Valuation Manual Update Final (A)

Development Bank Of Ethiopia
Research Process
1. INTRODUCTION
1.1 Back ground

Development Bank of Ethiopia (DBE) is a government owned financial institution with the aim of
providing short, medium and long term credit to priority area projects set by the Federal Government of
Ethiopia. Priority area projects are projects that are believed to generate foreign currency to the country,
labor intensive in nature and pay the most tax to the government
DBE’s lending tradition is project based, where the promoter is not obliged to avail collaterals outside
the project, in most of the cases. Most of the loan that DBE extends goes for the purchase of
Production Plant, Machinery and Equipment; and, to cover the construction of Civil Structures. Plant,
Machinery, Equipment; and Civil Structures are the major project items that the Bank holds as
collateral. DBE undertakes valuation of Building Assets for foreclosure action, expansion of existing
projects and re-valuation of its financed building assets.
Therefore, this developed manual which is to be up dated every year deals with valuation of
buildings and other associated civil works including consideration of the amount paid in
advance and interim payment/s for the plot of land held on lease bases as stated in the new
proclamation.
This developed and updated Real property valuation manual categorized and graded buildings
in detail to include pre-engineered ware houses, factory halls or ware houses ranging from
medium size to extra large size, G+1-G+4 buildings, Villa type buildings and other civil
works as well as empirical formulas for valuation of septic tank.
1.2Objective of the study
The objective of the study is to meet the expectation of operational units in valuing the
buildings to be foreclosed, revaluation of its building assets and expansion works of buildings
financed by the bank.
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1.3 Statement of the Problem

Most of the projects that DBE finances are specialized in nature, they are to produce specific
product and cannot easily be exchanged in the market in case they fail, hence, it entails both
over estimation and under estimation issue which needs careful and proper estimation.
1.4 Methodology
1.4.1 Data collection
 Primary data were collected through interviewing of concerned organs of the Bank and
other stakeholders.
 Secondary data were collected from the Bank’s Head Office custody, Ministry of
Urban Works and Construction, and Ethiopian Bankers Association, internet sources,
book ‘International valuation standard’ have also been employed.
1.4.2 Data analysis
 In this study the case team had selected representative plans for each category of
buildings and bill of quantity is prepared for each grade and category; by averaging
each category and grade then the rate is determined by dividing the total costs to the
area or volume
 The information gathered on land lease value is compiled and added to present value
of the building and site improvements.
1.5 Scope and Limitation of the study
1.5.1 Scope
The study mainly focuses on developing valuation manual for buildings and other civil
works by collecting, consolidating and analyzing relevant data through:
 Selecting Typical building plans (Architectural, Structural, sanitary and electrical
drawings )
 Conducting cost estimation for the typical buildings selected and associated civil
works
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1.5.2 Limitations and challenges

The main limitations and challenges of this study are
 Valuation of buildings with Steel or aluminum space frames are not covered in this
manual because of limitation of data, however, the sub structure and other local
constructions should be treated by BOQ, and the space frame part for the time being
should be treated by proforma invoice as discussed elsewhere in the document.
 Since the manual does not give detail procedure for testing or checking construction
material and quality of workmanship, it is purely left to the valuer’s visual inspection
and judgment.
 Getting data is the main challenges of this study.
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2. REAL PROPERTY AND ITS VALUATION (Definition and Concepts)

2.1 Real Property and Real Estate
Real property is an interest in real estate which is normally recorded in a formal document,
such as a title deed or lease. Therefore, real property is a legal concept distinct from real
estate which represents a physical asset. Real property encompasses all the rights, interests,
and benefits related to the owner ship of real estate.
In contrast, real estate encompasses the land itself, all things naturally occurring on the land,
and all things attached below and above the ground to the land by the people, such as
buildings and site improvements and permanently attached to the building such as plumbing,
heating and cooling systems; electrical wiring; and built-in items like elevators, or lifts are
also part of real property.
Valuation of real property is conducted for different purposes namely; expansion works of
existing projects, revaluation of its building assets and foreclosing properties of defaulted
projects.
2.2 Market Basis of Valuation
Market value is the estimated amount for which a property should exchange on the
date of valuation between a willing buyer and willing seller in an arm’s length
transaction after proper marketing wherein the parties had each acted knowledgably,
prudently, and without compulsion. The concept of market value reflects the collective
perceptions and actions of a market and is the basis of valuing most resources in
market based economies.
Market-based valuations are developed from data specific to the appropriate markets
and through methods and procedures that try to reflect the deductive process of
participants in those markets. They are performed by the application of the sales
comparison, income capitalization, and cost approaches to value.
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2.2.1 Income Capitalization Approach
It is the process of estimating the value of an income-producing property by

capitalization of the annual net operating income expected to be produced by the
property during its remaining economic life. Capitalization relates income and a
defined value type by converting an income amount in to a value estimate. The process
considers direct relationships, yield or discount rates applied to a series of incomes
over a projected period, or both. The income approach reflects the principle of
substitution and anticipation.
In another words, the income capitalization approach is based on the net income,
specifically net operating income, or investment return that a buyer expects from the
property. The price that the buyer will pay will be determined by the probable return
the property will yield from the investment and can be shown by the following
formula.
2.2.2 Sales Comparison Approach
It is the process of estimating the value of a property through examination and

comparison of actual sales of comparable properties. It is also called market
comparison or market data approach. A property being valued is compared with sales
of similar properties that have been transacted in the open market. In this approach, the
appraiser finds three to five or more properties that are sold recently and are similar to
the subject property in the same vicinity. The appraiser notes any dissimilar features
and makes adjustment by using the following formula.
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2.2.3 Cost Approach
Cost approach is the process of estimating the value of a property by adding the
appraiser’s estimate of the reproduction (the Birr amount required to construct an exact
duplicate of improvements to the subject property) or replacement cost (the Birr
amount required to construct improvements of equal utility using current construction
methods and materials) of property improvements (can be termed also as Replacement
Cost New), less accrued depreciation, to the estimated land value.
This approach is to be used when a value estimate via either the income capitalization
approach or the sales comparison approach is not possible because of data problem. In
cost approach, quantifying Deprecation to reach at Depreciated Replacement Cost or
Depreciated Reproduction Cost is the most paramount and important step.
Replacement or
Reproduction Cost of - Depreciation on + Site Value = Property Value
Improvements Improvements
However, of the three generally accepted valuation approaches to market value; this manual
adopts the cost approach for valuation of properties for the reason that, it is the cost approach
method which is more suitable to estimate specialized properties such as industrial complexes
of specialized nature, farm developments.
Specialized properties: - Are those properties rarely if ever sold on the open market, except
by way of sale of the business of which they are part of, due to their uniqueness, which may
arise from the specialized nature and design of the buildings, their configuration, size or
location.
Characteristics of specialized properties:
 Are useful to a limited number of uses or users;
 Are rarely, if ever, sold on the open market, except as part of the business entity
 Have generally specialized structures; and
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 Earn revenue that has not been derived from an open market and for which market
based evidence does not exist.
In general, specialized properties are those properties having specialized physical or geographical
factor, offer very little utility for any purpose other than that for which they were originally designed.
These classes of properties are so specialized by nature that no comparable market data could be
employed to apply the income approach; hence, the final market value will fully rely on the results of
the cost approach
In applying cost approach, buildings are first categorized according to their purposes, height,
materials of construction and size. Then each category is further classified into grades based on the
quality of materials used for the construction. For the analysis of cost of construction complete and
approved structural, architectural, electrical, sanitary and other designs of representative buildings are
collected and bill of quantity is prepared using currently updated unit price manual, finally the unit
cost per m2 and/or per m3 is determined by dividing the estimated cost of the construction of the
building into the building’s plinth area or volume.
The first step in the cost approach, as in any valuation exercise, will require collection of
relevant documents and carrying out property survey. This basic step will mainly involve the
following activities.
Step1. Document Collection
The valuer shall at first collect the following relevant documents:
Title certificate/s
Construction permit/s for improvements
Approved complete plan/s for G+1 and above buildings and for large size halls, but optional
for others except architectural plans
Specification and Bill of Quantities prepared by qualified professional/ for improvements
under construction/
Other relevant documents deemed necessary for the specific task
Step2. Carry out survey of the properties to acquire relevant data:
Land and title/ownership information:-
 Confirm that the ownership information, plot orientation and dimensions
indicated on the title deed correspond with the physical property, and take
owners address.
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 Carryout measurement of actual plot, to determine dimensions and plot area.

