VALUATION : PROFESSIONAL FEES PRESCRIBED BY BANKS: UNIFORMITY IS

REQUIRED

Article By: B. Kanaga SabapathyTiruchirappalli

1.0 FEES PRESCRIBED FOR VALUATION

1. Punjab & Sind Bank (issued by Zonal Office, Bhopal as on 11/09/2002) Value upto Rs. 50,000/- - 1/2 % Rs. 50,001/- to Rs. 1,50,000/- - 1/4 % Rs. 1,50,001/- & above - 1/8% With a maximum of Rs. 5,000/-

2) State Bank of India (Circular No. CIRCO/26/2004-05/ 07.09.2004, State Bank of India, Local Head Office, Chennai . First one lakh - Rs. 375/- Second one lakh - Rs. 185/- Subsequent every one lakh - Rs. 125/-

Maximum amount payable - Rs. 10,000/-

# For specific cases involving much higher value of property or for valuing complicated property, the rates may be agreed on a case basis on mutual discussions.

# Conveyance expenses and outstation expenses may be paid separately. Service tax may be paid.

3) Union Bank of India ( Circular No. 7779/27.09.2007 by Central Office, Mumbai-400 021)

The maximum professional fees payable for valuation of an asset will be as under:

1) On first Rs. 50,000/- of the assets valued - 1/2% of the value2) On the next Rs. 1.00 Lakh - 1/4% of the value3) On the balance - 1/8% of the value

The total fees should not exceed Rs. 40,000/- for property valued above Rs. 1.00 crore and upto Rs. 5.00 crore and Rs. 50,000/- for property above Rs. 5.00 crore.

Upto Rs. 50,000/- Rs. 250/-Above Rs. 50,000/-, upto Rs. 1,00,000/- Min. Rs. 250/-

Max Rs. 375/-Above Rs. 1,00,000/-, upto Rs. 50,00,000/- Min. Rs. 375/-

Max. Rs. 6,563/-

Above Rs. 50,00,000/-, upto Rs. 1,00,00,000/- Min. Rs. 6,563/-Max.Rs.12,813/-

Above Rs. 1,00,00,000/-, upto Rs. 5,00,00,000/- Min. Rs.12,813/-Max. Rs.62,813/-(limited to Rs. 40,000/-)

Above Rs. 5,00,00,000/- limited to Rs. 50,000/-

Further, where two or more assets in a particular account are required to be valued at one time) then all such assets shall be deemed to constitute a single asset for the purpose of calculating the fees of the valuer.

For outstation travelling and diem, actual tickets up to AC-II tier and Rs. 200/- day respectively may be considered for reimbursement. The above fee structure is subject to negotiation at the time of giving each assignment as the same is to be recovered from the borrowers, special care needs to be taken while negotiating fees for revaluation of the assets already mortgaged to the bank.

4) Sundaram Home Finance (Chennai)

FessValue upto Rs. 10 lakhs Rs. 1,000/-Above Rs. 10 lakhs up to Rs. 20 lakhs Rs. 1,000/- + Rs. 100/lakhAbove Rs. 20 lakhs up to Rs. 30 lakhs Rs. 2,000/- + Rs. 50/lakhAbove Rs. 30 lakhs up to Rs. 50 lakhs Rs. 2,500/- + Rs. 50/lakh

Above Rs. 50 lakhs up to Rs. 100 lakhs Rs. 3,500/- + Rs. 50/lakhAbove Rs. 100 lakhs up to Rs. 300 lakhs Rs. 6,000/- + Rs. 50/lakhAbove Rs. 300 lakhs up to Rs. 500 lakhsLayoutOthersService tax as applicableOutstation charges Rs. 500/- extra (above 50 Km.)

Rs. 10,000/- (Maximum)Rs. 2,000/-

5) Indian Overseas Bank (Central Office, Chennai – 600 002 – Ref. : Misc/174/2007- 08/17.11.2007)

1. Fees On the first Rs. 50,000/- of the asset valued - 1/2% of the value

Next Rs. 1,00,000/- - 1/4% of the valuerAndOn the balance of the asset valued - 1/8% of the valueSubject to a minimum of Rs. 250/- and maximum of Rs. 10,000/- for valuation of land, building and machinery for each party account.

2. Conditionsi) Where two or more assets are required to be valued at the instance

of an assess, all such assets shall be deemed to constitute a single asset for the purpose of calculating the fees.

ii) If the same property has to be revalued at the instance of bank, 50% of the above prescribed charges only is payable for the second instances of valuation, provided the first set of valuation report / documents are made available to the valuer.

