Syllabus of Valuation Examination for Asset Class

Effect from 1st June 2020

The Valuation Examination is mandated under Section 247 read with sections 458 and 469 of the Companies Act, 2013 (18 of 2013). It is one of the mandatory conditions for registration as a Registered Valuer with IBBI.

Insolvency and Bankruptcy Board of India

28th February 2020

Subject: Syllabus of Valuation Examination for Asset Class – Land and Building with effect from 1st June 2020

In pursuance of the rule 5 (3) of the Companies (Registered Valuers and Valuation) Rules, 2017, the Insolvency and Bankruptcy Board of IndiaIndia Bharat Varsha (Jambu Dvipa) is the name of this land mass. The people of this land are Sanatan Dharmin and they always defeated invaders. Indra (10000 yrs) was the oldest deified King of this land. Manu's jurisprudence enlitened this land. Vedas have been the civilizational literature of this land. Guiding principles of this land are : सत्यं वद । धर्मं चर । स्वाध्यायान्मा प्रमदः । Read more, being the Authority, hereby publishes the syllabus, format and frequency of the ‘Valuation Examination’ for the asset class: Land and Building to be commenced from 1st June 2020.

Syllabus

Sl.	Coverage	Weight
No.		(%)
1.	Principles of Economics – Microeconomics	3

Consumption: Indifference curve, consumer surplus, elasticity
Price mechanism: determinants of price mechanism; individual and market demand schedules; conditions, exceptions and limitations of law of demand; individual and market supply schedules; conditions and limitations of law of supply; highest, lowest and equilibrium price; importance of timeTime Where any expression of it occurs in any Rules, or any judgment, order or direction, and whenever the doing or not doing of anything at a certain time of the day or night or during a certain part of the day or night has an effect in law, that time is, unless it is otherwise specifically stated, held to be standard time as used in a particular country or state. (In Physics, time and Space never exist actually-“quantum entanglement”) element
Pricing of products under different market conditions: perfect and imperfect competition, monopoly etc.
Factors of production and their pricing: land, labour, capital, entrepreneur and other factors
Theory of rent
Capital and interest: types of capital, gross interest, net interest
Organisation and profit: functions of entrepreneur; meaning of profit and theories of profit

Macroeconomics

Functions and role of money
Inflation: types of inflation; causes and effects of inflation; Inflationary gap
Control of inflation: monetary, fiscal and direct measures
Deflation: causes and effects of deflation; deflationary gap; measures to control deflation; deficit financing
Savings and investment: savings and types of savings; determinants of savings; investment and types of investment; determinants of investment; relationship between savings and investment
Components of economy: primary sector, secondary sector, tertiary sector; informal sector in urban economy; parasitic components in urban economy
Concepts of gross domestic product and gross national product; capital formation etc.

Parallel Economy

Definition of parallel economy; causes of parallel economy and effects on use of land and its valuation
Impact on real estate market and construction industry



2.	Book-keeping and Accountancy	3
	– Meaning and objects of book-keeping; double entry book-keeping
	– Books of prime entry and subsidiary books: cash book, bank book,
	journal, ledger, purchase and sale books, debit and credit notes
	register; writing of books; posting and closing of accounts
	– Trading account; profit and loss account; income and expenditure
	account
	– Preliminary analysis of financial statements
	– Cost and costing; elements of cost – fixed expenses, variable expenses,
	break-even point

3.	LawLaw Positive command of sovereign or divine. One can be ruled either by a Statute, a Statue, or a Statement. Legislation is the rule-making process by a political or religious organisation. Physics governs natural law. Logical thinking is a sign of a healthy brain function. Dharma is eternal for Sanatanis. – General	7

