pp report 5th yr (1)

8/20/2019 pp report 5th yr (1)

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Amount of Re.1 :

•

Means the total amount to which an initial one-time investment ofRe.1 at a specied rate of interest will be accumulated in the end of

a given number of years

• If i! is the given rate of interest and n! is the number of years "then

the amount of Re.1 #$1%i&n

• '(ample: amount invested : Rs )**Rate of interest : )+

n#, years rate of interest accumulate at the end of , months : )**( $1#*.*)&,#Rs.,*

resent value of Re.1 :

• resent value of Re. 1 is payable or receivable at the end of the

given no. of yearsIf i! is the rate of interest / n! is the number of years " then

resent value of Re. 1.** #1

(1+i)n

• '(ample: present value# Rs. 0** receivable at the end of , monthsRate of interest# )+

0** (

0.05

1+¿¿¿1

¿

# Rs. )

Amount of Re. 1 per annum :

• It means that the total amount which will accumulate at the end of a

given no. of years" if Re. 1 is invested at the end of every year at aspecic rate of interest.

• If i! is the rate of interest" n! is the no. of years

• Amount of Re. 1 per annum#

i

1+¿

¿

¿n−1

¿¿

• '(ample : Amount invested #Rs. )** at the end of every ) years

Rate of interest # ,+


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)** ((1.06)5

0.06 # Rs. 2"01

3ears purchase:

• It is the gure which shows how many times the net annual income

is secured for its value

• 4or eg: if the annual income is considered as Rs.1*** / if its value is

Rs.2*"***" then it is said that the annual income is secured by 2*

times

• 5his number of times security of the annual income indicates the

value of the property .

• 3ears purchase represents capitalised value to receive Re.1 per

annum in perpetuity $for an indenite period" or for a (ed no. of

years&.

• 3ears purchased for a short period is less compared to that for

perpetuity so that investment for a short period is less more over

the income from it must be su6cient to allow interest on capital aswell as for sin7ing fund " so that the capital is recovered within the

short duration .

• 3ears purchased depends on the following factors:1. Rate of interest in light of property mar7et forming an integral part

of general investment mar7et

2. Age and condition of the building8. Mode of letting9. ituation of an frontage). ;onrming ecting the

development of a property. ?hether the property is full or partly developed0. ;ontinuity of rent. @igher rate of return for a lease hold property as compared to that

allowed on free hold property.


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• roperty mar7et forms a part of the investment mar7et and

therefore has to compete for its capital reuirements.

• All considerations being eual " an investor will generally invest in

such forms of investment which will give him ma(imum returns in

the form of interest whose rate will depend upon the demand /supply of the money.

• Interest is a reward for allowing to ma7e use of the money" the only

perfect liuid asset.

• 5he nancial reuirement of government" public bodies "industries "

business etc are raised by issue of stoc7s / shares which is

commonly 7nown as securities with certain rights attached.

• 5hose are issued in the form of certicates showing the original

value " can be sold for cash / are transferable to the buyer. 5heir

mar7et value will undergo changes depending upon the mar7et

conditions.

• Among the stoc7s / shares " the valuers have to 7eep an eye on the

yield available on the (ed interest securities li7e government bonds

etc" in order to decide what yield would be normally e(pected by a

purchaser if he were to invest his capital in real estate from the

investment point of view.

• 3ears purchased for a (ed no. of years:• 3ears urchased for the (ed no. of years is the multiplier by which

the net income per year" is receivable for a (ed no. of years is

multiplied in order to arrive at a present capital value of an asset.

• 3ears purchased is calculated in the following manner:

• 3early income from the capital invested representing a simple rate

of interest on the amount of capital invested.

• Annual sin7ing fund at a certain rate of compound interest to recoup

the capital invested at the end of a given no. of years.

• 3ears purchased for a (ed no. of years can be either at single rate

or at a dual rate

• 3 at single rate #

i

1+¿

¿

¿n−1

¿

i

1+¿

¿¿

¿


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• 3 at dual rate #

i

1+¿

¿

¿n−1

¿

i

1+¿

(¿¿n−1 ]+1

¿

¿

BR1

y+sinking fund forℜ .1

3'AR CR;@A' $3.& ID 'R'5CI53 :

It is the multiplier by which the net income per year recieveable in

perpetuity $i.e. forever& is multiplied in order to arrive at the presentcapital value of an asset" at a given rate of interest.

If I! is the rate of interest" then" 3ears purchase in perpetuity #1

i

'g : 3ears purchase in perpetuity using 9+ interest will be1

0.04=25

"5herefore" for an income of Rs. )** in perpetuity" a sum of Rs. )** ( 2)

# Rs. 12")** will have to be deposited in a ban7 at the rate of 9+interest.

IDEID= 4CDF :

• 5he capital invested in a property can be divided into two parts"

namely" that invested in land and that in building.

