The role of professional judgment in Indian real estate valuation: insights from lending industry experts

Abstract

PurposeThe purpose of this study is to examine the role of professional judgment in property valuation within India’s lending sector by exploring how different market and cultural factors influence valuation practices.Design/methodology/approachA mixed-methods research approach comprising interviews of 15 highly experienced property valuation professionals to understand nuances of property valuation and find important factors which require their professional judgment, based on which a questionnaire survey is administered to 137 valuers from various parts of India. A relative importance index (RII) analysis and a mixed model ANOVA were then used to evaluate the significance of different factors affecting property valuation.FindingsThe results reveal the factors which require professional judgment of property valuation professionals. Zoning and development plans, legal due diligence, regulatory compliance, real estate regulatory authority and supply–demand dynamics are top five factors. Also, there was no statistically significant difference between less experienced property valuers and their more experienced counterparts.Practical implicationsThe findings reveal important factors which require professional judgment while doing valuation in opaque property markets of India. A study reveals difficulties that valuation teams working for banks and NBFCs face due to challenges and variation in Indian real estate markets. Furthermore, it stresses the need for continuous professional development and adherence to ethical standards among valuation professions.Originality/valueThis research offers an all-inclusive study about the things that influence subjective judgment in Indian property valuation and provides insight into the intricate intertwining of regulatory, market and cultural aspects in the process.