6) Indian Bank (Central Office, Chennai-600 001 – Circular: CPGD Lr. 5.2003/ 5.5.2003)

Category Fee, where the value of property is

Fees % age Fees payable (Rs.)

Minimum MaximumA.

B.

C.

D.

Upto inclusive of Rs. 5.0 Lakhs

Above Rs. 5.0 lakhs upto and inclusive of Rs. 10.0 lakhs

Above Rs. 10.0 lakhs up to and inclusive of Rs. 1.0 crore

Above Rs. 1 crore

0.15%

0.125%

0.05%

Rs. 5000/- + 0.025% forRs. 10.0 lakhs

200/-

750/-

1,250/-

5,000/-

300/-

1,250/-

5,000/-

10,000/-

Note: The banks are advised to pay the fees (after deducting TDS whether applicable by means of banker’s cheque to the valuers on receipt of the report. The bank does not permit the payment of fee to the valuers directly by the borrower customers / owners of the property.

7. Vijaya Bank (Regional Office, New Delhi – dated 25.04.2006)

Up to Rs. 1.50 lakh - Rs. 200/-Rs. 1.50 lakh to Rs. 2.50 lakh - Rs. 250/-Rs. 2.50 lakh to Rs. 5.00 lakh - Rs. 500/-Above Rs. 5.00 lakh - Rs. 0.1% subject to maximum of

- Rs. 5,000/- per facility/account

8) State Bank of Mysore (Head Office, Bangalore Circular no. 011/2003-2004/ 12.02.2004)

On the first Rs. 50,000/- of the property so valued 1/2% of the value On the next Rs. 1,00,000/- of the property so valued 1/4% of the valueOn the next Rs. 50,00,000/- of the property so valued 1/8% of the valueOn the balance of the property so valued 1/16% of the value

9) The Federal Bank Ltd. (Credit Control Department)Fees

On the first Rs. 50,000/- - 1/2% of the value On the next Rs. 1,00,000/- - 1/4% of the value On the next Rs. 50 lakh - 1/8% of the value On the balance of property value - 1/16% of the value The fee payable as above is subject to a maximum of Rs. 5,000/-

Conditions i) When two or more properties are required to be valued at the instance of the borrower- all such assets shall be deemed to constitute a single asset for the purpose of calculation of fees.

ii) If the property has to be revalued at the instance of the bank, 50% of the charges are stipulated in the second or subsequent instances provided the first valuation is made by the same valuer and subject to a maximum of Rs. 2,500/-.

iii) If the property is in the form of vacant / house site, fees payable shall be 50% of the normal charges subject to maximum of Rs. 2,500/- . In case of more than one property –one vacant land other not a vacant land –valued, fee maybe calculated separately with overall ceiling of Rs. 5,000/-.

iv) The expenses or travel is limited to and fro first class railway fare or actual expenses if other modes of conveyance are used, whichever is less.

v) No halting allowance will be paid.

iv) The service tax payable may be added to the fees payable and income tax shall be deducted at source wherever applicable.

10)Oriental Bank of Commerce (Head Office, New Delhi-110 001 Circular No. HO/ ADV /27/2005-06/321/8.11.2005

1st Rs. 50,000/- of property so valued @ 1/ 2% of the value - Rs. 250/-On the next 1 lakh of the property so valued @ 1/ 4% of the value - Rs. 250/-For property of Rs. 1.50 lakh - Rs. 500/-On the balance of the properties so valued @ 1/8% - Rs.125/- per lakh

The above rates are indicative only and rates may be fixed depending upon the local conditions and in consultation with other banks operating in the area. An upper cap of Rs. 10,000/- may be fixed. For very specialized or high value properties the rates may have to be negotiated on case to case basis in consultation with the owners of the property.

11)Syndicate Bank (Head Office, Manipal- 576 119 Circular No. 203/99/ BC/CR/64/CRPPD 14.10.1999)

Considering the over an increase in the cost of operation, it has been decided to revise the valuation fees payable to approved valuers as per following schedule subject to a minimum of Rs. 250/- and maximum of Rs. 10,000/- for each party/account.a) On the first Rs. 50,000/- of the property valued

- at 1/2% of the value of property

b) On the next Rs. 1.00 lakh of the property valued

- at 1/4% of the value of the property

c) On the next Rs. 50.00 lakh of the property valued

- at 1/8% of the value of the property

d) On the balance of the property property valued

- at 1/16% of the value of the property

Branches may also note the following conditions :

1. “Where two or more assets are required to be valued at the instance of the borrower, all such assets shall be deemed to constitute a single asset for the purpose of calculation of fees.

