Engineers technocrats as Valuers
First of all we have to remember that we Engineers / technocrats have done our engineering studies after doing 10+2 system of schooling with science subjects at + 2 level. To join and pursue engineering studies at graduation level Science students at + 2 level are only eligible. At present we are learned engineers, now engaged in the profession of assessing market values of Land and building and or Plant and Machinery. We have a noble task of guiding the entities like Banks and other govt and private organisations by assessing the market values of Engineering Structures like lands and buildings and Plants and Machinery with application of our engineering knowledge for the benefit of the Nation. So we have to prove that we are distinct from other people who are educated in Arts, Commerce and Science streams.
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We know that every one talks of development. Actually what is development. It is provision of infrastructure consisting of civil structures like Bridges, roads, mechanical units like small, medium and heavy industries etc. All can be done by Engineers only. Whatever progress made in medicine vaious technological gadgets are also because of engineers only.
However, of late some craftily clever people are arguing that profession of valuation of Engineering entities is as good as economics. Some go to the extent of saying that Common Sense is enough to evaluate Lands and Buildings. They argue that everything comes under economic activity. And everyone know about economics. For that matter can we say handover Judiciary to Economists and Accountants because Judges and administrative staff work there by taking salaries in the form of money? Doctors work for money. Shall we handover medical field to accountants.
And it is an ongoing scandal to usurp Engineer’s Valuer profession by non technical people especially accountants. But our engineers’ response to this onslaught is pathetic. Some engineer valuers are thinking that If IBBI is made compulsory we will clear the exam. But new rules are allowing non technical people to clear the exam along with you. No problem!
Some Judgments have come to our rescue and clearly told that engineer Valuer profession is the domain of technocrats. We are unable to use what is written on the wall to preserve our profession for engineers/technocrats.
I hereby bring out some points to argue that engineering field is different from other fields and it cannot be handled by non technical people if it is execution of engineering projects or assessment of engineering structures like Land and Buildings or Plant and machinery.
PLANT AND MACHINERY VALUATION
1. Plant means all allied works of machinery which make up an industrial unit. Machinery means all motors and allied works. At present Banks adopt the figures written in quotations or Bills as values of new Machinery and plant for new Plant and Machinery. But all plant and machinery along with civil structures make up an industrial unit and market value is wholesome. This can be assessed by an engineer only.
And when it comes to value of old Machinery Banks are adopting book value. Book value means depreciated value of plant and machinery as submitted to income tax dept. by the owners in their Income tax returns. According to this the value of p and m becomes nil after 7 years. Whereas p and m which is in running condition commands some market value. This Market Value is required by the Banks to assess the economic worth of the asset that is pledged to the Bank. And there are so many factors which effect market value of used and under running condition P and M. Like the product manufactured in a factory has greater demand then market value of the the Plant Machinery will be more. Another factor is obsoletion of Machinery.
If technologically advanced Machinery with more efficiency is available then the existing Plant and Machinery becomes less valuable. And if the P and M are regularly upgraded with new machinery then it commands more market value. Who can assess technically the technological value differences ? Only Engineers. Who can study engineering ? Only with science background at + 2 level.
So it is suicidal for Banks to get valuations of Plant and Machinery by non technical people who entered into Valuation stream by dubious channels, who are not competent to assess market values of Plant and Machinery.
LAND AND BUILDING VALUATION
2. Land: There is a misnomer among engineers that anyone can tell about market value of land. Hence, we think asking an engineer for market value of Land is a God’s gift from the banks.
But truth is different. Engineer by his education and training is equipped with the faculty of calculating the value of any asset in a scientific manner. Others cannot do this. Engineers look at any material, manufactured or natural, in a scientific manner. Before doing Engineering they are geared with the knowledge of Natural sciences, viz., Mathematics, Physics and Chemistry.
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Normal people find it difficult to do calculations. For example, ask some one to tell what is 2+2. He will say it is 4 easily. Then ask him what is 2 x 2. Then he can tell that it is 4. Then ask him what is 2-2. After a pause he will answer it is Zero. Then ask him how much is 2/2. It is division of 2 by 2. Then he finds it difficult to answer. He may or may not answer also. So any one that is a layman cannot do mathematical calculations easily. And I came across people who are in Real Estate, that is, Real estate brokers and found astonishing human ability deficiencies.
I have discovered that, if they know that 200 yard plot is 10 lakhs, they are ought to err to assess value of 600 sq yd which may be lying adjacent to it. Because they simply think 600 sq yd plot will cost 30 lakh by doing simple multiplication – 200 x 3 times. But this method fails in some cases. Because a 600 sqyd plot may become suitable for apartments. In that case it fetches more value. And if that plot is not located in non apartment culture area it fetches less value, because potential buyers may not be available who can invest a large sum of 30 lakh to purchase it. So only an engineer can assess market value of the plot correctly and reliably.
2. Residential buildings. People think that anyone can tell the market value of a building by applying plinth area rate. But they cannot assess the market values of civil structures in a technical way. Because,
a) Cost of construction varies from building to building depending on its utility, size of rooms, height of roof, quality of construction, use of quality materials. etc. Hence, plinth area rate cannot be applied uniformly for all buildings.
For example, if size of rooms are in the range of 12’x10′, then plinth area rate of construction may works out to Rs. 2000/- per sq ft. If rooms sizes range between 15’x12′ plinth area rate comes down to Rs. 1600 per sq ft. So uniform rate cannot be applied to assess cost of construction of a building on a flat.
And in case the building is constructed in black cotton soil area – for small buildings foundation cost would be less. Whereas if it is a multi-story building foundation cost doubles. Only engineer can know this variation based on the locality.
b) cost of wood used varies from Rs 1200 to 5000 per cu ft. So Plinth area rate varies widely depending on quality of wood used.
c) Marble cost varies between Rs. 30 to Rs 300 per sqft. PA rate varies accordingly. And also cost of other finishes like electrical fittings plumbing material used may be on higher side for a building constructed by a owner who used Rs. 300/- per sq ft marble. Then plinth area cost would increase manifold. That means if one finishing is superior other finishings also become costly. Hence PA rate to be applied becomes high. Only an engineer valuer can do this kind of assessment while doing market valuation of a property. And,
d) construction cost would be less for commercial buildings. High for residential buildings.
e) only engineers know how much steel is used and how many bags of cement is used, and only engineers can assess what was the cost of construction of a particular building depending on so many Engineering factors.
d) depreciation factor on the cost of construction can be assessed by engineers only. Depending on the condition and maintenance of the building, not simply by considering the age of the building.
And Future life can be assessed by engineers only.
So engineers should vehemently oppose usurpation of our Engineer valuer profession by accountants and others. And preserve our profession for technocrats fraternity in the interest of the engineering field and also in the interest of our profession. And also to save the Country from huge losses which may occur because of improper valuations that would be made by incompetent people.