 Take note of any encroachments or reductions of Vis-a’ Vis the title deed.
 Take note of location of the property with respect to prominent land marks.
 Determine holding type remaining holding period
 Identify any easements or restrictions
Information on Improvements on the site:-
 Measurement of buildings with (plus or minus 50 cm tolerance both ways),
compound works, fences and ancillary facilities and comparison with permitted
constructions.
 Construction details and improvement category
 Age/remaining lives for buildings, land and improvements
 Quantities, area, volume, size or capacity
 Condition and deprecation information
 Costing information (original cost and major refurbishment details land costing,
where available)
 Component information (where applicable)
 Notes on special structures
Neighborhood information:-
 General use of property
 Location
 Type and width of access roads
 Distance from main road
 Information on local development plans in near future
 Encumbrances on the site
 Availability of basic utilities
Once relevant documents are collected and physical survey of properties are carried out to
capture pertinent characteristics and parameters of neighborhood and specific property,
there are five steps to complete the cost Approach to Valuation.
 Estimate the replacement cost new (RCN) of all improvements to the land
 Estimate the accrued deprecation for each improvement.
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 Calculate replacement cost new less deprecation (RCNLD) by deducting all

accrued depreciation from replacement cost new for each improvement.
(Subtract step 2 from step 1).
 Request land lease value from the concerned lease office
 Add all replacement cost new less accrued depreciation to the land lease
value. This step some how will derive us to a value which is indicative market
value. Each of these steps is explained in the following sections:
Step3. Estimate the replacement cost new (RCN) of all improvements to the land
Replacement /construction costs of improvements are based on market rates or evidence,
which would typically be estimated from analysis of ranges of representative improvement
categories.
The step mainly requires:
 Categorization of improvements
 Building grading
 Determination of superficial/plinth area or volume of the subject property
 Determination of appropriate replacement cost rate
 Determination of costs of site developments, consultancy fees and others
Mechanism of analysis and data corresponding to the above steps are detailed as follows:-
Step3.1 Improvement Categorization

At first, improvements on the site will be categorized in to two major groups (Buildings and
Site works) enabling effective grouping of replacement cost calculation:
Buildings are then grouped in a way that would allow the most comprehensive and effective
representation of building types. As in any such exercise, the valuer’s expertise in the
proper identification of building components and judgment in the application of ranges of
replacement cost rates is vital for the realistic representation of costs of specific properties.
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Table 1: Improvements Categorization
Sr.
No Improvement Category Description of category
I. Buildings
Include all buildings with more than one story. Basement
1 Category I (G+1 – G+4) and mezzanine each counted as one
Single story building. example G+0 residential buildings,
2 Category II (villa) G+0 guest houses, G+0 office buildings etc fall into this
category
3 Category III (Production
Halls and Ware houses)
Include buildings having no or minimal internal partition wall

A) 200-500m2 and having height greater than 3.5m

2
B) 501-1,000m and height greater than 5m. Most factory halls, stores,
meeting room, lecture rooms fall into this category
C) 1,001-2,500m2 and height greater than 5m. Most factory halls, stores,
D) 2,501-5,000m2 and height greater than 5m. Most factory halls, stores,
E) 5,001-10,000m2 and height greater than 5m. Most factory halls and stores
fall into this category
F) Above 10,000m2 and height greater than 5m. Most factory halls and stores
fall into this category
II. Site Works

Includes any civil work improvements on the site in addition
to buildings described above, such as pavements, retaining
5 Site Improvements walls, fences, septic tank, sewerage systems, and any other
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ancillary civil engineering works which could be

considered as part of the Real property
* For factories with Partition wall area to plinth area ratio greater than 20%, the cost of partition wall
Should be calculated separately by bill of quantity method and added to the total cost
Minimum requirement for Buildings to be held as Collateral

Buildings offered as collateral should fulfill the following conditions:-
 Supply of own water and electric meters wherever applicable
 Safe vehicular access road to the property
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 No evidence of continuing settlement, excessive dampness, leakage, decay, termite

