Amogh N P
✦ In loving memory of Amogh N P — Architect · Designer · Visionary ✦
A bill of quantities, a calculator and a building model — the documents the estimate becomes, and the worth a valuation finds.
Unit VEstimation and Specification

Valuation & Documents

The worth of a property, and the documents an estimate becomes.

≈ 40 min + studio task

Valuation determines the present worth of a property — for sale, mortgage, rent, taxation or acquisition — and the same property can have different values (market, book, salvage). Learn the income terms (gross, outgoings, net), the methods (cost, rental/capitalisation with Year's Purchase, profit, development), depreciation, and the difference between market and book value. Then see the documents the estimate matures into — the abstract of cost, the Bill of Quantities and the legal Measurement Book — and how they feed tendering.

Learning objectives

By the end of this lesson, you will be able to — mapped to the course outcomes for Estimation and Specification:

1
CO5 · Understand

State the purposes of valuation and the income terms (gross, outgoings, net).

2
CO5 · Apply

Value a property by capitalisation (net income × Year's Purchase) and the cost method.

3
CO5 · Understand

Apply depreciation and distinguish market, book, scrap and salvage value.

4
CO6 · Analyse

Prepare the abstract, BOQ and measurement-book documents the estimate becomes.

Income, methods, depreciation

Valuing the property

Capitalise the NET income × Year's Purchase (YP = 100/rate); depreciation falls the value with age; market value ≠ book value.[1]

Capitalisation — Year's Purchase gross rent ₹6,00,000 − outgoings ₹1,50,000 net income ₹4,50,000 YP = 100 / rate = 100 / 8 = 12.5 Capital value = 4,50,000 × 12.5 = ₹56.25 lakh Capitalise the NET income (not gross) × the Year's Purchase multiplier.
DiagramCapitalisation by years' purchase — net annual income times the year's purchase gives the capital value

Worth for a purpose

Valuation determines the present worth of a property for a defined purpose (sale, mortgage, rent, taxation, acquisition) — so the same property can have different values. Gross income is total annual receipts; outgoings are annual expenses (taxes, repairs, management, insurance, sinking fund, vacancy); net income = gross − outgoings. Income methods capitalise the NET income.[1]

Straight-line depreciation value years → cost ₹40 L scrap ₹4 L (50 yr) after 20 yr ≈ ₹25.6 L Annual depreciation = (cost − scrap) / life = (40 − 4) / 50 = ₹0.72 L/yr.
DiagramStraight-line depreciation — value falls by an equal amount each year from cost to scrap over the life
Abstract, BOQ, Measurement Book

The documents the estimate becomes

The abstract prices the items, the BOQ becomes the contract sum, and the Measurement Book is the legal record for payment — feeding the separate contracts course.[3]

From estimate to site record Abstract of costqty × rate = amount BOQtender list · contract sum MeasurementBooklegal record → payment The MB is the audit-proof link between work done and payment made; the BOQ feeds tendering.
DiagramThe documents an estimate becomes — abstract of cost, then bill of quantities, then measurement book

Two different numbers

Market value is the price the property would fetch in the open market on the valuation date (demand-driven, fluctuates). Book value is the value in the owner's books = original cost − depreciation charged to date (an accounting figure, NOT market). Scrap value = demolished-material value less demolition cost; salvage = reusable value if removed intact; obsolescence = loss of value because the design/utility is outdated though physically sound.[1]

Market vs book value

At a glance

AspectMarket valueBook value
BasisMarket value: open-market price on a dateBook value: cost − depreciation in accounts
DriverMarket: demand, locationBook: accounting/depreciation policy
Fluctuates?Market: yes, with the marketBook: no, follows a fixed schedule
Capitalise which income?Myth: gross incomeReality: NET income × YP
UseMarket: sale, mortgage, acquisitionBook: balance sheet, asset records
Vocabulary

Key terms

Valuation

Determining the present worth of a property for a stated purpose.

Year's Purchase (YP)

The capitalisation multiplier — 100/rate for a perpetual income.

Net income

Gross income minus the annual outgoings.

Depreciation

Loss of value due to age, wear and decay.

Obsolescence

Loss of value from being outdated though physically sound.

Measurement Book (MB)

The legal site record of measured work, the basis of running and final bills.

Apply it

Studio task

For a rented building with a gross annual rent of ₹6,00,000 and outgoings of ₹1,50,000, value it by capitalisation: compute the net income, the Year's Purchase at 8%, and the capital value. Separately compute the straight-line depreciated value of a ₹40-lakh building (10% scrap, 50-year life) after 20 years, and explain the difference between its market and book value.

Check your understanding

Self-assessment

1. Year's Purchase for a perpetual income at 8% is —

2. Book value is —

3. Loss of value because a building's design/utility is outdated though sound is called —

In a nutshell

Recap

Valuation finds present worth for a purpose; the same property can have market, book, scrap and salvage values.
Capitalise NET income (gross − outgoings) × Year's Purchase (YP = 100/rate for a perpetual income).
Depreciation is loss of value with age (straight-line = (cost − scrap)/life); obsolescence is being outdated though sound.
Market value (open-market, fluctuates) ≠ book value (cost − depreciation, an accounting figure).
The estimate matures into the Abstract → the BOQ (basis of the contract sum) → the Measurement Book (legal record for payment).
The evidence

References & further reading

  1. [1]S.C. Rangwala, Valuation of Real Properties, Charotar Publishing (methods, YP, depreciation).
  2. [2]B.N. Dutta, Estimating and Costing in Civil Engineering (valuation chapter).
  3. [3]CPWD Works Manual (abstract, BOQ, Measurement Book procedure).
  4. [4]M. Chakraborti, Estimating, Costing, Specification & Valuation (valuation & documents).
  5. [5]BIS, IS 1200 (the measurement basis underlying the MB and BOQ quantities).

Further reading

  • S.C. Rangwala — Valuation of Real Properties.
  • B.N. Dutta — Estimating and Costing in Civil Engineering.
  • CPWD — Works Manual (abstract, BOQ, MB).

Sources gathered and fact-checked June 2026. Published values vary by source, sample and method — treat as indicative and confirm against the cited standard before structural use.