2. If the property has to be revalued at the instance of the bank, 50% of the charges are stipulated in the second instance, provided the first set of valuation report/ documents are made available to the valuer.

3. If the property is in the form of a vacant land / house site, fees payable shall be 1/ 4% of value of the asset, subject to a maximum of Rs. 2,000/-.

4. In cases warranting interim reports at various stages of construction / development for every valuation fees at the rate of Rs. 100/- per such additional valuation are admissible. But this is again subject to a ceiling of Rs. 10,000/- per party/ account.

5. The expenses for travel are limited to and for 2nd class railway fare or actual expenses if other modes of conveyance are used whichever is less.

6. No halting allowance is allowed.

7. The service tax payable may be added to the fees payable and income tax shall be deducted at source wherever applicable.

12. UCO BankUpto Rs. 50,000/- - Rs. 750/-Rs. 50,0001 to Rs. 1.00 lakh - Rs. 1,000/-Rs. 1,00,0001 to Rs. 50.00 lakhs - Maximum Rs. 1,000/- Minimum Rs. 6,250/-Rs. 50,00,001 and above - Minimum Rs. 6,250/-

Maximum Rs. 25,000/-For outstation travelling and diem, actual railway tickets up to 1 st class and Rs. 200 per day respectively, may be considered for reimbursement. The above fee structure should be further negotiated with the valuers if the value of the property is high.

13 Bank of India (Zonal Office, Bhopal – Ref. No. ZO: Credit: MNT: 2292/27.01.1999)

On the first Rs. 50,000/- of the asset as value - 1/2% of the valueOn the next Rs. 1 lakh of the asset as value - 1/4% of the valueOn the balance of the asset as valued - 1/8% of the value

Where two or more asset are required to be valued, all such assets shall be deemed to constitute a single asset for the purposes of calculating the fees payable.

14) Life Insurance Corporation of India (Divisional Office, Bhopal – Ref. No. L&HPF/01.01.1998)

Up to Rs. 50,000/- -Rs. 250/-Between Rs. 50,000/- to Rs. 1,00,000/- -Rs. 350/-Between Rs. 1,00,000/- to Rs. 3,00.000/- -Rs. 350/- + 0.20% of the value

of the Property above -Rs. 1,00,000/-

Between Rs. 3,00,000/- to Rs. 5,00,000/- -Rs. 750/- + 0.15% of the value of the property above -Rs. 3,00,000/-

Between Rs. 5,00,000/- to Rs. 20,00,000/- -Rs. 1,050/- +0.10% of the value of the property above -Rs. 5,00,000/-

Above Rs. 20,00,000/- -Rs .2,250/- +0.05% of the value of the property above - Rs.20,00,000/-

15) Punjab & Sind Bank (Zonal Office, Bhopal – letter dated 11/09/2002)

Value up to Rs. 50,000/- - 1/2%Rs. 50,001/- to Rs. 1,50,000/- - 1/4%Rs. 1,50,001/- & above - 1/8% with max. of Rs. 5,000

16) Central Bank of India (Regional Office, Chennai – RO: CR: 2005-06:935/ 07.12.05)

1) First Rs. 50,000/- of the value of asset - 1/2% of the value Next Rs. 1.00 lakh of the value of asset - 1/4% of the value Above Rs. 1.50 lakhs - 1/8% of the value

2) If two or more assets are required to be valued all such assets shall be deemed to constitute a single asset for the purpose of the payment of valuation of fee. However if the secured asset is vacant land, the max. amount of fees should not exceed Rs. 5,000/- and in other cases should not exceed Rs. 10, 000/-.

3) A reasonable amount of conveyance charges may be reimbursed if the work allotted is outside the area of the valuer (Mutually agreed to between the valuer and the bank).

17) LIC Housing Finance Ltd. (letter dated 24.11.1998)

Up to Rs. 50,000/- - Rs. 250/-Up to Rs. 1,00,000/- - Rs. 250/- + 1/ 4% of the value above

- Rs. 50,000/-Above Rs. 1,00,000/- - Rs. 375/- + 1/8% of the value above

- Rs. 1,00,000/-

18) Can fin Homes Ltd. (Credit Dept, Bangalore – ABM No. 130/98 dt. 11/08/1998)

Up to Rs. 50,000/- - 1/ 2% with a minimum of Rs. 250/-Up to Rs. 50, 000/- to 1,50,000/- - 1/ 4% with a minimum of Rs. 500/-Above Rs. 1,50,000/- - 1/8%

19) The Dhanalakshmi Bank Ltd. (Erode – letter dt. 30/08/1998)

i) For Agricultural land / landed property only Rs. 150/- per acre Minimum of Rs. 250/- & maximum of Rs. 5,000/-ii) For land with building Land valuation as per ceiling as above Building @ 0.1% of the value of the building Minimum of Rs. 400/- & maximum of Rs. 10,000/-

20) Andhra Bank (Credit Risk Management, Head Office, Hyderabad Circular No. 38/26.04.2004)

1) Fees payable to Valuation

If the property is in the form of a vacant land / house site, fee payable is 0.25% on the value of the property subject to a maximum of Rs. 2,000/-. In the case of other properties, the fee payable is 0.25% on the value of property subject to a maximum of Rs. 10,000/-.

