We spoke to Prof. Syamales Datta about all things real estate valuation and self-publishing. Check out Part 1 of the interview if you haven’t already.
Since real estate is an illiquid asset what would you advice is the right way to valuing real estate?
Truly, real estate has poorer liquidity than the various alternative investment assets that are available in the general investment market. In valuing real estate therefore, the valuer is to choose a higher rate of capitalization of net income or potential net income from real estate. In deciding on the final rate of capitalization directly, the valuer should also carry out analysis of similar transactions of real estate in the same location or in similar locations.
Liquidity is just one aspect for which a higher rate of capitalization of net income is appropriate. The other aspects that render investment in real estate disadvantageous are the risks and the operating expenses of real estate. A summation of all such factors for each of which a further addition is given is to be applied to the yields of gilt-edged securities. Against this some deductions are to be applied for the prospect of capital and rental appreciation of real estate. The final adjusted cap rate thus derived from yield of gilt-edged securities is the one to be adopted as the final rate of capitalization.
Right now the real estate market is going through a bearish cycle. How do you think distressed assets should be valued?
A distressed asset is such an asset where the owner of the asset is forced to sell well below the market value. In valuing distressed assets, the property is likely to be sold at a considerable discount from market value even when the market is bullish. In a bearish market as prevailing at present, there is no indication that investors in shares or gold are planning to switch to real estate. Neither is there any impressive real rate of growth of income, nor is there any improvement of the unemployment situation. The method of valuation does not vary whether the market is bearish, bullish or in-between.
Rental yielding assets are becoming a popular investment avenue. What is the right way to evaluate them?
It is true that rental yielding assets are becoming a popular investment avenue. The income approach to valuation is the right way to value rental yielding assets. The two principal methods under the income approach are (1) the income capitalization method and (2) the discounted cash flow method and both are used to value rental yielding assets.
What is your next book project about?
Rather than publishing another paperback soon, I am currently studying. I am at present engaged in reading up aspects of real estate valuation not known to me including emerging standards, case laws and research publications. I do present my papers at symposia and review a few peer works when I don’t have a lot to cook.
What is your experience with self-publishing?
Till 2012 I had no experience in self-publishing. Two editions of my earlier valuation bestseller were published in 1993 and 2004 by a traditional publisher, the contract was coercive and royalties were small leading me to finally self-publish. I discovered that operating from home requires the self-publisher to understand the soft copy creation process thoroughly and design beautifully adhering to a desktop publishing standard or hire professional services. But rather than not print ever it is easier to produce books with imperfect cover design or interior layout and pagination since you can update these things. My source files are managed using version control software.
My Publishing Proxy and son Ansuman Datta (https://books.aucklandwhich.org) and I would like to thank Linux, LibreOffice, GIMP, Mudranik Technologies and antivirus software makers for making publishing easier.
My earnings from the sales of Mastering Real Estate Valuation from its release during the beginning of the golden jubilee celebrations of the Institution of Valuers (IOV) at Hyderabad on 29 Dec 2018 to 31 Mar 2019 propelled my net profit for the financial year to 1159% of that of the previous fiscal, i.e., I had a growth of 1059% and this last net profit surpassed my lifetime royalties from traditional publishing. I’m now selling online exclusively vide https://books.aucklandwhich.org/a/sdatta.
I have had the good fortune to have drafted syllabi of several real property valuation examinations. The problem with many institutes and universities including some open universities is that they are unsuccessfully trying to follow the paradigm of creating their own course mat by a specific deadline. And prior to that deadline by a few days they are getting it authored by those who do not respect the student’s needs. In doing so they have gone the way of uncertified computer training institutes. The way to break this habit of producing substandard course mat in a sellers’ market is to quality test using standards as good as the world’s top 100 course mat producing universities and institutes and if they fail the tests you allow reference books to take their place and not endanger life and property with substandard course mat. Print-on-demand (POD) is the way to be accurate.
Thank you so much for sharing your views and educating the investor on how to approach valuation! Wish you all the best for your future endeavors.
As Publishing Proxy for the book Mastering Real Estate Valuation and developer of https://books.aucklandwhich.org I would like to make an interesting quote from course material on forensic science published by a varsity in India which also teaches valuation, “Some persons are allergic to alcoholic drinks. The drinks madden them and they behave like maniac under the influence” although it is well known that all allergies are immune responses that may produce sneezing, itching, rash, and difficulty breathing or swallowing. I still have that volume. My cousin Anubrati who is an anthropologist and I had a good laugh over it years back. Course material needs to be certified as per course mat certification requirements by multiple accountable persons. I agree with the author that print-on-demand (POD) is the way to go as it gives bull’s eye precision so that what’s on screen is what you print without the need to check proof post submission to the printer unlike offset printing used by world-renowned publishers.
I would also like to remind low-budget institutes of the need to assign free ISBN numbers to their course materials and to give the author final page size specs for better layout and graphics sizing. The free office suite LibreOffice named in the interview may be used for document sharing across Windows, Linux and Macintosh systems as it uses the Open Document Standard (https://en.wikipedia.org/wiki/OpenDocument) best of all. Today, not using LibreOffice means authors, universities and book production staff cannot work in team.
This book is very much useful for IBBI Examination. The content of the book matches with the syllabus prescribed for IBBI Examinations.
Actually the interview of Prof.Datta is a lecture to the student about Indian valuation procedure and standards which are to be followed.His vast knowledge on the subject along with Indian economy proves he is the doyen of Indial valuation field. His expereince and knowledge in every sphere of valuation gives us his new book on real estate valuation.we are lucky enough as we got his blessings all time and hope that would remain forever.
Thank you team for providing such great content and a great interview for builders and developers.