attack or other condition impairing the safety or serviceability of the structure
 Stone Masonry foundation above and below ground level
 CIS roof cover
 For Chika House the wall should be chika plastered internally and cement plastered
or /and rendered externally for which its plan is approved by the concerned body.
Step3.2 Building Grading
This is an objective measure of the construction quality of materials used in completing the
structure. Buildings are categorized into four groups based on purpose, height and size,
these are G+1 and above category, villa, large and medium size store category and each
category is again subdivided into grades based on the quality of material, and workmanship,
it is important to properly determine the grade because costs are directly related to it. In this
manual no detail procedure for measuring material or workmanship quality is given, the
valuer is expected to have basic knowledge and experience which enable him to identify
quality mainly by visual inspection. The following table gives a description on building
category, grade with their respective plinth area rate
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Table:2 Category I (G +1 – G + 4)
Plinth area Grade A Grade B Grade C Grade D Grade E Grade F
Rate(2013/14) 8,224/m2 6,285/m2 5,490/m2 4,500/m2 4,018/m2 3,740/m2
Rate(2014/15) 8591/m2 6572/m2 5725/m2 4917/m2 4,217/m2 3905/m2
Top quality material Good quality material Average material and Economic class Low cost construction Inferior quality material
and workmanship, & and workmanship standard, material, standard material & & workman ship, with
unique in style workmanship, workmanship, simple workmanship some no adequate light,
General
repetitive style of design how lesser than ventilation &
Description
design standard, with no circulation, exhibit no
adequate light & professional touch
ventilation, lucks
professional touch
Sub structure C-25 & above C-25 & above C-25 & above C-25 & above C-25 C -25
supper
C-25 & above C-25 & above
structure C-25 & above C-25 & above C-25 C -25
Mostly aluminum Brick, some part Mostly HCB with HCB HCB HCB
curtail or equivalent aluminum curtail or some part Bricks
Walling with some reinforced equivalent
concrete
Mostly best quality Mosaic, good quality Quartz/mineral plastered/ rendered Plastered /rendered Pointed
marble or granite ceramic, marble plastered , average and painted externally/plastered
cladding cladding, plastered grade cladding, internally
and Wall décor internally gypsum
Wall finish plastered and painted
Roofing Best quality roof tile, 0.5mm thick and G-28 CIS or EGA on G-30 CIS on wooden G-3o or G-32 CIS on G-32 CIS on wooden
slate on timber or above EGA on steel or wooden truss, truss wooden truss truss
steel truss, reinforced timber truss, good
concrete roof quality roof tile
Best quality parquet, good quality parquet, PVC ceiling ,chip wood Hard board painted Hard board painted Some part hard board
Perforated aluminum acoustic or gypsum painted, ceiling
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Ceiling ceiling Decorated

Best quality sash Aluminum or solid Aluminum imitation 38mm LTZ window 28mm LTZ window 28mm LTZ window and
doors with trim wood wooden sash doors, or Seiko profile metal and doors, 3 mm clear and doors with 3mm doors ; rough trim
double glazed double good trim internal door and windows, glass, standard flash clear glass flash window and doors
hanged windows with flush wooden doors typical design, 4mm wooden doors wooden doors ,usually not air tight
Windows & aluminum tinted glass
doors
Mostly granite , best Good quality marble Marble chips, average Mostly standard Mostly Cement Cement screed
quality parquet on and some part good quality ceramic, good quality plastic tiles, screed, some part
Floor finish screed quality porcelain quality PVC tile terrazzo, and some terrazzo tile
part ceramic tile
Plenty of fixtures, best plenty of fixtures of Good quality Standard class and Economic class Low cost fixtures and
European made or good and European European or Asian mostly Asian brand fixtures and below below the required
equivalent, decorated made or equivalent fixtures of adequate fixtures of just the required quantity quantity(Turkish type
and luxurious class quality, decorated big quantity sufficient quantity WC, small size hand
Sanitary fixture such as Jacuzzi size, with sufficient wash basin
proportion to the
building requirement,
high class fixtures
such as shower box
Plenty of fixtures, plenty of fixtures of Average quality Economic class and Inferior quality Inferior quality fixtures
Good and European good and European European or Asian mostly Asian brand fixtures and below and below the required
Electrical made or equivalent made or equivalent fixtures of adequate fixtures of just the required amount amount
quality with sufficient quality with sufficient quantity sufficient quantity
fixtures proportion to the proportion to the
building requirement building requirement
Table :3 Category II (villas)

Building Element Grade A Grade B Grade C Grade D
2 2 2
Rate/m2(2013/14) 7,065/m 5,244/m 3,925/m 2,313/m2
Rate/m2(2014/15) 8057/m2 5825/m2 4470/m2 3063/m2
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good quality material and top Average material and standard low cost construction material
General construction quality workmanship, workmanship, repetitive style of low cost material and standard and workmanship somehow
detail professionally designed design workmanship, simple design lesser than the standard
stone masonry above and
footing or other type below ground level reinforced stone masonry ,hard core, mass stone masonry, hard core,
sub structure reinforced concrete structures concrete grade beam concrete slab(c-20 and lesser) mass concrete slab
Reinforced concrete column Reinforced concrete column and No reinforced concrete
super structure and beams beams Concrete structures structure
Mostly HCB with some part Wooden splinter with chicka
walling mostly Brick and stone walls Brick HCB plastering , HCB wall
Mosaic, dressed kotebe stone
kebena stone, other good cladding or equivalent average Cement sand Rendering for
Wall finish quality claddings cladding, Quartz plastered Plastered /rendered and painted chika walls/ Pointing to HCB
EGA or G-28 on steel or timber Most part G-28 or 30 on timber
truss, Reinforced concrete truss, some part concrete,
Roofing Roof, good quality roof tile medium quality roof tiles CIS Gage 30 or 32 on wooden truss CIS Gage 32 on wooden truss
good quality parquet and
Ceiling acoustic, gypsum decorated PVC ceiling ,chip wood painted Mostly Hard board painted No ceiling, some part abujedid
Aluminum or solid wood sash Aluminum imitation metal door Some part 28mm LTZ or
doors, good trim internal flush and windows, typical design 38mm LTZ window and doors ; rough rough trim local wooden
Window and doors wooden doors 4mm tinted glass trim window and doors doors
Mainly low quality plastic tile,
terrazzo, cement tile with some part
Floor Finish Marble, parquet Marble chips and porcelain good quality screed Cement screed
Terrazzo made Turkish with high flush
/ economic class low flush WC, Only cement made toilet
Average quality Asian fixtures economic class shower try and hand seat with no flushing, no
Sanitary and fixtures good quality European fixtures of adequate quantity wash other sanitary fixture
standard quality and insufficient No fixture, (e.g. lamp holder
Electrical fixtures good quality European fixtures good quality European fixtures quantity and incandescent lamps)
 Chicka houses mentioned in grade D of store category should fulfill the minimum requirement stated on page 10 of this manual
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*
Category III Ware Houses and Factory Halls
Table :5 A) 200-500m2
Building
Component Grade A Grade B Grade C
3 3
Rate/m3 (2014/15) 789/m 614/m 358/m3
Good material and standard workmanship, Economy class material and standard low cost material with floor area
General Description with floor height 5m and above workmanship below 750 m2
Sub structure Higher class (c-25 and above) RC foundation Higher class (c-25 and above) RC foundation stone masonry
hot rolled Primary super structural members
beam and column frames, red oxide or
galvanized finished secondary structural
members ( purlins, girt, eave struts, wind
bracing, flanges) and to other secondary Reinforced concrete intermediate, top , grade
Super structure structural members beams and columns Eucalyptus pole
Steel sheet, 1.5-2.5m height of the wall can be
walling hydra form, brick or HCB HCB or stone CIS
color coated, galvanized, factory applied poly
ester paint minimum of 0.5mm thick for steel
panel, pointing or plastered and painted for
Wall finish HCB ,brick or hydra form Pointed -
plain galvalum finish or corrugated galvanized
steel sheeting painted internally and externally CIS Gage 30 or 32 on wooden
Roofing with polyester paint on steel truss CIS Gage28 or 30 on wooden truss truss
Aluminum, galvanized steel window and door
Window and doors frames - CIS and wire mesh
Floor Finish Good quality cement screed RHS or 28 mm LTZ and or fixed metal louver mass concrete
Sanitary system partial sanitary fixtures Cement screed No sanitary fixtures
partial sanitary fixtures(high flush Turkish
Electrical fixtures Good quality Fixtures type toilet seat, hand wash basin) Incandescent lamp
standard quality electrical fixtures
For Pre engineered ware house, with Standard quality aluminum sandwich panel take 817 Birr/volume
** For ware houses with floor treatment coating or other floor finishing the cost should be calculated separately and added to the total cost
*** Heavy duty Electrical installation of factory buildings should be estimated separately.
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Table 6: B) 501-1,000m2
Building Component Grade A Grade B Grade C
Rate/m3 (2014/15) 690/m3 624/m3 337/m3
Good material and standard
workmanship, with floor area below 750 Economy class material and standard
General Description m2 workmanship, low cost material
Higher class (c-25 and above) RC Higher class (c-25 and above) RC
Sub structure foundation foundation stone masonry
Reinforced concrete intermediate, top, Reinforced concrete intermediate, top ,
super structure grade beams and columns grade beams and columns Eucalyptus pole
Walling HCB, brick, hydra form or stone HCB or stone CIS
Wall finish Plastered or/and rendered and painted Pointed -
Roofing EGA roof on steel truss CIS Gage28 or 30 on wooden truss CIS Gage 30 or 32 on wooden truss
Ceiling Painted Chip wood Ceiling - -
Aluminum imitation, RHS, 38mm LTZ
Windows and doors or/and louvered glass RHS or 28 mm LTZ and or fixed metal louver CIS and wire mesh
Floor Finish Standard quality ceramic tiles Cement screed mass concrete
Sanitary system Sufficient average quality fixtures type toilet seat, hand wash basin) No sanitary fixtures
Electrical fixtures Good quality electrical fixtures standard quality electrical fixtures Incandescent lamp
* In calculating volume of multi purpose halls effective height should be taken

