Building Age and Depreciation Calculator

Land does not depreciate. Buildings do. Splitting the two is how a valuer works, and it explains why an old house in a good colony is still worth a great deal.

The split that explains almost everything

A property is two assets sitting on top of each other. There is land, which does not wear out and generally appreciates. There is a building, which wears out from the day it is finished.

Once you separate them, a lot of confusing things become obvious. An eighty year old bungalow in Golf Links is expensive because the land is expensive and the building is nearly irrelevant to the price. A five year old flat an hour outside the city has a newer building and much cheaper land, and the market prices it accordingly.

How depreciation is actually applied

The convention among Indian valuers is straight line depreciation down to a salvage value of about 10 percent of the replacement cost. A building does not become worthless while it is standing and usable.

The life depends on how it was built. Good quality reinforced concrete framed construction is generally taken at 60 to 70 years. Load bearing brick work is taken lower, around 50. Semi pucca construction lower again.

So a 30 year old RCC building on a 60 year life has used half its life and carries roughly 45 percent depreciation on its structure, not 50, because of the salvage floor.

Replacement cost, not what it cost you

The figure to enter is what it would cost to build the same structure today, not what was paid decades ago. Construction costs have moved enormously, and using the historic figure produces a meaningless answer.

For an ordinary residential structure, current costs run in a broad band depending on specification and city. A contractor or an architect locally will give you a realistic figure in ten minutes.

When a valuer uses this method

Where there are no good comparable sales, which is common for industrial property, institutional buildings and unusual houses.

For insurance and reinstatement valuations, where the question is specifically what it would cost to rebuild, and land is excluded entirely. That is why an insurance figure looks so much lower than a market value, and it is not a mistake. More on insurance valuation here.

And as a cross check against the comparable sales method, because two methods agreeing is a much stronger report than one method asserting.

Age is not condition

A calculator counts years. A valuer looks at the building.

Cracks, settlement, water damage, the state of the roof, whether the electrical work has ever been redone, whether extensions were built without approval. A well maintained forty year old house can carry less effective depreciation than a neglected twenty year old one, and only an inspection can tell you which you have.

All free tools