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Exercise 8 : (IBBI)
Awarehouse property is situated close to a port facility in a major port twn. It is let out on a
50 years lease. The lessee is paying to the lessor an exclusive ground rent @ INR 2,000
perannum, after payment of an one time premium of INR 25,00,000, The rack rental value
on full repairing terms amounts to INR 1,20,000 per annum. The yield from freehold ware
houses in similar locations is considered to be 10% and for long term lease is 15%.
(Valuation of Real property : Page no. 69 - Mr. Symales Datta)
Questions :
What is the outgoing for lessor?
What is the net income for the lessor during the term period?
What is the YP during the term period?
What is the YP during the reversionary value calculations?
What is the value of freeholder's interest?
What is the market rent?
POR ON aWhat is the outgoing for lessor?
‘The outgoing for lessor is nil on the assumption that the lease is on full repairing
terms, however this is not specifically mentioned in the question. But could be
inferred as such, as the rack rent mentioned is on full epaining terms.
Whats the net income forthe lessor during the term period?
Rs. 2000/- per annum
What is the YP during the term period?
YR = 100/15 = 6.68
Whatis the YP during the reversionary value calculations?
The YP during reversionary value calculations is 100/10 = 10,
Whatis the value of freeholder's interest?
\Value of freeholder’s interest = value of term + value of reversion
i) Value of term (lessor's interest) 2000 x 6.65 = 13,320
ii) Value of reversion
Market value Rs. 1,20,000/-
YP.@10% 100/10=10
Capitalised value 4,20,000 x 10 = 12,00,000
YP.in perpetuity deferred _ 4
soyears@10% — — (T+o.ye 0081S
Value of reversion 2,00,000 x 0.008618
10,222
iil) Value of freeholder'sinterest 13,220 + 10,222
Rs. 23,542.
Whats the market rent?
Rs. 1,20,000/- per annum.