2) Fees payable on revaluation The fee payable in case a revaluation is done by the same engineer who had originally valued the property shall be as follows:

If property is in the form of a vacant land / house site, payable is 0.125% on the value of the value of the property subject to a maximum of Rs. 1,000/-. In case of other properties, the fee payable is 0.125% on the value of property subject to maximum of Rs. 5,000/-. 3) Re-imbursement of outstation expenses incurred

To & fro 1st class / AC 2 tier fare boarding / lodging at the rate of Rs. 250/- per day at all district Head quarters / cities and Rs. 150/ day at other centers. The expenses reimbursed are to be recovered from the borrower.

21) The South Indian Bank Ltd. (Circular No. CCD/078/97-98 dt. 29.12.1997)

1) The fees or charges for valuation of building, machinery, etc. will be 0.1% of the value of the securities under valuation with a minimum of Rs. 500/- and a maximum of Rs. 10,000/-.

2) For the purpose of fees calculation, different properties, building or machineries situated in the same location will be treated as one valuation and maximum fees payable will be Rs. 10,000/- only.

3) Where securities are situated at a distance beyond 100 Kms, actual travelling expenses limited to 1st class train fare, if connected by rail, or taxi fare at the approved rate will be reimbursed against the voucher produced or self declaration submitted. Where own vehicle is used, Rs. 2.50/- per Km. Will be paid.

4) The fees / charges for the valuation along with the travelling expenses if any, to be reimbursable, will be paid by the bank directly and I undertake that no amount, on any account, will be collected from the customers directly.

22 Corporation Bank (Regional Office, Coimbatore – RO/CBE/ILRD/OR/ 594/99- 31.01.2000)

On the first Rs. 50,000/- of the property so valued - 1/ 2% of the value On the next Rs. 1,00,000/- of the property so valued – 1/ 4% of the value On the next Rs. 50,00,000/- of the property so valued – 1/8% of the value On the balance of the property so valued, 1/16% of the value.

22) Karnataka Bank Up to Rs. 50,000/- - Rs. 250/-Rs. 50,001/- to Rs. 1,00,000/- - Rs. 350/-Rs. 1,00,001/- to Rs. 3,00,000/- - Rs. 350/- + 0.2% of above 1.0 lakhRs. 3,00,001/- to Rs. 5,00,000/- - Rs. 750/- + 0.15% of above 3.0 lakh

Rs. 5,00,001/- to Rs. 20,00,000/- - Rs.1,050/- + 0.1% of above 5.0 lakhMaximum fees - Rs. 4,000/-

24) ING Vysya Bank

a) In case of land & buildingOn the first Rs. 50,000/- - 0.5% of the valueOn the next Rs. 1,00,000/- - 0.25% of the value In the excess of Rs. 1,00,000/- - 0.125% of the value Subject to a maximum of Rs. 7,500/- for each property valued.

B)In case of vacant land / house site - 0.25% of the value Subject to a maximum of Rs. 2,000/-

25) Canara Bank (Bangalore Circle)Up to Rs. 50,000/- - 1/2% Rs. 50,001/- to 1,50,000/- - 1/4%Balance asset - 1/8%

For valuation of stocks the max. fees - 50,000/-

26) HUDCOFees is as per the norms prescribed in the Wealth Tax Act, 1957 (i.e. CBDT rates).

27) Bank of Baroda

Rs. 50,000/- of property valued - Rs. 250/- Rs. 50,001/- to Rs. 1,00,000/- - Rs. 350/-Rs. 1,00,001/- to Rs. 3,00,000/- - Rs. 350/- + 0.2% of above 1.0 lakhRs. 3,00,001/- to Rs. 5,00,000/- - Rs. 750/- + 0.15% of above 3.0 lakhAbove Rs. 5,00,000/- - Rs. 1,050/- + 0.1% of above 5.0 lakh

28) Punjab National Bank (Circular : CPY- 22/15.02.2003, Credit Policy & Management

Division, New Delhi) Rs. 20 Lakhs & above but less than 50 Lakhs - Rs. 2,000/- Rs. 50 Lakhs & above but less than 1 Crore - Rs. 4,000/- Rs. 1 Crore & above but less than 5 Crore - Rs. 7,000/- Rs. 5 Crores & above - Rs. 10,000/-The fees prescribed above are maximum and branches may negotiate the fees on case to case basis according to quantum of work involved. In case of a borrower, where a number of properties are to be valued, spread over different locations, the incumbents shall negotiate the consolidated fee lower than those prescribed above.29)

Note : 1) The fees expressed as above is as on March 2008 and based on the

available particulars. If there is any correction or revision, the fact may please be highlighted.