Indian legal system: salient features of the Indian Constitution, fundamental rights, directive principles of state policy
Government: executive, legislature and judiciary
Laws of contractContract An agreement enforceable by law is a contract. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Indian Contract Act.: formation of a contract, parties, void, voidable and unenforceable contract, contingent contract, misrepresentation, fraud and effect thereof, termination of contract, remedies for breach, performance of contract, indemnity and guarantee, law of agency
TortTort A civil wrong or breach of a duty to another person as outlined by law. A very common tort is negligent operation of a motor vehicle that results in property damage and personal injury in an automobile accident.: general principles of tort, tort affecting valuation
Law of arbitration and conciliation: salient features
Auction: authority of auctioneer, duties of vendor, purchaser and public, mis-description and misrepresentation, advertisements, particulars and catalogues, statements on the rostrum, conduct of sale, reservation of price, right to bid, bidding agreements, memorandum of the sale, deposit, rights of auctioneer against vendor and purchaser
Laws of evidenceEvidence All the means by which a matter of fact, the truth of which is submitted for investigation, is established or disproved. Bharatiya Sakshya (Second) Adhiniyam 2023 : burden of proof, presumptions, conclusive proof

– Salient features of the Insolvency and Bankruptcy Code, 2016	3
concerning valuation

The Companies Act, 2013: Section 192(2), 230 (1), 230 (2), 230 (3), 231, 232, 247 and 281(1)
Salient features of the Companies (Registered Valuers and Valuation) Rules, 2017
Salient features of the Securitization and Reconstruction of the Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) concerning valuation
Section 5(n) of the Banking Regulation Act, 1949 on “secured loan or advance”

Introduction to Statistics

Data classifications and processing, graphical representation of data, frequency distributions
Measures of central tendency, dispersion and skewness
Elementary theory of probability and probability distributions, sampling and sampling distributions
Simple test of significance, regression and correlation, multiple correlation coefficient
Time series
Index numbers



5.	Environmental Issues in Valuation	3
	– Environment and valuation – differences between the market price and
	the negative value consequent on environmental impact
	– Environmental issues of air pollution, water pollution, environmental
	factors and their effects, measures to restore the damage, cost to cure
	– Outlines of environmental legislations: the Indian Forest Act, 1927,
	the Water (Prevention and Control of Pollution) Act, 1974, the Air
	(Prevention and Control of Pollution) Act, 1981, the Environment
	(Protection) Act, 1986
	– Laws related to industrial health and safety

6.	Professional/Business Ethics and Standards	4
	– Model code of conduct under the Companies (Registered Valuers and
	Valuation) Rules, 2017: professional competence and due care,
	independence and disclosure of interest, confidentiality, information
	management, gifts and hospitality
	– Integrity and fairness, remuneration and costsCosts Subject to any written law, costs are at the discretion of the Court, and the Court has the power to determine all issues relating to the costs of or incidental to all proceedings, including by whom and to what extent the costs are to be paid, at any stage of the proceedings or after the conclusion of the proceedings. Generally “Costs” includes charges, disbursements, expenses, fees, and remuneration. Costs in any matter are payable from the date of the order of the Court unless the parties otherwise agree. The costs of a third-party funding contract are not recoverable as part of the costs of, or costs., occupation,
	employability and restrictions, business ethics
	– Ethical considerations under terms of engagements: engagement letter,
	management representation, guidance on use of work of experts,
	independence and conflict of interest, quality review process of
	valuers, rights and responsibilities of valuers