** Heavy duty Electrical installation of factory buildings should be estimated separately
Table 7: C) 1,001-2,500m2
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Building Component Grade A Grade B Grade C

Rate/m3 (2013/14) 619/m3 568/m3 317/m3
Economy class material and standard

General Description Good material and standard workmanship workmanship low cost material
Higher class (c-25 and above) RC Higher class (c-25 and above) RC
Sub structure foundation foundation stone masonry
Reinforced concrete intermediate, top, Reinforced concrete intermediate, top ,
super structure grade beams and columns grade beams and columns Eucalyptus pole
Walling HCB, brick, hydra form or stone HCB or stone CIS
Wall finish Plastered or/and rendered and painted Pointed -
Roofing EGA roof on steel truss CIS Gage28 or 30 on wooden truss CIS Gage 30 or 32 on wooden truss
Ceiling Painted Chip wood Ceiling - -
Aluminum imitation, RHS, 38mm LTZ
Windows and doors or/and louvered glass RHS or 28 mm LTZ and or fixed metal louver CIS and wire mesh
Floor Finish Standard quality ceramic tiles Cement screed mass concrete
Sanitary system Sufficient average quality fixtures type toilet seat, hand wash basin) No sanitary fixtures
Electrical fixtures Good quality electrical fixtures standard quality electrical fixtures Incandescent lamp
* In calculating volume of multipurpose halls effective height should be taken

Table 8: D) 2,501-5,000m2
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Building Component Grade A Grade B

Rate/m3 (2014/15) 826/m3 674/m3
General Description Good material and standard workmanship Economy class material and standard workmanship
Sub structure Higher class (c-25 and above) RC foundation Higher class (c-25 and above) RC foundation
Reinforced concrete intermediate, top, grade beams and Reinforced concrete intermediate, top , grade beams and
super structure columns columns
Walling HCB, brick, hydra form or stone HCB or stone
Wall finish Plastered or/and rendered and painted Pointed
Roofing EGA roof on steel truss CIS Gage28 or 30 on wooden truss
Ceiling Painted Chip wood Ceiling -
Windows and doors Aluminum imitation, RHS, 38mm LTZ or/and louvered glass RHS or 28 mm LTZ and or fixed metal louver
Floor Finish Standard quality ceramic tiles Cement screed
partial sanitary fixtures(high flush Turkish type toilet seat,
Sanitary system Sufficient average quality fixtures hand wash basin)
Electrical fixtures Good quality electrical fixtures standard quality electrical fixtures

Table 9: E) 5,001-10,000m2
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Rate/m3 (2014/15) 923/m3 770/m3
Reinforced concrete intermediate, top , grade beams and
super structure Reinforced concrete intermediate, top, grade beams and columns columns

Table 10: F) Above 10,000m2

Rate/m3 (2014/15) 603/m3 577/m3
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Reinforced concrete intermediate, top , grade beams and
super structure Reinforced concrete intermediate, top, grade beams and columns columns

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Valuation of buildings with Steel or aluminum space frames
Steel or aluminum space frames are currently in use especially for bigger factories and
warehouses of wider span due to the fact it has cost and erection time advantages in the
assembling process. However, to establish the valuation rate of same we are in short of
data for the time being; hence, it is proposed to use original contract prices or proforma
invoices.
To determine the depreciated replacement cost of steel or aluminum space frames, all fees
normally included in the acquisition cost shall be thoroughly assessed. These cost
components shall be
1) Original contract or commercial invoice cost

2) Freight-in, handling, and storage costs
3) Specific in- transit insurance costs
4) Bank charges
5) Erection costs
6) Customs clearance and payments (if there is any) should be considered.
However, in the absence of documents of different charges use the percentage set by the
DBE as stated below
a) Bank charges: (3% of FOB value)

b) Sea Freight: In the absence of shipping documents: (3% to 5% of
FOB value) depending on the size of the container or building element
c) Marine Insurance: (1% of FOB value
d) Port handling, Loading and Unloading, Customs clearing and
forwarding, local transport and other costs: (3% of FOB value)
e) Erection cost of space frames established from the compiled and
analyzed data: (10 % of FOB value)
f) The cost of the sub structure should be valued using BOQ method until sufficient data
and documents are collected and analyzed.
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Plinth area / volume multiplying factors for regions out side A.A.
The current construction costs of the buildings outside Addis Ababa have been calculated
assuming that the construction site is in Addis Ababa, therefore for buildings outside Addis
Ababa, the factors which take into account additional transportation cost, variation in
equipment rental and labor cost is introduced
Replacement cost of buildings in different regions is calculated using their respective unit
price manual that is, using unit rate of construction works prepared for their regions. Price of
most of the construction works of regions out of A.A. are higher than A.A. unite rate, since
most of industrial construction materials are transported from A.A.
Therefore, the ratio of the replacement cost of building constructed say, in Bahir Dar, valued
using Bahir Dar regions’ unit rate, to the replacement cost of the same building constructed
in A.A. is calculated to be 1.06, and hence, the same procedure is followed in calculating for
the other regions.
Table 6: Plinth area / volume multiplying factors for regions out side Addis Ababa
No DBE Regional offices Multiplying Factor