• 5he building is subGected to the natural law of decay with the result

that the owner will start losing part of his capital every year till a

time comes when the physical life of the building is


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capital invested in the building on its e(piry of useful life and in the

absence of such provision" the capital will be drifted away from the

property mar7et.

• 5his is overcome by providing what is 7nown as sin7ing fund

wherein a small portion of rent is set aside every year and depositedin a ban7 or invested in government securities at compound interest

such that when the life of building is over" the owner can receive the

full value of his building either from a ban7 or from securities.

• 5he calculation of sin7ing fund depends upon the life of a building as

well as upon the rate of interest and it is generally calculated on

H1* of the cost of construction as the owner will get 1*+ of the

cost on the sale of old building materials when the life of the

building is over.

• If I! is the rate of interest and n! is the number of years in which

the investment is reuired to be recouped" then"

• Annual sin7ing fund for accumulation of Re.1.00=

i

(1+i)n−1

• 'g: An old building having a future life of 2* years has been

purchased for Rs. 2*"***H- e(cluding the value of land. Assuming

that the value of demolished materials will be


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M'5@BF B4 AJCA5IBD:

Income capitali


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Jaws relating to repairs:

Introduction

1. 5he relationship between landlord and tenants is created by acontract of tenancy called the lease where by the landlord allows

the tenant e(clusive possession and enGoyment of the landlords

premises for a denite period in e(change for a periodic payment

called the rent.

2. If the lease is from year to year "it has to be by a registeredinstruments

8. 5he latter type of arrangement is to be found in case of monthlytenancy where in rent receipt and delivery of possession of

premises form important ingredient s to Gustify relationship between

landlord and tenant.

9. 5he liabilities! of repairs can be contracted one or statutory onedepending upon the circumstances of the case .

;B'DAD5:?hen there is a written lease or agreement" the respective liabilities of

the lesser $landlord& the lessee $tenant& are usually (ed by e(press

clauses in the deed itself.

;B'DAD5 by the lesser:

1& 5o put lessee in possession of the property.

2& Allow lessee uiet and peaceful possession of premises or payment

of rent regularly.8& 5o carry out heavy or special or structural repairs if so provided.9& 5o renew the lease if so provided.)& 5o pay the specied outgoings

;B'DAD5 by the lessee:

1& 5o pay the rent regularly.

2& 5o repair and 7eep in repair the demised premises.

8& Dot to ma7e additions or alterations to the premises.9& Dot to commit waste


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)& Dot to change the user of premises.,& Dot to erect permanent structure

?hat is repairsK

Repairs is a term of widest connotations! whose range varies from up7eep

to maintain the property as far as possible in its original condition and

e6ciency without the renewal and also include restoration "reconstruction

or even renewal of e(isting part of a building and at times renewal of

complete building "

tatutory provisions for repairs:

1& ection 8)9 provides that if any building" wall or other structure is li7ely

to fall in any way. 5he owner of such structure to repair such structure.

2& ection 801 provides that the state of the building in any bro7en walls"

bro7en Loorings and lea7ages through walls or Loors causing damages

"the landlord is reuired to ta7e suitable action to rectify.

8& ection 2) provided for repairs to drainage wor7s including

replacement of bro7en drain pipe by new ones.

Modality on failures of landlord to e(cute repairs :If the landlord has failed to e(ecute the repairs he will be

prosecuted in the court and authority will be granted to the tenants

under section 9 of M ; A;5. ?hich provides for a grant to

recover resonate e(penses incurred by them on repairs from the

rents that may become due from time to time "

rocedure and terms conditions for authority:

Cnder section 9


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1& Appointment of an architect or an engineer to prepare the plans

and estimates of repairs as per municipal notices as well as for

other wor7s

2& Applications signed by the occupiers from authority to besubmitted with the plans as well as an architect to supervise the

wor7s of repairs.8& Authority limits deductions by the occupiers of the amount spent

on repairs.9& 5he date of commencement of repairs be communicated to the

authority within a wee7 .)& 5he authority carries a validity period and if the wor7s are not

completed within the period .,& Do additions alterations are permitted for the structure for which

authority has been grated for repairs.& Applications by the architect for issue of completion.

?hat is dilapidations:

5he word dilapidations is a state of disrepair and waste is the resultant

e>ect of that disrepair.

Filapidations is the inGury which has occurred to houses" buildings during

temporary possessions of one party .

illustrations:

1& 5o stop lea7age of water from a toilet bloc7 will be tenantable

repairs.2& If not attended to in time. it will a>ect a few of the timber Goints

"beams and posts of the toilet bloc78& Again neglect in attending the above structural repairs.

Documents

pp report 5th yr (1)