Land and Building Valuation explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Land is the asset creditors are most confident about and most often wrong about.
It is visible, it is durable, and there is a government-notified rate for it — which creates the impression that valuing it is close to arithmetic. In a CIRP it is nothing of the sort, because the questions that decide the number are about who can buy it, for what use, and what is attached to it — none of which appear on the title deed.
The class covers freehold and leasehold land, buildings of every type, and in real estate cases all inventory — under construction, completed, sold and unsold. Three approaches: sales comparison, income, depreciated replacement cost. Circle rate is not market value. And the encumbrance search is the valuer's job, not the debtor's.
What the class covers
| Included | Notes |
|---|---|
| Freehold land | Valued on use potential, not historical cost |
| Leasehold land | Residual lease term and transferability drive the number |
| Commercial, industrial and residential buildings | Including structures on leased land |
| Real estate inventory | Under construction, completed, sold and unsold units — all of it |
That last row is what makes real estate cases distinctive. In a developer CIRP the "asset" is not a plot with a building on it; it is a project at a stage of completion, with committed obligations to buyers attached to parts of it. Valuing it as land plus structure produces a meaningless figure. Real estate CIRP and negative net value →
The three approaches
Sales comparison. Value by reference to observed transactions in comparable property. The strongest evidence where genuinely comparable sales exist and are verifiable — and the approach most vulnerable to being run on unverified asking prices rather than concluded transactions.
Income approach. Where the property is leased or capable of being leased, capitalise the rental stream, or run a discounted cash flow. Appropriate for commercial buildings with tenants in place; the discount rate and the assumed vacancy are where the judgment sits.
Depreciated replacement cost. What it would cost to build the structure today, less depreciation for age and condition, plus land value. Used for specialised buildings with no rental or sale market — a purpose-built industrial structure, for instance. It is a fallback, and a report should say so when it uses it.
In practice a defensible report will cross-check at least two, and explain any divergence between them.
Why circle rate is not the answer
The circle rate — the government-notified rate for a locality — is a minimum for stamp duty purposes. It is a floor for revenue collection, not a measure of what a buyer will pay.
It can be wrong in both directions:
- In a rapidly developing area, actual market rates can be a multiple of the circle rate, because notified rates lag development.
- In an area with constrained demand, poor access or legal encumbrances, the realisable value can fall below the circle rate — sometimes well below.
Using it as a standalone benchmark produces a number that is defensible-looking and wrong. The valuer has to assess current realisable value independently, by reference to comparable transactions. Circle rate vs market value →
The questions that actually move the number
What can it lawfully be used for? Land zoned residential cannot be sold to an industrial buyer. Permitted use determines the buyer universe, and a smaller buyer universe means a lower realisable value regardless of area or location.
Who can actually reach it? Access and surrounding infrastructure are not soft factors. A parcel with no approach road, or one landlocked behind a third party's holding, has a different value from an identical parcel on a highway.
What approvals exist, and what is still needed? Development requires clearances. A site with approvals in place is a materially different proposition from one where the buyer inherits the approval process.
What is attached to it? Charges, liens, litigation, statutory dues, ring-fenced amounts. This is the item that most often surfaces late.
The encumbrance problem
The corporate debtor is not a reliable source on what is charged over its own property. Sometimes the records are genuinely incomplete; sometimes disclosure is not in the promoter's interest.
So the search is the valuer's responsibility, running independently of what management provides:
- Registrar of Companies charge search for registered charges;
- sub-registrar records for the property itself;
- RERA data in real estate cases — registrations, project status, declared encumbrances;
- pending litigation affecting title or possession;
- statutory dues capable of creating a charge over the property.
That last one has real teeth. The Supreme Court in State Tax Officer v. Rainbow Papers Ltd held that a statutory charge under a State tax law can create a security interest. A valuation that ignored it has not merely missed a liability — it has misstated who is entitled to the proceeds. Statutory liabilities in valuation →
Physical inspection is not optional
Documents do not show a collapsed roof, an encroachment, an access dispute with a neighbour, or a third party in occupation.
Physical verification is a precondition to the estimate under Regulation 35, and for immovable property it is where the discrepancies between the paper position and the real one surface. Photographs and a dated site report should form part of the working papers — protecting both the valuer and the RP against later allegations about the condition or existence of assets. Why desk valuation fails →
Key takeaways
- Real estate inventory sits in this class — all of it, at every stage.
- Cross-check at least two approaches and explain any divergence.
- Circle rate is a stamp duty floor, and can be above or below market.
- Permitted use sets the buyer universe, and the buyer universe sets the value.
- Run the encumbrance search independently of the debtor's disclosure.
- A statutory charge can be a security interest — find it before the CoC does.
- Photograph the site. It protects the valuer and the RP.
Read next
- Circle Rate vs Market Value in IBC Valuation
- Real Estate CIRP: Negative Net Value and Unsold Inventory
- Physical Site Inspection: Why Desk Valuation Fails Under IBC
- Valuation Under IBC: The Complete Guide
Disclaimer: Positions stated as on 5 September 2026. Stamp duty and land records are State subjects and practice varies — verify locally.