MPSC ATP · Topic 18

18 MPSC ATP Methods of Valuation questions with answers

8 questions from MPSC ATP Mock Test 1 with answers and MPSC ATP 2022 question paper with answers. Try each one, then tap Show answer.

Previous-paper questions are as in the original paper. Medha AI wrote the answers and explanations.

Investment / rental method

  1. Q1 Mock Test 1, Q94

    A property let at a rent below the prevailing market rent for the next 5 years, after which it will be re-let at market rent, is best valued by

    1. Acapitalising the market rent in perpetuity without deferment
    2. Bthe contractor's method
    3. Ccapitalising the current rent in perpetuity
    4. Dcapitalising the current rent for 5 years at YP for 5 years and adding the market rent capitalised in perpetuity deferred 5 years
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    Answer D. capitalising the current rent for 5 years at YP for 5 years and adding the market rent capitalised in perpetuity deferred 5 years

    This is a term-and-reversion valuation: the present (lower) rent for the term is capitalised with YP for 5 years, and the reversion to full market rent is capitalised in perpetuity and deferred by 5 years using PV of Re.1.

    Source: Investment method: term and reversion

Belting method

  1. Q2 Mock Test 1, Q95

    In the belting method of land valuation, the plot is divided into belts parallel to the

    1. Aside boundary
    2. Blonger diagonal
    3. Crear boundary
    4. Droad frontage
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    Answer D. road frontage

    Belting recognises that land nearer the road frontage is more valuable; belts of increasing depth are drawn parallel to the frontage and each successive belt is valued at a reducing proportion of the front belt rate.

    Source: Belting method of valuation

  2. Q3 ATP 2022, Q81

    The belting method of valuation is suitable for plots having frontage on

    1. Aboth sides
    2. Bonly one side
    3. Cthree sides
    4. DNone of the above
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    Answer B. only one side

    The belting method values deep plots that have a road on one side, dividing the depth into front, middle and rear belts at decreasing rates; plots with frontage on two sides are treated as having two front belts. (Answer matches the official MPSC final key, 26-12-2022.)

    Source: Belting method of land valuation

Methods of valuation - matching

  1. Q4 Mock Test 1, Q96

    Match the depreciation method (Column I) with its formula or characteristic (Column II):

    Column I: (A) Straight line (B) Constant percentage (C) Sinking fund (D) Quantity survey

    Column II: (1) D = C(1-p)^n gives book value (2) Each component of building assessed separately (3) (C-S)/n per year (4) Annual instalment accumulates with compound interest

    1. AA-1, B-3, C-4, D-2
    2. BA-3, B-4, C-1, D-2
    3. CA-2, B-1, C-4, D-3
    4. DA-3, B-1, C-4, D-2
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    Answer D. A-3, B-1, C-4, D-2

    Straight line: equal annual depreciation (C-S)/n; constant percentage: fixed % of the diminishing balance; sinking fund: instalment accumulating at compound interest; quantity survey: detailed item-wise assessment of deterioration.

    Source: Depreciation methods: formulae

Comparative / sales comparison method

  1. Q5 Mock Test 1, Q97

    The method of valuation in which the value of a property is estimated by analysing recent sale instances of similar properties in the locality and adjusting for differences is known as the

    1. Aresidual method
    2. Bcontractor's method
    3. Ccomparative (sales comparison) method
    4. Dprofits method
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    Answer C. comparative (sales comparison) method

    The comparative or market approach relies on evidence of actual transactions of comparable properties; differences in time, location, size, shape and tenure are adjusted to arrive at the value of the subject property.

    Source: Valuation theory: comparative method (Rangwala, Valuation of Real Properties)

Belting method principle

  1. Q6 ATP 2022, Q82

    What is the fundamental principle of the belting method?

    1. ABack land is more valuable
    2. BMiddle land is more valuable
    3. CMiddle and back lands are more valuable
    4. DFront land is more valuable than back land
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    Answer D. Front land is more valuable than back land

    Belting rests on the principle that land nearest the road frontage is the most valuable and value falls with depth, e.g. front:middle:rear belts at 100:66.67:50. (Answer matches the official MPSC final key, 26-12-2022.)

    Source: Belting method of land valuation

Return frontage

  1. Q7 ATP 2022, Q83

    Plots situated at the junction of two roads, having frontage on both these roads, are said to have

    1. ADouble frontages
    2. BReturn frontages
    3. CSingle frontage
    4. DNone of the above
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    Answer B. Return frontages

    A corner plot with frontage on two intersecting roads has a 'return frontage', which usually adds value; 'double frontage' refers to frontage on two parallel roads at front and rear. (Answer matches the official MPSC final key, 26-12-2022.)

    Source: Valuation - frontage and corner influence

Developer's method principles

  1. Q8 ATP 2022, Q84

    The principle(s) of the Developer's Method of Valuation is/are:

    (i) In the absence of comparables of large extents of land, instances of small building plots can be adopted as the base.

    (ii) It is subject to deductions for land (for roads/amenities) and the cost of infrastructure.

    (iii) The land must possess the necessary potential for urban use, farm house, etc., for which there must be demand.

    1. A(i) and (ii) only
    2. B(iii) only
    3. CAll of the above
    4. D(ii) and (iii) only
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    Answer C. All of the above

    The developer's (hypothetical layout) method derives value of large undeveloped land from rates of small developed plots, after deducting land for roads/open spaces and development cost, and applies only where the land has development potential with demand. All three statements hold. (Answer matches the official MPSC final key, 26-12-2022.)

    Source: Developer's / residual method of valuation

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