Desktop Valuation/Automated valuation models- Are we ready?
I have been reading lot of posts about Automated valuation Models/ Desktop Valuation & its benefits in Quarantine...
But just a simple question to ask our-self..
Are we really ready to adopt Automated Valuation models ( AVMs) or Desktop Valuations in Indian market especially for mortgages? Aren't we very far for adopting such techniques?
"Elon musk developed a driver less cars and that are running successfully in some parts of the world but if ever thought to use the same in India, Is Indian environment and Indian roads in condition to adapt that today? Answer is NO. There is not just one reason but many.
Same applies to Desktop Valuations or AVM's. Indian Market is not yet ready to adopt that. & some of the major reasons are:
1) Property identification is far more challenging in India than any other country which are using AVM's. AVM's do not take into account property identification- Four Boundaries of site in comparison to the four boundaries of the documents.
2) They do not take into account factors like Graveyard/Nalah/Garbage/slum/ Railway Track T Point / South Facing/ closer to Temple/ school/ Grave yards / Religious structure / Electricity lines / Electric Pole/ Specific Tree like Peepal / Bargad Tree/ ASI Monuments / Slum/ Low class locality/ Railway Line etc or any other negative impacting reasons.
3)Many things can distort the estimated value of a property, including situations where a property is unusual compared to its neighborhood counterparts, access to off-market data is limited or missing.
4)They do not put into consideration the present physical condition of the property.Thereby, rely on “average condition” scenarios when determining value.
5) They cannot locate the exact location of property. Unlike other countries , India does not have HD view, 3 D view and Street view in Google maps which easily helps to locate the property. AVM' s rely on Google maps. Satellite Image of Google maps is updated once in 1-2 years time period.
6) They do not work in uncertain market scenarios. Like they cannot take into account the impacts of covid -19 while valuing the property.
7) They do not take into account the physical area of the property. They rely on documented area. Many properties especially in affordable segment do not have all necessary plans, Approvals and completion certificates. Without these documents area consideration can be inaccurate and can lead to Improper results. ( Sale deed do not account for authenticity of the area mentioned in the deed)
8) AVMs drawn especially from public records sources which can be inaccurate and incomplete. “Public records are known for being incomplete and slow to react to changing market trends,” There can be a delay for transactions to be recorded then even longer to be published electronically.
There are lot of other reasons like intentional frauds, forging of documents etc. Since it does not hold good for major chunk of properties , I believe that it's not suitable for Indian market.
I am not completely against the the automation but completely relying on it to arrive at value is not correct. Data analysis can be partially used to validate the results from traditional Method.
DATA has now become most important treasure for all sectors. No doubt data analysis will help Valuation Industry in many ways.I agree that AVM's are future, and we all should keep working on it.
Do u agree? Please share your views in comments below.
Senior Manager-Technical(CRM) at Yes Bank Ltd
4 年Only for apartments desk top valuation suits not for land and buildings in india it works in America
Registered Valuer u/s 34AB of Wealth Tax Act, 1957 (Government Approved Valuer) and Registered Valuer with IBBI under Company`s Act, 2013 for Land & Building
4 年I absolutely agree with you... Depending on fully automated valuation models can be proved a big risk for Indian economy because still major part of India is made up of villages which is not developed with planned structures in identical terms...
National Technical Manager at Yes Bank
4 年To add, the physical custody of the property and the neighborhood confirmation or enquiry of the property's ownership always adds value in keeping the frauds out. And compliance of construction wrt development norms and it's effects on recommendation/valuation is one more thing I would like to add to your list. I feel though AVM looks a misfit to Indian markets as of now, reforms in terms of availability/ access/transparency of the land /property revenue records and ownership title as per registration records on a given date will certainly restore some credibility. And the Google multi dimensional views when made possible could make it little viable with the control checks listed
Deputy Manager - Technical at Utkarsh Small Finance Bank.
4 年Absolutely correct, I was thinking the same regarding property identification, four boundaries, religious factor, proper approach road, land locked property etc and many more seems to be cons, if we use the huge previous data before covid-19 to valuate the property just after this pandemic is quite very early I think, one should analysis the market for next one year to gain new stats and compile AVM accordingly.
D.C.E.| B.E.Civil | A.I.V.(L&B) | Area Technical Manager | HDFC Bank
4 年AVM is digitised valuation tool and DV is approx or tentative average value derived with assumptions. Both can give output of market value in normal market condition when buyer and seller are in the market and transactions are happening. In current market scenario output couldn't be a market value because every input parameter e.g. land cost, cost of materials, labour cost, govt charges and developer profit all are expected to be corrected by some %. So, using inputs of normal market conditions i.e. before COVID-19 pandemic, deriving any value (market value, distress value, RR Value) at time of market uncertainty would be misleading. So, AVM and DV are not vaccines for current market scenario. It's time to restructuring standards and processes till everything on track.