By Business Reporter
ReporterAGRIBANK has aligned its valuation policy to the International Valuation Standards (IVS) and to market practices in Namibia, effective December last year.
Previously, the bank used the income production method for the valuation of commercial farmland, which is based on what the farmer is most likely to get out of his farm based on its carrying capacity and the availability of other infrastructure to support production.
This value does not change over time in order to capture the movement of the market, but rather changes only if there are changes made on the farm. This valuation method disadvantaged potential clients as they were expected to top up higher amounts whenever they took out farmland loans.
With the new valuation method, namely the comparable sales approach, the top up is minimal. This is because the approach compares recent property sales with similar agricultural characteristics that were sold in the area in which a client intends to acquire farmland. With the new approach, Agribank is now on par with other lending institutions, as well as with the Ministry of Land Reform. The comparable sales method is at the heart of all real estate valuations and it is the most preferred method of valuation to reflect the property market values.
“For urban properties, which clients also use as collateral for loans advanced by Agribank, the bank previously used the Depreciated Replacement Cost method (DRC) to determine urban values, but the land component was obtained from the provisional municipal valuation rolls instead of it being market related. However, when one uses the DRC, the land component has to be market related.
“The Depreciated Replacement Cost method is usually the last resort method of valuation and it is only used to value properties that are rarely sold in the market or where there is no active market for the property being valued. Most of the Agribank urban valuations were below market values as a result of using land values from the municipal valuation rolls. Hence, Agribank discontinued using values from the valuation rolls and has opted for the comparable sales method which is market related and takes into account the prevailing market conditions,” Rino Muranda, manager: marketing and communication said. prestigiousCEO: Mr. Fessor Mbango receiving the award on behalf of Erongo RED.
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