Unfinished building objects value

The Urban Planning Code of the Russian Federation defines an unfinished capital construction object as: “a building, a construction or objects which are not finished excluding light constructions, kiosks, sheds, etc”.

Situations where building cannot be completed for some reasons were not uncommon. Usually, the reason for that is lack of funds allocated by investors or clients.

It is frequently investor to unfinished object wishes to continue building which requires assessment of the object.

Preparedness of unfinished building is an often used concept and expressed as a percentage. This is important in matters of co-investing. At a certain stage it can be found that Developer is unable to finish building therefore there is a need for understanding of what part of the money should be returned to each individual investor or participant of shared construction based on the availability of the particular part of the house (apartment), which was proposed for the allocation in the property after delivery of object in operation.

The concept of the availability of unfinished building object expressed as a percentage dates back to the time of USSR when work stages were processed as an acts, so-calledВ  “protsentovki”, which reflected the percentage of work completed for the construction phase, or to the entire building. This was useful during the universal application of a unified pricing system in which it suffices to multiply the facility readiness percentage for its estimate price to make clear how much money is spent, or will be spent on its completion or, more importantly to understand how much percentage of a state plan for the respective period (quarter, six months, a year, five years, etc.). In a market economy where not all is regulated by the State “protsentovki” is gone, but a grain of truth in the present moment remained.

From the percentage of readiness it is possible to calculate what portion of the money conforms to costs needed, what is unfounded therefore it is to be analyzed in detail and what is necessary for completion of the construction.

Don’t forget about costs for reconstruction of what was lost during the period when building was not finished. Also if building is deactivated in accordance with the requirements of normative and technical documents there will be contingencies caused by reactivation of the building.

In the light of the foregoing it is important for investor to value an unfinished building object to date to assess the economic feasibility.

Usually, unfinished building value applies to buildings and constructions. It is necessary to correctly classify unfinished building object for the value to be objective.

There are several ways to classify unfinished building objects. Potential profitability of real estate is a substantial classification criterion. Most of the buildings, public utility constructions and residential buildings can be used as profitable real estate. In evaluating this type of unfinished building objects a cost and profit method is used.

Evaluation of unfinished building objects is made to be used:

• to put an unfinished building object on an organization’s books;
• to determine market value that represented construction and market situation for an unfinished building object;
• to take a decision on further use of unfinished building object;
• to sell or buy an unfinished building object;
• to take a decision on management of land plot where unfinished building object is located.

Market value appraisal allows solving a number of problems:

• to put an unfinished building object on an organization’s books;
• to determine market value that represented construction and market situation for an unfinished building object;
• to take a decision on further use of unfinished building object.

Further use of unfinished building object depends on degree of its completion, possibility of changing its exploitation assignment. Often a frame of unfinished object can be used in another way then it was proposed to.

• to sell or buy an unfinished building object.

More often a new owner faces additional spending on paperwork, technical evaluation, linking connections. Today’s investor prefers to purchase an unfinished building object with prebuilt set of documents.

• to make effective use of land plot where unfinished building object is located.

Mostly a land plot is exactly what is valuable. Through our evaluation you can determine variations of the most effective use of land plot where unfinished building object is located.

If you have any questions ask specialists of Ltd. “Agency “Independence” online or by the phone. You can receive free consultation on each case and ask any of your questions.