1 Bahir Dar and surrounding 1.06
2 Dire Dawa and surrounding 1.00
3 Hawassa and surrounding 1.03
4 Jimma and surrounding 1.04
5 Mekele and surrounding 1.06
Step 3.3 Replacement Cost Rate Determination and method of measurements
Once the improvement category and Grading is determined from the description given in the table
above replacement cost for buildings and other improvements will be determined from respective
plinth area rate or volume. As far as possible buildings are classified into different grades so that
buildings which will be pledged as a collateral to fit specifically to one of the building grades, but in
actual practice the building pledged as a collateral may fall in between two grades. In this case a
guide line is given below for selecting a reasonable value between values of consecutive Grades
This manual adopts the Code of Measuring Practice, 5th Edition of The Royal Institute of
Chartered Surveyors. For all practical purposes and reporting needs GEA (Gross External
Area) as defined in the code shall be used.
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Guide line to choose reasonable value within the given range
It is the ultimate intention of this manual to minimize variations between valuers in the
determination of rates. Although this manual is prepared with the basic understanding that
each valuer will act prudently, in a competent and ethical manner in all aspects of the
valuation exercise, however, it is necessary to set a certain guideline according to which the
valuer takes a reasonable value between rates when building falls between two grades
which most of the time the valuer/s could encounter
As already mentioned in the building category part, the rates represent the typical range of
values, with consideration of the specific components of the development in each category.
Typical percentages of building components, which are annexed to this manual, are already
calculated from sample buildings used for the category development and also calculation of
the range of values for each and every respective building category. These percentages will
be used in choosing reasonable plinth area rate /volume between the boundary values.
WORKED EXAMPLE
GIVEN
A G+2 residential building around Lafto, located 30m from 20m wide main Road has been
Offered for collateral
.
Location: Lafto ,Kebele 17
Plot Area: 500m2
Improvement G+2 Building
Site improvement Dressed stone pavement, septic tank and HCB fence
This Building, is categorized under SINGLE STOREY & ABOVE CATEGORY
Building Grade
Building Element Component Description of Building X

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General Description Quality material and workmanship, most part of the building
is composed of best quality component, designed by
consulting firm, all designs are available
Sub structure C-25 class RC
supper structure C-25 or Higher class RC
Walling Both internal partition walls and external walls are HCB
front side aluminum (covers 28% of the external wall area)
Wall finish External front part aluminum other sides are Harar marble
cladding, toilets and kitchen with best quality ceramic tiles
Roofing EGA on steel truss
Ceiling Decorated suspended gypsum ceiling
Windows and doors External doors are aluminum while the rest are good quality
flush wooden doors
Floor finish Good quality porcelain, marble
Sanitary fixture Plenty of good quality, decorated large size with sufficient
proportion to the building requirement
Electrical fixtures Plenty of fixtures, good and European made or equivalent
quality with sufficient proportion to the building component
Comparing the component description of Building X with reference grading description given
on page10 – 12 we can see that, this building fits into class B of category I, except for its
walling. The walling material used namely HCB corresponds to a Grade C building of the
same category
Therefore, this building can not take the plinth area rate given for Grade B, which is 6,572
Biirr/m2; or the plinth area rate corresponding to Grade C building 5,725 birr/m2, thus, the
plinth area rate should fall between the two rates, now the question is how to choose
reasonable value between the ranges? To decide on this, we need to see the following
points
 Which building components are common to both grades? The sub structure, super
structure requirement for both Grade C and Grade B are the same
The difference between the plinth area rate of grade C&B (i.e.) 847 Birr/m2, is due
to the difference in material quality of all building components (other than the
aforementioned structural parts).To approximate the contribution of each building
component we use percentage cost of typical building component enclosed with
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this manual as Annex. For our case to approximate the contribution of block work
out of the 847 Birr we can use the table as follows
For G+2 building grade B, cost percentage of block work internal is 5%, block work
external 13%, roofing 8% joinery 2%, metal work 8% floor finish 6% wall finish
internal 18%,wall finish external 10% ceiling woks 8%,sanitary work 2% and
electrical work 2% summing these we get 82%
The value we should deduct from the plinth area of grade B building for not fulfilling
wall requirement = 847*(sum of percentage cost of internal and external block
work) /82 = 847*18/82 = 185.93
The plinth area rate of the building will be 6,572.00 – 185.93 = 6386.07 Birr /m2
Replacement cost determination of site improvements

A. Septic Tanks
The size of a septic tank depends on many factors, of which the major one is the number of
users. This by itself depends on the floor area of the building and the purpose of the
building. The following table relates the total floor area of a building to the required capacity
of the septic tank. The valuer shall use this table only after making sure that there is a
septic tank constructed to serve the building under consideration. This procedure is directly
taken from the Ethiopian Bankers Association valuation manual
Table 7
Item Total floor area of Capacity of

No. the building(M2)* septic tank (M3)
1 Below 200 10
2 200 10
3 1,000 20
4 2,000 30
5 3,000 and above 60
* Floor area includes all buildings in the compound.
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Note
 For intermediate floor area of buildings, interpolate the above figures linearly to
arrive at the corresponding capacity of the septic tank.
 For residential and office buildings, multiply the capacity of septic tank shown
above by a factor F=1.0.
 For commercial buildings, multiply by a factor F that ranges from 1.1 to 1.4,
depending on the prevailing conditions.
 For factory buildings, multiply by F which ranges from 0.7 to 1.0, depending on
the prevailing conditions.
 For multi-purpose halls, multiply by a factor F which ranges from 0.3 to 0.8,
depending on the prevailing conditions.
Costing of Septic Tanks

After determining the size of the septic tank by the procedure stated above, use the
following equation to arrive at the cost of the septic tank:
Y = 1,248x + 33929
Where X is the size of the septic tank in m3, and Y is the cost of the septic tank in Birr.
B. Other site improvements

Fence work, compound gate, pavements, site sanitary, site electrical works, water tank and
supports and other civil works should be treated by bill of quantity
Civil costs for washed and dry coffee sites
As the name signifies these are properties built for washing, grading and drying of green
coffee and dry coffee
Individual components of the site shall be estimated using the following unit rates.
1. Cheery Hopper, 1,674 Birr/m2/1,741 Birr/m2
2. Fermentation and soak Tanks, 1,529 Birr/m2/1,529 Birr/m2
3. Reception & Machine room, 744 Birr/m2/744 Birr/m2
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4. Washing, Grading and Effluent Channels, 331Birr/m2/331 Birr/m2

