20

th
April, 2012, National Housing Bank, New Delhi

UNIFORM VALUATION STANDARDS
WAY FORWARD



Handbook on
Policy, Standards and Procedures for
Real Estate Valuation by
Banks and HFIs



Prof.Dr.P.S.N.Rao, SPA, New Delhi
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/ real
property finance options / products
Foreign Direct Investment
REMFs / REITS
Bad loans recovery
Credibility and transparency in global
markets
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 in
India
A few universities conduct 2 years Masters
degree courses on Valuation
In many engineering/architecture/town
planning institutes, valuation is taught as a
subject
The Institution of Surveyors conducts an
AICTE approved course on Valuation
There is no standardised continuing
education either
Practice of Valuation
Institution of Valuers offers membership to architects, civil engineers
for 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
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 all
shapes and sizes no standardisation
For wealth tax purposes, Form O-1 is
used.
Standards are absent
The situation is almost a lezeiz faire
International
Benchmarks
TIAVSC ( The International Assets
Valuation Standards Committee ) was
established in the year 1981
USPAP ( Uniform Standards of
Professional Appraisal Practice ), USA
AVSB ( Australian Valuation Standards
Board )

Indian Initiatives
The Ministry of Companies Affairs,
Govt. of India has released a concept
paper 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 on
Mortgage and Valuation of Property
The issues were discussed in this Sub-
Committee and subsequently, a Steering
Group on Developing Valuation Standards
for Real Estate Financing in India was
constituted.
The IBA Steering Group had 17 members
who closely interacted to bring out the
Handbook.

Survey of Banks and HFIs

It was agreed that the first step would be to
conduct a Survey of Banks and HFIs
The objective of this Survey was to review
the existing processes being followed by
Banks and HFIs for empanelling and
conducting valuation of properties
Detailed questionnaires were circulated to
several 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 access
the draft Handbook.
Suggestions
Around 40 suggestions were received
as a result of this.
These suggestions were again
discussed by the IBA Steering Group
and the decisions were finalised.
The final Hanbook was prepared.
Permission from IVSC
Since one of the earlier Committees of the
Government of India had recommended that
the Valuation Standards for India need to be in
tune with international standards, the
standards in the Handbook were accordingly
prepared.
The same were discussed with the
International Valuation Standards Committee (
IVSC ) and due permission was obtained since
international standards were being adapted to
suit Indian conditions. Due acknowledgement
has also been accorded to IVSC for the same.
Release of Handbook
The Handbook has been printed and is
ready for distribution.
Part C
Outcome : The Handbook

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 Secured
Bank Lending
Procedures
Procedure for Call for Applications for
Empanelment
Procedure for Selection of Valuers
Procedure for Annual Performance
Review
Procedure for Conflict Resolution
Procedure for Internal Work Allocation in
Banks / HFIs
Procedure for Aloting work to Valuers

Annexures
Format of Valuation Report ( more than Rs.
5 crores )
Format of Valuation Report ( upto Rs. 5
crores )
Format of Terms of Engagement for
Empanelment of Valuers
Format of Undertaking to be submitted by
the Valuer for Empanelment
Application for Empanelment of Valuer with
Banks/HFIs
Part D
Way Forward : Next Steps
Adoption of Handbook by the Boards of Banks and HFIs

Distribution of Handbook to all Valuer Associations

Placing of Handbook on IBA website

Placing of Handbook on websites of Banks and HFIs

Developing Internal Systems for Implementation of
Handbook

Training of Key Banking / HFI Officials on new regime
based on the Handbook

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
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 processes
and procedures.
One should be able to download copies
of the Handbook so that printing can be
minimised.
Developing Internal Systems for
Implementation of the Handbook

Within each bank/HFI, the internal
systems for implementing the Handbook
need to be worked out.
Forms, system of maintaining records,
formats of valuation reports to be
entertained, 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 the
new 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.

Issues
Methodology of course delivary
Preparation of course content
Nodal agency to coordinate all activities
Involving all Valuer associations
Online delivary of course material
Contact programmes
Testing and certification

Funding
Funding agencies
Course Fees
Other expenses

Thank you.


Prof.Dr.P.S.N.Rao
eMAIL : drpsnrao@hotmail.com