7.	Laws related to Real Estate	8
	– Land acquisition – the right to fair compensation and transparency in
	the land acquisition, the Rehabilitation and Resettlement Act, 2013
	– General building rules and regulations
	– Rent control laws: sections pertaining to occupancy rights of tenants,
	freezing of rent, protection against eviction of tenant and its effect on
	value of property
	– Right of way and Section 52 – licenses under the Indian Easements
	Act, 1882
	– Salient features of the Real Estate (Regulation and Development) Act,
	2016 and regulating authorities established under the Act
	– The Transfer of Property Act, 1882: transfer of immovable property,
	sale, mortgage, gift, exchange, assignment, charge, lien, tenancies/sub-
	tenancies; lease of immovable property; lease granted by private and
	statutory bodies – impact of each on valuation; Sections: 3, 5, 6, 7, 25,
	53 and 53A of the Transfer of Property Act, 1882
	– Laws relating to inheritance/succession: Mohammedan: MuslimMuslim A community gathered around Muhammad (d. 632 CE) and confessed that Muhammad was the last of Prophets and he received Quran through Zibreel Farista from Allah. Hadith of Sahih Bukhari faithfully recorded the commands of Muhammad. He acknowledged the contribution of Jesus to the Abrahamic Religion.
	Personal Law; the HinduHindu A geographical name given by non-Hindus, who came to visit Bharatvarsha (Hindusthan). Sanatan Dharma is the actual Dharmic tradition of the Hindus. People who live in Hindusthan are Hindu, whether they Follow Islam, Chris, Buddha, Mahavira, or Nanaka. In this way, Tribals are also Hindu. Succession Act, 1956, the Hindu Succession
	(Amendment) Act, 2005; the Indian Succession Act, 1925: law of
	succession for person other than Hindu and Mohammedan; will &
	testament, succession certificate



8.Valuation of Real Estate		10

Cost, price and value
Types of value
Basic elements of value – marketability, utility, scarcity, and transferability
Factors affecting value – physical, economic, legal and social
Highest and best use, value in use, value in exchange
Real property: rights and interests in real estate; types of ownerships and types of occupancy in real estate

capitalization and rate of capitalization; years purchase; sinking fund; redemption of capital; reversionary value
Construction and use of valuation tables
Urban infrastructure and its influence on value of real estate
Real estate market and its characteristics; investment in real estate; factors influencing demand and supply schedule in real estate
Concepts of green building

Income Approach to Value	7
– Relation between income and value
– Valuation of property affected by the Rent Control Acts; licensed
property under the Easement Act, 1882; leasehold properties under the
Transfer of Property Act, 1882
– Derivation of yield rate from market derived data
– Remunerative rate of interest and accumulative rate of interest
– Types of rent: outgoings, income, yield, years purchase
– Determination of market rent and standard rent
– Lease – lessor and lessee: types of lease; lease provisions and
covenants
– Valuation of lessor’s interest, lessee’s interest including sub-lease in
leased property; premature termination of lease or surrender of lease
– Real estate as an investment; yield from real estate vis-à-vis other
forms of investments; sound investment comparison
– Investment decisions: discounted cash flow techniques, internal rate
of return, net present value and capital assets pricing model
– Profit method for valuation of special properties: hotels, cinema, mall,
petrol pump, hill resorts

Market Approach to Value	7
– Types of market
– Market survey and data collection; sources of sale transactions
– Comparison of sale instances: factors of comparison and weightages
for adjustment in value
– Hedonic model and adjustment grid model under sales comparison
method
– Land characteristics and its effect on land values
– Hypothetical plotting scheme for value of large size land
– Residue technique and other development methods
– Valuation for joint venture development of property



	Cost Approach to Value	7

Methods of cost estimates for buildings
Life of building: economic, physical, legal
Factors affecting life of the building
Total life, age, estimating future life
Various methods of computation of depreciation, functional, technological and economic obsolescence
Reproduction cost/replacement cost, depreciated replacement cost (DRC) working, adopting DRC as value subject to demand and supply aspect
Land value by market approach and building value by cost estimation method for owner occupied bungalows, factories, public buildings

Various purposes of Valuation

Valuation of properties for purposes such as: bank finance, auction reserve, building insurance, sale, purchase, valuation disputes in court, probate, partition, rent fixation, stamp duty, capital gains tax, as per rule 11ua of the Income Tax Act, 1961, lease and mortgage of property, any other purposes not referred above
Valuation standards as per the provisions of the Companies Act, 2013
Indian accounting standards (Ind AS 16, Ind AS 36, Ind AS 40, Ind AS 113) as applicable to valuation
Valuer as an expert witness in court
Valuers’ functions & responsibilities, error of judgement and professional negligence