5. Masonry Reservoir
A) Sub structure, 622 Birr/m2/622 Birr/m2
B) Super structure: wall including plastering, 693 Birr/m3/693 Birr/m3
6. G.S.P and Gate valves shall be estimated using bill of quantity
7. The elevated washed coffee drying bed that includes wire mesh, eucalyptus posts, tension
Wires, etc is not worth of estimation, as its rate of depreciation is high and can easily be
dismantled .
Other special Considerations
A. when ever such items as,
 Machine foundation
 Columns supporting overhead cranes
 Retaining walls
 Corbels
 Shades, garages, car parks
 Apron, washing ramp, Oil Interceptor and mud trap of fuel station are
encountered; it should be analyzed using bill of quantity method based on an
approved plan.
The cost of machine foundation should be calculated separately using bill of quantity method
from the approved plan and added to the total cost.
B. Roof Terrace: If there is a floor tile or any other material like guard rails etc the
additional item should be treated using bill of quantity method.
C. Pent House: if the floor area of the pent house is greater than the sum of the areas of the
stair well and the lift shaft, it shall be treated to have an additional story, else the area will be
added to make total floor area, but the pent house shall not be added as an additional story.
D. Verandah: In case the width of verandah exceeds 1.2m veranda should be treated using
the bill of quantity method
E. Halls: The rate obtained for halls is with the assumptions that there are no mezzanine
floors. If the hall has mezzanine floors, the valuer should treat it using bill of quantity.
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F. Fence: In case of a common fence wall between two owners of property, only half of the
fence part shall be considered in the valuation, unless the owner presents legal documents
showing that the whole fence belongs to him/her.
Consideration of Professional Consultancy Fees
The additional cost incurred for consultancy services, such as architectural, structural,
electrical and sanitary designs and drawings, as well as quantity surveying,
construction supervision, geotechnical investigation, topographic surveying and
other related services shall be included in the estimation as a percentage point of the total
depreciated replacement cost.
The following table shows the common fees for professional consultancy services as a percentage
of the Deprecated Replacement Cost adopted from Ethiopian Bankers’ Association
Table 8
Item Project cost (Birr) Fee Rate as %
No. Project Cost
1 0-500,000 4.25
2 500,001-1,000,000 3.75
3 1,000,001-2,500,000 3.25
4 2,500,001-5,000,000 2.75
5 5,000,001-10,000,000 2.25
6 >10,000,000 1.75
The percentage points shall be included only if complete and relevant documents are
presented, such as architectural, structural, electrical, sanitary documents, etc. However, if
only partial documents are presented, split the above percentage points proportionally as
follows:
1. Architectural 45%
2. Structural 30%
3. Electrical 10%
4. Sanitary 10%
5. Specification and bill of quantities 5%
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Step4: Estimating the Accrued Depreciation
Definition and concepts
Depreciation is any loss in value from original fixed asset cost. The term is used in
different context in valuation and financial reporting. In the context of asset valuation,
depreciation refers to the adjustment made to the cost of reproducing or replacing the
asset to reflect Physical Deterioration, Functional Obsolescence and Economic
Obsolescence in order to estimate the value of the asset in hypothetical exchange in the
market when there is no direct sales evidence available.
In financial reporting, depreciation refers to the change made against income to reflect
the systemic allocation of the depreciable amount of an asset over its useful life to the
entity. In financial reporting, it is specific to the particular entity and its utilization of
the asset, and it is not necessarily affected by the market.
The total depreciation due to all causes from time of construction to the date of
valuation is called accrued deprecation. Generally there are three categories of
depreciation: Physical Deterioration, Functional Obsolescence and Economic
Obsolescence.
Physical Deterioration is a loss in value due to impairment in physical condition; may

be curable or incurable. Curable physical deterioration can be repaired or replaced
economically; that is, the cost to cure the defect will result in an equal or greater
increase in overall property value. Incurable physical deterioration cannot be cured
economically.
Functional/Technical Obsolescence is a loss in value within a structure due to

changes in tastes, preferences, technical innovations, or market standards. This results
when layout, design, or other features are undesirable in comparison with features
designed for the same functions in the same property. Functional obsolescence
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includes excess capital costs and excess operating costs. Functional Obsolescence may
be curable or incurable.
External or environmental or economical obsolescence is any loss of value from

causes outside the property itself and is almost always considered incurable
Straight Line Deprecation method is a method of estimating accrued depreciation by

applying to the replacement cost new of the property the ratio of the asset’s effective
age to its economic useful life.
Effective Age of a property is based on the actual wear and tear and maintenance, or
lacks that the building has received. On the other hand, the economic life (useful life)
of property is the period of time during which a structure may reasonably be expected
to perform the function for which it was designed or intended.
2.5.1 Depreciated Replacement Cost (DRC)
The DRC of a structure is found by deducting the costs of wear and tear (depreciation)
from the replacement cost new (RCN). The deduction made for wear and tear
(depreciation) depends on a number of factors. For instance, according to Real
Property Valuation Manual of Ethiopian Bankers Association (EBA), the age of the
structure relative to its expected usable life span (service life) is the basic factor for
wear & tear of physical asset. Another factor considered in determining depreciation is
the existing condition of the structure.
Ethiopian Building code of standard (EBCS) states that design life of reinforced concrete
building is 50 years which is nominal value. In determining the expected service life (ESL) of
a building component or assembly, ISO 15686-1 prescribes an approach based on
knowledge about materials and building technology. This approach starts with reference,
service life estimate and applies a series of factors that relate to the specific use conditions
of the component or assembly. The factors are:
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A. Quality of components as supplied to the project;

B. Design level of a component or assembly’s installation (e.g. how protected it is from
elements which may degrade it);
C. Work execution level or skill level of the installers;
D. Indoor environment (e.g. whether the component will be utilized in a wet area such as
a bathroom or kitchen, or in a relatively stable indoor environment such as living room
E. Outdoor environment (e.g. northern climate, coastal climate, southern climate, etc.);
F. In-use conditions (refers to specific use conditions of the building); and
G. Maintenance level (what is the level of maintenance possible for the particular
component during its useful life?). Hence, considering the
 50 years design life given in EBCS as a reference,
 ISO 15686-1 stated above as a guiding principle
 Techniques used by institution of different countries for determination of
buildings useful life and
 Observations made on the building assets financed by the bank
The table below is given for useful life of buildings and other civil works
Design Service Remark

Sr. Improvement Description Life
No (Years)
1 Buildings with RC structures with brick and stone
masonry wall and RC Roof or EGA sheet over steel truss 50
2 Buildings with RC structures, concrete block walls and
Roof with EGA sheet over steel truss /pre-engineered 45
factory halls as defined in Grade A of large size factory
halls
3 Stone masonry foundation , RC grade beam, column, tie
beam, bricks or concrete block walls , CIS roof over 40
wooden truss
4 Wooden splinter / adobe/ CIS wall with mainly wooden
structures with stone masonry foundation and cement
plastered and rendered externally for chicka houses, 25
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corrugated iron sheet over wooden truss

