commodities like sugar, cloth etc.
There must be a certain amount of guess, but the guess must be an intelligent one based on certain objective factors which have a rational nexus with the valuation.
There are different methods and which one would be suitable for a particular property must depend on the particular features of the property of these methods of one should be preferred which can provide more objective data for reliance.
The principles for determining the market value have been fully expounded by the judicial committee of the privy council of Gajapatiraju v. Revenue Divisional Officer(2). It was stated by their Lordship of the Privy Council that the land is not to be valued merely by reference to the use to which it is being put at the time at which its value has to be determined, but also by reference to the uses to which it is reasonably capable of being put in the future.
The second principle laid down in the said decision is that when the land has usual or unique features or potentiality, the valuing officer must ascertain as best as he can from the materials before him the price a willing purchaser would pay for the land. The Judicial Committee defined the expression ‘Market Value’ as the price which a willing Vendor might reasonably expect to obtain from a willing purchaser.
In the state of Gujarat v. V.V. Vaghela (3) the Supreme Court has held : ‘The market value is the amount which the land if sold in the open market by a willing seller might be expected to realise. In the case of land, the market value is generally ascertained on a consideration of the prices obtained by the sale of adjacent lands with a similar advantage. “When there are no sale of comparable land, the value must be found in some other way. One method is to take the annual income which the owner is expected to obtain from land and to capitalise it by a number of year’s purchase. The capitalised value is then taken as the market value which a willing vendor might reasonably expect to obtain from a willing buyer.