30th August, 2011 by S724LnGK

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									 20th 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 Master’s
    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
Valuer Associations
 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
 TheMinistry 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

								
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