In-Dept Understanding of Belting Method for Valuation of Immovable Properties

1.  What is Belting Method?

It is a method of computing the value of an Immovable Asset that follows certain rules.

2. About Guidelines of Belting Method

The guidelines are not specified with clarity in the literature. Certain guidelines which define the method is not enough for the understanding of the process.

Using the liberty of justify the process, we may follow the process as below

In this blog, I shall discuss these aspects and try to provide some clarity.

1. We should this method when we have a plot with a large L/B ratio.

This is vague information. Let's clarify.

If the L/B ratio | [1, 2.5] we can use Belting up to 2 levels

If L/B ratio | [2.5, 4.5] we can use Belting up to 3 levels

If L/B ratio | [4.5, 8.125] we can use Belting up to 4 levels

and so on....

But, wait, what is the logic behind these intervals?

L/B ratio is always > 1

A standard aspect of L/B ratio limits to 1.5x. And so, in general, 1.5x is the factor that we use in the Belting method

Now, with this basic understanding, let's see the following

Belt 1 starts at d= 0 from the road edge

Belt 2 starts the endpoint of Belt 1, which is (say) d=1

Belt 3 starts the endpoint of Belt 2, which (say) d=1+1.5=2.5

and so on

Now, Let...

Length of Belt 1 is        x.1.5^(1-1)   (say)

Then,

The length of Belth 2 is        x.1.5^(2-1)

The length of Belt 3 is            x.1.5^(3-1)

In general,            x.1.5^(n-1)

Lets, take sum of these of each level,

i.e.

(Note; Level 1 belting is simple the base rate...no need of the Belting method in such case)

For 2 level Belting, we take sum of Belting of Level 1 + Belting of Level 2

For 3 level Belting, we take sum of Belting of Level 1 + Belting of Level 2 + Belting of Level 3

In general,

we take the sum of all the belt lengths up to n belts.

i.e For nth level belting, belt length is found by taking summation of all the Belt Lengths

i.e.

for Level 1            x.1.5^0 = x

for level 2            x(1.5^0+1.5^1) = x(1+1.5) = 2.5x

for level 3            x(1.5^0+1.5^1+1.5^2)=x(1+1.5+2.25) = 4.75x

Similarly,

for level 4            x(1.5^0+1.5^1+1.5^2+1.5^3)=x(1+1.5+2.25+3.375)=8.125x

Now, this explains the intervals that we take for each level!!!

Now, the following questions come

1. How many intervals should we take for a certain asset which is to be valued?

2. what is the value of x, that should be taken?

Answer to Q1 above....

It depends on the L/B ratio of the plot and the intervals explained above.

e.g.

If the L/B ratio of the plot is 2, then it comes in the range [1,2.5] This belongs to 2 level belting zone

If the L/B ratio is 7.78, the plot comes in the range of [4.75,8.125]. This belongs to 4 levels of belting

Now, we must also answer Q2 above

The answer is as mentioned,

x=Max{1.5x(Width of Plot) or Road width from Divider}

So,

Assum, a plot with L=70' and W=9' and the road width is 40'

Then, L/B ration = 70/9 = 7.78.

This comes under 4level belting group

The Road width from Divider = Road Width/2

So, x will be maximum of 1.5x(9') or 40'/2

i.e.

x=MAX{ 13'6" or 20' }

Now, before we do the plotting, we need to understand that this plot has belting UPTO 4 Levels. i.e. It is not necessary that it will have 4 levels. But, it is certain that this will have 3 levels of belting

let's do the belting of this plot...

Belt 1 = x = 20'

Belt 2 = 1.5x = 30'

Belt 3 = 2.25x = 45'

Belt 4 = 3.375x = 67'6"

The plot length is 70' which is distributed in ascending order

So,

Level 1 Belt = From 0 to (0+20) = 20'            0 to 20'                    50' remaining

Level 2 Belt = From 20 to (0+30) = 50'           20' to 30'                20' remaining

Level 3 Belt = From 0 to (0+45) = 20'            50' to 95'                25'  less

So, this plot has the belts as above

Other rules of Belting is known to all....

3. What is the outcome of this?

There are assets that have undesired aspects (specific L/B ratio) but, we as valuers, we need to find the value of such assets. There has been a lot chaos and uncertainty due to no clarity of method.

It is also suggested that this method should be used only for large assets.

This doesn't answer some questions...

like, what if the asset is large enough but the L/B ratio is 1.3. (proper ratio) Then, what is the belt length?

Or, How many blets are needed?

Answers to these questions are not available but general practice is 20m for commercial and 30m for residential in a plot of at least 1000sqm size.

This doesn't give us a proper answer. What to do if the conditions are different?

This is what I have tried to explain in this article which uses a logical approach to try to generalize it for all the assets (irrespective of the size of plot, as this is not a limiting standard)