5 Fencing and compound works 20
6 External sanitary & electrical 20
Table: 9 useful lives for different structures
Method of Depreciation
Although there are different methods of depreciation the age life (straight line) method shall
be used in estimating depreciation in this manual. This method is based on the assumption
that the depreciation occurs at an even rate throughout the projected useful life of the
structure. However, this method of depreciation assumes that every building depreciates on
straight line bases over the span of its economic life.
In order to use this method of depreciation it is important to know the chronological/actual
ages and effective ages. Buildings effective age may or may not coincide with the
chronological age. If a building has had better-than-average maintenance and is superior in
quality and design its effective age may be less than its actual age. For instance a 50 years
old house may have an effective age of only 40 years because of rehabilitation or
modernization. On the other hand, a poorly constructed house that has been inadequately
maintained may have an effective age greater than its chronological/actual age.
Estimation of effective age is subjective judgment of the engineer; however, to minimize the
problem of subjectivity, condition factors which factors up or down the chronological age
adopted from Ethiopian Bankers Association (EBA) is given in the table below.
Table: 9 Condition factor grading

Corresponding
No Rating Description Depreciation
Multiplier
Buildings in perfect condition, very attractive and highly
desirable.
This “new” appearance exhibit no physical deterioratio
1 Excellent n diminished of functional utility. Rarely do occupied 0.80
structures merit this condition.
Very good, slight evidence of deterioration, still

attractive and quite desirable Has a “like new” both
exterior and interior appearance. Many new homes or
2 Good a recently finished exterior or interior may exhibit this 0.90
condition. No exterior repairs are evident
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Marked wear and tear is apparent, average

attractiveness and desirability. Most properties exhibit
3 Normal this condition. Normal “wear and tear” is evident with 1.0
only minor signs of deteriorations and functional utility
is normal
Marked deterioration, rather unattractive and
undesirable but still useful both Interior and exterior
4 Fair wall require some maintenance, but the property 1.1
generally is habitable even though physical
deterioration is evident and functional utility is reduced
dilapidated structure with no functional utility and
5 Poor considerable physical deterioration 1.2
Thus, the formula for straight line method of depreciation is,

D = A/UL
Where, D = Depreciation
A = The effective age
UL = Total useful or economic life
Hence, the chronological age of the building is multiplied by the condition factor grading to
calculate the effective age of the building by referring to the table above, thus, the effective
age computed will be used to find the depreciated replacement cost.
Example: A building with a useful life of 50 years, chronological age of 18 years and
replacement cost of Birr 1,500,000.00 observed to be in fair condition; find the depreciated
replacement cost of the building
 Condition factor for a building with fair grading is 1.1, therefore, the effective age
will be 18 * 1.1 = 19.8 years
 The depreciation amount of the building is equal to birr 1,500,000.00*19.8/50
= Birr 594,000.00
 The depreciated replacement cost = Replacement Cost New less depreciation
(RCNLD) will be Birr 1,500,000.00 - 594,000.00 = Birr 906,000.00
Therefore, the depreciated replacement cost is birr 906,000.00 (Nine hundred six thousand
birr only)
Step 5: Consideration of the value of land use rights as per the proclamation
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It is known that land is the property of the government and the people as it is depicted in the
constitution of the country. Hence, the bank only considers the amount paid for the leased
land use right as stated in the proclamation issued 28 th November, 2011, in article 24, sub
article 1, Transferring and Pledging of Leasehold Right states that, … A lessee may transfer
his leasehold right or use it as collateral or capital contribution to the extent of the lease
amount already paid. Hence, to get the amount paid so far for the leased land, the
concerned lease office where the subject property is located should be communicated in
writing and made part of the estimate
VALUATION OF PROPERTY FOR:

FACTORY HALL, ADMINSTRATION BLDG,
A factory hall located around kaliti, 120m from Debre Zeite road
The following are particulars of the property.
Location: Akaki kaliti Subcity, former Woreda, Kebele, House
Plot: Area: 2,800m2, held through lease.
Improvements:
Buildings:
Factory hall, Administrative building
Site Improvements
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Research Process
Septic tank, water tank, fence work, Asphalt road

The Valuation Analysis
Cost Approach
Step1. Document collection
All relevant documents are collected
Step2.
2.1 Property Survey
The following data have been extracted from the survey
Plot is held by way of lease
Area is 2,800m2
No encroachment is found
2.2 Improvements
Buildings:
Factory hall: Has 6m effective height and 1,500 m2 plinth area with no internal partition
Administrative building: single story, 3m height, partitioned into offices, toilets and 30m2
meeting room
Factory Hall Administration Building
Plinth area 1500 130
Effective ages 12 12
Building components as depicted below
ITEM No BUILDING COMPONTENT Administrative

Factory hall
DESCRIPTION building
RC floor slab with RC RC floor slab with RC
1 SUB STRUCTURE grade beam grade beam
SUPER STRUCTURE R.C. Structure (Elevation

2
columns and tie beam) RC structures
36 SEP., 2014
Research Process
A. Internal A Internal
HCB 15cm thick HCB 15cm thick
Stone 40cm thick Stone 40cm thick
3 WALLING B. External B External
HCB 20cm thick HCB 20cm thick
CIS CIS
A. Internal
Plastered and painted
WALL FINISH External Plastered and painted
4
Plastered and quartz
painted
CIS G-30 on wood
CIS G-30 on wood
5 ROOFING
Chip wood painted

6 CEILING FINISH Hard board ceiling
Aluminum imitation door 38 mm LTZ profile

7 DOOR AND WINDOW and window frames door and window
frames
85% of the floor is

finished with Good quality
8 FLOOR FINISH cement screed, the
65% terrazzo, the
remaining part is good
remaining PVC tiles
quality ceramic
Average quality Asian Average quality Asian

9 SANITARY INSTALATION
fixtures or equivalent fixtures or equivalent
Good quality
ELECTRICAL Good quality PHILIPHS
10 PHILIPHS products
products or equivalent
or equivalent
There is septic tank in the Site Improvements premises, 420 m2 gravel compound road;
1000 liters capacity PVC water tank supported on steel stand and florescent compound light
Step3 Estimate the Replacement Cost New (RCN) of the Development
Step 3.1 Improvement categorization

The factory hall is categorized under category III (Large size multi purpose halls) and
the administration building is categorized under category II (Villa)
Step 3.2 Building grading

37 SEP., 2014
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Buildings Grading Remark

According to the component description
Factory hall B above, the building exactly fits into grade B
According to the component description
Administration Building C above, the building fits into grade C
Step 3.3 Replacement cost rate
Plinth RCN (birr)

Buildings Rate area/volume
Factory hall 567/m3 9,000m3 5,103,000.00
Administration Building 4470/m2 130m2 581,100.00

Total 5, 684,100.00
General Site Works

As mentioned in the note, the cost of fence works, compound gates, compound road, water
reservoir/ tanks should be calculated in detail and the take off sheet should be attached
with the report, for this example only the summary of the cost is given
Amount
estimated
Item Description Unit Quantity
after detailed
cost breakdown
Fence and other compound

works
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HCB fence over a stone masonry

