how is the value of land determined

How is the value of Land determined?

Learn about the value of land with Manoj Joshi
Chal Chala Chal 2009

Movie Case Study

The scene from the movie shows Uttam and Vinayak sitting with a land buyer. He mentions that even though the price of the land is decreasing, he is still willing to give the price that he had earlier promised. Uttam and Vinayak decide to make this deal. In this blog, Learning Perspectives will explore how the value of land is determined.

How is the value of land determined?

The value of land increases when the demand for the land is greater than the availability of the land. Sometimes the value of the land is higher because of its location too. The total value of the land includes any improvements that are made on it along with the raw land.

Users of property generally determine the value of land to sell to prospective buyers. For example, a landowner who sells their land will determine it by exploring the market price of the land and the capitalization rates.

An appraiser determines the value of land by conducting a market analysis. The prices of similar properties are compared to get a fairer picture. Location & the neighboring area has a big impact on the price of the land. Remote areas that have transportation challenges and other amenities would have a lower price compared to land with many facilities.

Location, access, usable land, and site quality are some factors that determine the value of the land. Houses are built on such lands. It is quite common to hear that the value of a property increases when it is near a metro station. Hence, location & neighborhood are major factors that determine the value of the land. Improvements too increase the value of the land.

Why the value of land decreases?

The value of land decreases because of many factors. Environmental factors also play a role. If the land is in an earthquake-prone zone, then the value of the land may depreciate. The land could also be in a place where landslides, floods, and other hazards are common.

The value of the property also decreases due to poor maintenance or too many foreclosures. A shady neighborhood and no proximity of facilities also play a role in depreciating property.

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