Visualization of geospatial entities generally adopts digital elevation models (DEMs) that are interpolated to establish 3D co-ordinates for the entire terrain. The accuracy of the generated terrain models depends on the type of interpolation mechanism adopted. Generally available methods in this context use point data values and their distribution; however, terrain characteristics such as shape are not generally considered in the interpolation. We propose an adaptive interpolation strategy that considers the terrain features for improving the estimation accuracy. In this research, we have compared the proposed approach with different contemporary interpolation techniques, such as inverse distance weighting, kriging (KRG), nearest neighbour and spline methods. Comparative analysis of the proposed technique with contemporary approaches revealed that considerable success has been achieved with the procedure. Investigations have also been done to analyse the sensitivity of the approach to terrain smoothness.