1
foundation includes the cost of
related excavation and earth work, ml 215 541,800.00
concrete work, stone masonry works
7mts. Wide asphalt road; the cost

2 includes excavation cart away, curb M2 420 254,100.00
stone and all other related works
Total 795,900.00
Site Sanitary and Electrical
Water tank including the cost of the

3 lit 10,000 54,600.00
stand
External electrical work (compound
4 no 18 16,065.00
light points and all works related)
Septic Tank:
Volume = (20+
5 (630/1000)*10)*0.8=25.04m3
Y=Cost = 1248*25.04+ 33929 no 1 65178.92
Total 135,843.00
Step 4
Estimate the accrued depreciation & RCNLD
Building Service Condition Effective Percent RCN RCNLD
Life Grading Age good
3,725,190.00
Factory hall 45 Normal 12 0.73 5,103,000.00
Admin.
40 Normal 12 0.70 581,100.00 406,770.00
Bldg.
Fence and
road work 20 Fair 12*1.1 795,900.00 270,606.00
0.34
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Research Process
External
electrical
20 0.40 54,337.20
and Normal 12 135,843.00
sanitary
TOTAL 6,615,843.00 4,456,903.20
Consultancy Fee
All design documents are available
Cost percentage = 2.75% * Total RCNLD
= 2.75% * 4,456,903.20 = 122,564.84
Replacement Cost New Less Depreciation including consultancy fee = 4,579,468.04
Step5 Consider the value of land holding right (LHR) as per the proclamation
The plot of land is held with lease system, therefore, as it is stated elsewhere in the manual
the amount so far paid should be collected from the concerned lease office by
communicating the office in writing. Hence, let us assume that the total lease value is Birr
3,500,000.00 out of which the amount so far paid is Birr 1,000,000.00
RCNLD + Consultancy Fee + Lease Value so far Paid = 4,456,903.20+ 122,564.84 +

1,000,000.00 = Birr 5,579,468.20
There for, the value of the subject building property including Consultancy Fee & land
lease value so far paid is Birr 5,579,468.20 (Five million five hundred seventy nine
thousand four hundred sixty eight and 20/100 birr only) which some how will derive
us to indicative market value
COMPONENT PERCENTAGE (FOR EACH BUILDING CATEGORY AND BUILDING

GRADE)
BUILDING Multi purpose
COMPONENT Villa G+1&G+2 G+3&G+4
Halls/Stores
Grade Grade Grade Grade Grade Grade Grade Grade Grade Grade Grade
C&D A&B E&F C&D A&B E&F C&D A&B C B A
Sub Structure 13% 9.5% 29% 19% 8% 27% 19% 10% 6% 25% 18%
Super Structure 0% 6% 33% 22% 9% 42% 30% 16% 0% 7% 9%

40 SEP., 2014
Research Process
Block work -
internal 4% 4.5% 3% 3% 5% 3% 2% 2% 0% 0% 0%
Block work -
External 3% 5% 7% 9% 13% 4% 5% 5% 19% 13% 9%
Roofing 17% 6.5% 4% 5% 8% 2% 3% 8% 51% 22% 13%
Joinery 3% 8% 1% 2% 2% 1% 2% 2% 10% 2% 0%
Metal Work 21% 12.5% 10% 8% 8% 10% 8% 6% 0% 4% 8%
Floor finish 3% 11% 2% 5% 6% 2% 7% 9% 0% 10% 16%

Wall finish -
internal 14% 9% 2% 9% 18% 2% 10% 21% 0% 2% 6%
Wall finish -
External 7% 13% 1% 6% 10% 0% 4% 7% 0% 2% 9%
Ceiling Works 4% 8.5% 0% 4% 8% 0% 4% 8% 0% 5% 10%
Sanitary Work 8% 5% 4% 3% 2% 3% 3% 2% 11% 4% 1%

Electrical work
Wor 4% 2.5% 4% 3% 2% 5% 4% 3% 3% 3% 2%
ANNEX: Typical Building component Percentage
41 SEP., 2014

Valuation Manual Update Final (A)

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Development Bank Of Ethiopia

1.1 Back ground

1.2Objective of the study

1.3 Statement of the Problem

1.4.1 Data collection

1.5.2 Limitations and challenges

2. REAL PROPERTY AND ITS VALUATION (Definition and Concepts)

2.2 Market Basis of Valuation

2.2.1 Income Capitalization Approach

It is the process of estimating the value of an income-producing property by

2.2.2 Sales Comparison Approach

It is the process of estimating the value of a property through examination and

2.2.3 Cost Approach

 Carryout measurement of actual plot, to determine dimensions and plot area.

 Calculate replacement cost new less deprecation (RCNLD) by deducting all

Step3.1 Improvement Categorization

Table 1: Improvements Categorization

Include buildings having no or minimal internal partition wall

Include buildings having no or minimal internal partition wall

II. Site Works

ancillary civil engineering works which could be

Minimum requirement for Buildings to be held as Collateral

 No evidence of continuing settlement, excessive dampness, leakage, decay, termite

Ceiling ceiling Decorated

Table :3 Category II (villas)

* In calculating volume of multi purpose halls effective height should be taken

Building Component Grade A Grade B Grade C

Economy class material and standard

* In calculating volume of multipurpose halls effective height should be taken

Building Component Grade A Grade B

* In calculating volume of multipurpose halls effective height should be taken

Rate/m3 (2014/15) 923/m3 770/m3

* In calculating volume of multipurpose halls effective height should be taken

Table 10: F) Above 10,000m2

* In calculating volume of multipurpose halls effective height should be taken

Valuation of buildings with Steel or aluminum space frames

1) Original contract or commercial invoice cost

a) Bank charges: (3% of FOB value)

No DBE Regional offices Multiplying Factor

Guide line to choose reasonable value within the given range

Plot Area: 500m2

Improvement G+2 Building

This Building, is categorized under SINGLE STOREY & ABOVE CATEGORY

Building Element Component Description of Building X

Replacement cost determination of site improvements

Item Total floor area of Capacity of

Costing of Septic Tanks

B. Other site improvements

4. Washing, Grading and Effluent Channels, 331Birr/m2/331 Birr/m2

Step4: Estimating the Accrued Depreciation

Definition and concepts

Physical Deterioration is a loss in value due to impairment in physical condition; may

Functional/Technical Obsolescence is a loss in value within a structure due to

External or environmental or economical obsolescence is any loss of value from

Straight Line Deprecation method is a method of estimating accrued depreciation by

2.5.1 Depreciated Replacement Cost (DRC)

A. Quality of components as supplied to the project;

Design Service Remark

corrugated iron sheet over wooden truss

Table: 9 Condition factor grading

Very good, slight evidence of deterioration, still

Marked wear and tear is apparent, average

Thus, the formula for straight line method of depreciation is,