Property valuation. In a property appraisal activity, what is assessed? What is actually assessed is "real property". Namely the legal rights that underlie control over land or land with all other derivative rights attached to both above land and underground. Physical construction that is above or below ground is called real estate.
In the latest SPI (Indonesian Valuation Standards) (SPI 2014) real property is defined as property rights, which is wrong. In positive law, the right to land lies with the state, then it is passed down to customary law communities and then to individuals.
Land rights are also not absolute, only limited to normal needs. For example, the holder of land ownership rights does not automatically have the right to the mineral content underneath, but the rights to the minerals remain with the state so a permit is required if they intend to carry out mineral exploration. The legal system is different from that in western countries which are more absolute.
In property valuation/appraisal, the value referred to is always the market value, which is the value formed from the strength of demand and supply in the free market, without any intervention from anyone in normal market conditions (not in the midst of a recession or a booming market).
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By accommodating IAS 98, the concept of fair value as a substitute for cost is also used in the valuation world. But this fair value is not always synonymous with market value. The implementation of the appraisal must also accommodate the type of property being assessed. Property that generates income should be assessed using the income approach, but which approach? Is the income approach in property valuation or business valuation? Now here's what's interesting.
In property valuation/appraisal, what is assessed is real property, namely the legal rights that underlie physical control over the land and everything attached to it above and below the land, whether buildings or trees, or other constructions, but does not include mines or minerals in the ground and air. on.
The 2014 Indonesian Valuation Standard (SPI) which refers to the international standard (International Valuation Standard / IVS) in PPPI 15, Property Valuation with Special Businesses answers this question. Properties with Special Businesses (SPBU) -Trade-Related Property (TRP) are individual properties such as hotels, restaurants, public fuel stations (SPBU), which can transfer ownership while operating.
This property includes not only land and buildings but also furniture and equipment and business components that are formed by intangible assets, including transferable goodwill. This PPPI 15 provides guidance on the valuation of PBB as an operating property and the allocation of value from the PBB into its main components. So in assessing the PBB, the technology used must be a business valuation, not property valuation, except for the type of income-producing property that is not PBB.