The practicing valuers may please note that the fees structure may vary from place to place and they are requested to verify.

2.0REMARKS BY THE AUTHOR: 1) The fees prescribed by the Central Board of Direct Taxes as well as

the Institution of Valuers is as follows :

For Rs. 50,000/- of value : 1/2%For next Rs. 1,00,000 of value : 1/4 %Above Rs. 1,50,000 : 1/8%

In simple words First one lakh : Rs. 375/-

Second one lakh : Rs. 185/-

Subsequent every one lakh : Rs. 125/-

2) The Reserve Bank of India in its circular has given guidelines to all the banks that the panel valuers should be the valuers be the valuers registered with the Central Board of Direct Taxes under section 34AB of Wealth Tax Act. Many banks prefer their panel valuers should be the life members of Institution of Valuers, of Valuers, Delhi, the

only professional body meant for valuers.

3) When the above is a fact, then the valuers are eligible to get fees prescribed by the Central Board of Direct Taxes and the Institution of Valuers.

1) But it is not known why different banks adopt different yardsticks while prescribing the professional charges.

1) Different zones adopt different fees (and it is a pity that some of the branch managers adopt their own fees in order to favor the borrowers) and some of the regions follow different patterns for housing schemes.

2) Central Board of Direct Taxes and Institution of Valuers have not flxed any ceiling whereas some of the banks have flxed ceiling such as Rs. 4,000, Rs. 5,000, Rs. 7,500, Rs. 10,000, Rs. 25,000, Rs. 50,000, etc. There is no uniformity at all.

3) Some banks have fixed one ceiling to landed property and another ceiling for land & building property. Many people think that doing valuation of land is easy whereas it is no so, actually.

4) i) As per CBDT norms, “If two or more assets are required to be valued, all such assets shall be deemed to constitute a single asset for the purpose of payment of valuation fees”.

ii) But CBDT & Institution of Valuers have not flxed any upper ceiling.

iii) Some of the banks have fixed a ceiling of Rs. 10,000/- and they stipulate further that “the same ceiling holds good for any number of assets”.

There is no logic at all. How can a valuer do ‘n’ number of valuations requested by a borrower for properties situated at different locations and is expected to receive a ceiling of a meager Rs. 10,000/-. What is the guarantee the borrower obtains the reports and will not use for other purposes ? The valuer becomes a victim and the borrower becomes smart. In other words, the borrower is provided with an option to split the reports as he wishes and the valuer is deprived from getting his rightful due for such a split.

iv) No doubt the borrower is an important person for any bank but the bank should respect the valuers also. Due regard is to be given to the professionals.

v) In some case, the bank manager pleads for a lower fees since the facility granted is too small when compared to the value of the asset. No control is there to compensate the valuer when the limit is raised later on.

5) Personally I suggest the following: The professional charges payable to the panel valuers may be

i) Rs. 125 for everyone lakh of value subject to a maximum of Rs. 10,000/- for first one crore of property value and Rs. 5,000/- for every additional one crore of value.

ii) Travelling & accommodation boarding, photo expenses at actual & service tax, if applicable is to be added. iii) For very high value properties, complicated & tedious properties or less value properties which involve more labour, etc. the fees could mutually be fixed.

3.0 CONCLUSION

The client and the banker should be made to realize and recognise that Valuation is not a mere application of principles. It is an application of mind. The experience and expertise a valuer brings into his profession are irreplaceable. The responsibility of the valuer in terms of the correctness of the value

assessed is onerous. A good professional valuer could save the bank from sticky accounts by assessing the realized value correctly (if the purpose of valuation is for mortgage). The fee paid to a valuer is not only for his work, but also for the responsibility he shoulders.

When the assessed value is high, the fees may appear to be large, but the responsibility undertaken is also immense.

The valuer is always on the banker’s side. He wants to take care the Bank’s interest first.

The valuer’s expectation is :

LET THERE BE UNIFORMITY AMONG ALL THE BANKS IN THE COUNTRY WITH REGARDS TO THE PROFESSIONAL FEES.