MPSC ATP · Topic 16

16 MPSC ATP Valuation questions with answers

7 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.

Interests in land

  1. Q1 Mock Test 1, Q88

    Which of the following is NOT an example of an easement?

    1. ARight of way over a neighbour's plot
    2. BRight to occupy premises as a tenant for a term of years
    3. CRight of support from an adjoining building
    4. DRight to receive light and air through a window
    Show answerHide answer

    Answer B. Right to occupy premises as a tenant for a term of years

    Rights of way, light and air, support and water flow are typical easements; the right to occupy for a term of years is a lease (an interest in possession), not an easement.

    Source: Indian Easements Act 1882, s.4 illustrations

Value, cost and price

  1. Q2 Mock Test 1, Q89

    Match the kind of value (Column A) with its description (Column B):

    (a) Scrap value (b) Salvage value (c) Book value (d) Distress value

    (i) Value of a property at the end of its utility period without being dismantled

    (ii) Amount shown in the owner's accounts after deducting depreciation from original cost

    (iii) Value of dismantled materials of a building at the end of its life

    (iv) Value realised when the owner is forced to sell under pressure

    1. A(a)-(iii), (b)-(i), (c)-(ii), (d)-(iv)
    2. B(a)-(i), (b)-(iii), (c)-(iv), (d)-(ii)
    3. C(a)-(iii), (b)-(ii), (c)-(i), (d)-(iv)
    4. D(a)-(iv), (b)-(i), (c)-(ii), (d)-(iii)
    Show answerHide answer

    Answer A. (a)-(iii), (b)-(i), (c)-(ii), (d)-(iv)

    Scrap value is the value of dismantled materials; salvage value is the value at the end of the utility period without breaking up; book value is original cost less depreciation as per books; distress value arises from a forced sale.

    Source: Valuation textbook: types of value

Rents and income

  1. Q3 Mock Test 1, Q90

    'Ground rent' is the rent paid

    1. Aby a lessee to the freeholder for the land alone, the lessee usually erecting the building
    2. Bby a sub-tenant to the head lessee for the building
    3. Cfor a furnished flat
    4. Das municipal tax on open land
    Show answerHide answer

    Answer A. by a lessee to the freeholder for the land alone, the lessee usually erecting the building

    Ground rent is the rent reserved under a building lease for the bare land; the lessee constructs the building at his own cost and holds it for the lease term.

    Source: Valuation textbook: ground rent

Characteristics of land

  1. Q4 ATP 2022, Q74

    Consider the following as special characteristics of landed property:

    (i) Heterogeneity and lack of standardisation

    (ii) Total supply of land is not fixed

    (iii) No effect of various legislations

    (iv) Total supply of land is fixed

    Which of the above are correct?

    1. AOnly (i) and (ii)
    2. BOnly (ii) and (iii)
    3. COnly (i) and (iii)
    4. DOnly (i) and (iv)
    Show answerHide answer

    Answer D. Only (i) and (iv)

    Land is heterogeneous (no two parcels are identical) and its total supply is fixed; land markets are heavily affected by legislation (zoning, rent control, ceiling), so (ii) and (iii) are wrong. (Answer matches the official MPSC final key, 26-12-2022.)

    Source: Principles of valuation - characteristics of real estate

Reversion

  1. Q5 ATP 2022, Q76

    The 'land value in reversion' is applicable in the valuation of

    1. Aproperty rented out for a fixed period only
    2. Bproperty rented out in perpetuity only
    3. Cboth (1) and (2)
    4. Dneither (1) nor (2)
    Show answerHide answer

    Answer A. property rented out for a fixed period only

    Reversionary value arises only when a lease is for a fixed term, at the end of which the land/property reverts to the lessor; it is deferred at PV of Re.1 for the unexpired term. A perpetual lease has no reversion. (Answer matches the official MPSC final key, 26-12-2022.)

    Source: Valuation - leasehold interests and reversion

Rack rent

  1. Q6 ATP 2022, Q77

    'Rack rent' can be defined as

    1. Athe rent reserved under the head lease and payable to the first lessor, in case of sub-leased property
    2. Bthe best possible rent at which the property can be let, i.e. full rent neither frozen nor circumscribed by any statute in force
    3. Cthe difference between an improved rent and the head rent
    4. Dthe rent fixed between the landlord and the tenant at the inception of the tenancy
    Show answerHide answer

    Answer B. the best possible rent at which the property can be let, i.e. full rent neither frozen nor circumscribed by any statute in force

    Rack rent is the full annual rental value obtainable in the open market, not restricted by any rent-control statute; option (1) is head rent and (3) is profit rent. (Answer matches the official MPSC final key, 26-12-2022.)

    Source: Valuation - types of rent

YP in perpetuity

  1. Q7 ATP 2022, Q79

    If the Years' Purchase (Y.P.) in perpetuity is 12.5, then the rate of return is

    1. A10%
    2. B6%
    3. C12%
    4. D8%
    Show answerHide answer

    Answer D. 8%

    YP in perpetuity = 100 / rate of interest, so rate = 100 / 12.5 = 8%. (Answer matches the official MPSC final key, 26-12-2022.)

    Source: Valuation tables - YP in perpetuity = 100/i

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