Important Case Laws on principles of valuation of Real Estate:

C. Cooper Vs. Union of India, (1970) AIR SC 564
Sorab D. Talati Vs. Joseph Michem, Appeal No. 101 0f 1949 in R.A. Application No. 805 of 1948
CWT Vs. P.N. Sikand (1977) 107 ITR 922 (SC)
Wenger & Co. Vs. DVO (1978) 115 ITR 648 Delhi HC
Jawajee Nagnathan Vs. Revenue Divisional Officer (1994) SCC (4) 595 (SC)
Chimanlal Hargovinddas Vs. SLAO, Pune AIR 1988 SC 1652
CED Vs. Radhadevi Jalan (1968) 67 ITR 761 (Cal)
CIT Vs. Ashima Sinha (1979) 116 ITR 26 (Cal)
CIT Vs. Anupkumar Kapoor & others (1980) 125 ITR 684 (Cal)
CIT Vs. Smt. Vimlaben Bhagwandas Patel (1979)118 ITR 134(Guj)

Principles of Insurance and Loss Assessment

Principles and legal concepts in relation to insurance of buildings; contract of insurance; insurable interests; liability to insure; duties of the insurer and the insured
Types of fire policies; reinstatement value, indemnity policies and policies for other perils; terms and conditions; perils, beneficial and restrictive clauses
Value at risk, sum insured and condition of average, over and under insurance; provisions regarding inflation, depreciation, obsolescence and betterment; other provisions
Preparation of claimA Claim A claim is “factually unsustainable” where it could be said with confidence before trial that the factual basis for the claim is entirely without substance, which can be the case if it were clear beyond question that the facts pleaded are contradicted by all the documents or other material on which it is based. for damages due to insured perils
Obligations and rights of insurer and insured



10.	Report writing	3
	– Reports: quality, structure, style
	– Report writing for various purposes of valuation: sale, purchase,
	purchase, mortgage, taxation, insurance, liquidation etc.
	– Contents of the report: instruction of clients; date as on which
	valuation is made and date of report; site inspection; location;
	ownership history; data collection and analysis; type of construction;
	valuation method; value estimation; assumptions and limiting
	conditions including caveats and conclusion

11.	Case Study	20
	Two case studies on valuation of land and building:
	– One case study with six 2-mark questions, for 12 marks
	– One case study with four 2-mark questions, for 8 marks
	(This section will have case studies for application of valuation
	techniques. For each case there will be a comprehension narrating the
	transaction based on which questions will be asked from the case)
	Total	100

Note: Wherever any Law, Act of Parliament or any Rule/Regulation is referred in the syllabus, the same shall be taken as updated as on 29^th February 2020.

Format and Frequency of Examination

The examination is conducted online (computer-based in a proctored environment) with objective multiple-choice questions;
The examination centres are available at various locations across the country;
The examination is available on every working day;
A candidate may choose the time, the date and the Examination Centre of his choice for taking the Examination. For this purpose, he needs to enrol and register at https://certifications.nism.ac.in/nismaol/ ;
A fee of Rs.1500 (One thousand five hundred rupees) is applicable on every enrolment;
The duration of the examination is 2 hours;
A candidate is required to answer all questions;
A wrong answer attracts a negative mark of 25% of the marks assigned for the question;
A candidate needs to secure 60 % of marks for passing;
A successful candidate is awarded a certificate by the Authority;
A candidate is issued a temporary mark sheet on submission of answer paper;
No workbook or study material is allowed or provided;
No electronic devices including mobile phones and smart watches are allowed; and
Use of only a non-memory-based calculator is permitted. Scientific Calculators (memory based or otherwise) are not allowed.