The guideline value of a property is documented and published by the State Government. This is a public document that indicates the minimum value of the land considered for registration.
It helps the registering officer to detect prima facie any undervaluation of property. It is left to the buyer or seller to find out through various sources what the market value of a property is. This is difficult task and can become a contentious issue during disputes involving compensation for land acquisition. How does the court view this and what methods they recommend?
Market value, in simple words, is the price that a willing prudent buyer will offer to a willing prudent seller. But in the case of land acquisition, it is not the willing seller but someone who is forced to sell. Hence there is need to have a method to arrive at a market value.
The value depends on the theory of supply and demand which again depends on various factors like the economy, purchasing capacity and laws of the land.
The Full Bench of the Madras High Court in the case of Sakthi & Co vs Shree Desigachary (2006) 2 CTC, suggested three methods to ascertain the market value of the property.
(1) Avail the opinion of experts
(2) The price paid within a reasonable time in bonafide transactions of purchase of the lands acquired or the lands adjacent to the lands acquired and possessing similar advantages. Evidence of bonafide sales between willing prudent vendor and prudent vendee of the lands acquired or situated near about that land possessing same or similar advantageous features would furnish basis to determine the market value.
(3) To arrive at a value based on the number of years passed since the last purchase of the actual or based on immediately prospective profits of the lands acquired. To explain this further one can arrive at the value by multiplying the number of years passed since last purchase with the net annual income.
The other way to arrive at the value by capitalization method
The above excerpts were referred by the court in the case Mis. Greaves Ltd vs V.S. Raghava and another (2007) 4 MLJ 229
The court further added that "It is settled law, as laid down in the judgments referred above that in determining the market value the court has to take into account either one or the other three methods to determine the market value of the lands appropriate on the facts of a given case. According to the Supreme Court, generally, the second method of valuation is accepted as the best."
The courts state that the evaluation of these factors depends on the facts of each case and there cannot be hard and fast rule.
It also adds that common sense is the best and most reliable guide. The courts stipulate that every case must be dealt on its own set pattern bearing in mind all the factors as a prudent purchaser of land in which position the officer/judge must place himself or herself in.
Defining the phrase "opinion of experts", the Madurai Bench of the Madras High Court in the case A. V. Gopalakrishnan vs. O.L.Y.R. Paramanandam (2007) 4 MLJ 189) observed that the person "should be brought under the definition of expert as required under the Indian Evidence Act".
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