How to Value a Property: Three Methods and When Each Applies

Three methods, three different questions. Run all three, and where they disagree, the disagreement is itself information.

1. Comparable sales

The question: what have similar properties actually sold for?

The method:

1. Find three to five sales in the last six months, ideally in the same society
2. Match on configuration, floor, facing, condition and carpet area
3. Convert each to price per square foot of carpet area — not super built-up
4. Adjust for the differences
5. Apply to your property

The adjustments that matter: higher floors usually carry a premium up to a point; corner units command more; a recently renovated interior is worth real money; facing matters in some markets enormously and elsewhere not at all.

The trap: using asking prices instead of transaction prices. Asking prices are aspirations. Where possible use registered values or genuinely known deal prices.

2. Rental yield

The question: what is this worth as an income asset?

Annual rent ÷ market price = gross yield

Residential gross yields in most Indian cities are low relative to interest rates, and net yields after maintenance, vacancy, property tax and repairs are lower still. That is normal — Indian residential returns have historically leaned on capital appreciation rather than income.

The use of this method is comparative, not absolute. If a flat's implied yield is far below others in the same locality, it is priced above the market. If it is far above, either the price is low or something is wrong with the property.

3. Replacement cost

The question: what would it cost to build this again?

Land value + construction cost − depreciation

Rarely the right method for a flat, because you cannot buy the land separately. It is useful for independent houses, for plots, and as a sanity check on new construction in an emerging area where comparables barely exist.

Reconciling the three

Weight them by what the property is:

• Flat in an established society: comparables dominate, yield as a cross-check
• Investment purchase: yield carries real weight
• Independent house or plot: replacement cost matters much more
• New area, few transactions: replacement cost plus whatever comparables exist, widely

When comparables say ₹78 lakh and yield implies ₹65 lakh, you have not found an error — you have found that the market is pricing appreciation, and that is worth telling the buyer explicitly.

What is not a valuation

• The circle rate or ready reckoner rate. It is a floor for stamp duty, not a market value.
• What the seller paid, plus what they hoped to make.
• The portal's automated estimate, which knows nothing about the condition of the specific flat.
• What the neighbour claims they were offered.

The one-line version for a seller

"Three flats like yours sold in this building in the last six months, at ₹6,100 to ₹6,400 per square foot of carpet. Yours is on a higher floor and has a renovated kitchen, so ₹6,500 is defensible. ₹7,200 is not, and at that price we will sit for four months and then take ₹6,300 anyway."

That is a valuation conversation. Everything else is a negotiation about feelings.