Tag: Real Estate Valuation

Interview (Part 2) : Prof. Syamales Datta

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.

Interview (Part 1): Prof. Syamales Datta

We had the opportunity of interacting with Prof. Syamales Datta, author of Mastering Real Estate Valuation and Advanced Valuation for Secured Lending by Banks and Financial Institutions.

Syamales Datta received his Physics (Hon) from Calcutta University and joined Howrah Improvement Trust. He qualified with RICS in 1971 and retired from service in the spring of 2004 after serving as chief valuer. A fellow of the IOV and the IOS, Datta has also been a research guide for Annamalai’s masters programme. He has taught valuation at IIEST, IUM, IEM, ILGUS, WBVB, HUDCO, JU, TIU, IOV, IOS, and recently at RVOS.  Datta coordinates symposia. Earlier titles include Valuation of Real Property: Principles & Practice and Advanced Valuation for Secured Lending by Banks and Financial Institutions; the former bestseller is replaced with this paperback by time. The Valuer’s Day Award in 2007 and the Valuer Excellence Award in 2016 are some of Datta’s recent honors.

The author valued for Andal Aerotropolis, mall development rights in Curzon Park, Kolkata and he was consulted by Indo Nabin and the LIC(I). He did a feasibility analysis project for Kolkata Metro’s wing, east of the Ganga. Government projects included the semi-weekly market in Howrah and Nagaland’s cement factory. Works and writings made headlines and case laws and some are sub judice. The author’s profits from self-publishing have surpassed his total royalty earned over two decades from traditional publishers.

Check out his web profiles here:
https://books.aucklandwhich.org/a/sdatta
LinkedIn: https://www.linkedin.com/in/syamalesdatta
Goodreads: https://www.goodreads.com/author/show/8155370.Syamales_Datta

 

Describe your writing process.

Before writing a book on real property valuation, I first plan how much coverage is to be given to theories that will be included in the book and how to deal with concepts and events to be covered. Then, I plan the fashion of inclusion of topics like market valuations, statutory valuations, investments, taxation, etc. in the book. In covering them, I carefully follow the guidelines laid down by standards bodies like The International Valuation Standards (IVS) Council, the Royal Institution of Chartered Surveyors (RICS) etc. I follow this process when I write on real estate valuation.

When I write on other subjects, I concentrate on the purpose of writing, and try to compile information and explanations needed. I select a suitable bibliography and study the thoughts and views on and trends in the subject matter. Finally, I select a framework based on my research and converge on my writing. I generally sit at my desk when I write for extended periods but I sometimes pace my bedroom floor in meditation before arriving at conclusions. During breaks, I relax with a cuppa and digestive cookies.

Explain to potential non-fiction writers the kind of homework they need to do before writing a comprehensive book of non-fiction.

Non-fiction authors should give every effort to themselves study the ideas, concepts and principles pertaining to the subjects of their books. In this process, the writer should examine global and local practices. Use search engines and online encyclopedia,  multimedia presentations, learning platforms and professional groups as far as possible. For example, we have a Facebook group.

Authors should expose themselves to and benefit from the exchange of views with other writers and professionals. One’s own experience in writing contributes richly to new ventures. Research papers and authentic reading materials in the subject also help build up concepts. Even non-fiction writers have a great need to enjoy fiction in order to grow a good sense of style. Style guides are more necessary to writers of non-fiction than fiction, to make intelligible information out of technical data.

How long did it take for you to write this book?

It took me about four years to write Mastering Real Estate Valuation.

Before this, I had written Valuation of Real Property (1st Ed. 1993 & 2nd Ed. 2004, Eastern Law House, Kolkata). Those bestsellers were replaced by Mastering Real Estate Valuation, 1st Ed. which was published Sat 29 Dec 2018 in Hyderabad vide my FaceBook timeline for multimedia from the 49th Indian Valuers Congress 2018.  New legislation, new editions from the IVSC and the RICS and the need to give precedence to truth over the printer’s devil à la offset forced me to expensively self-publish this title from the Portable Document Format. I had previously self-published Advanced Valuation for Secured Lending by Banks and Financial Institutions (2nd Ed. ISBN 978-93-5156-947-3) 242 pages long vide https://books.aucklandwhich.org/b/adval/.

Please provide us a brief overview of the book.

The reasons that propelled me to write this volume are the dual context of liberalization and globalization, my desire to fully apprise readers of the historical development of the concept of property rights, a non-uniform dearth of reading material on leasehold valuation of real property in the developing nations of the world, updates to the International Valuation Standards and its free availability to members of member organizations like The Institution of Valuers as I am.

The book starts with the basic concepts and characteristics of real estate market. I talk about the challenges that India faces in its real estate market scenario and the evolution of modern real property rights to their complex present day form.

Various valuation approaches and methods have been explained at length. A separate chapter has been added on The Principles of ‘Yield’ which is the most crucial tool in the valuation of income-producing real estate. There are about 60 solved examples on leasehold valuation throughout various chapters of this book that constitute a significant body of problems on income-producing real estate.

Case studies have been provided to illustrate how to go about the valuation of development property and trade-related property as well as valuation and rent-control legislation, inter alia. A variety of cases under the housing sector and commercial real estate have been demonstrated.

There are a total number of 120 odd solved examples that will greatly interest professionals. The use of spreadsheets and pie diagrams is made wherever appropriate like the illustrations involving Hotel Hightopp and Pasteur Nursing Home.

All chapter sections have been provided with dot-separated Latin section numbers and each chapter starts with a part called ‘At a Glance’, for the convenience of varsities and other institutions and the IBBI Valuation Examination’s Asset Class–Land & Building which I have taught twice at the latter program. These are also useful for various training programs of IOV and IOS. The book has a minisite on the Internet at https://books.aucklandwhich.org/b/mrev and Chapter 01: Real Estate—Concepts and Context is available free from https://bit.ly/value2019.

Prof. Syamales Datta imparts some more knowledge about real estate valuation and talks about his self-publishing experience in Part 2 of this interview.