Valuation of Unregistered land – what’s the problem?

James Kavanagh & Prof Frances PlimmerRICS, UK

World Bank – Land & Poverty March 2015 - MC C2-135 13.00hrs Tues 24th March- orld

Contents

• Brief Introduction

• Formal and informal

• Compulsory acquisition/purchase

• Markets – data, trust, revenue, market

• Risky business – the business of ‘Risk’

• The ‘continuum’ of ‘risk’

• RICS research – valuation of unregistered land

• Conclusions and future initiatives

Valuation of Unregistered land – what’s the problem?

Formal and informal..

• Enabling a ‘trade’ in land and property rights

• Customary system pressures

• Lack of a market

Valuation of Unregistered land – what’s the problem?

Valuation of Unregistered land – what’s the problem?

Compulsory Purchase/Eminent Domain

• The planning system as the ‘sword’ of Land administration policy

• Large infrastructure provision

• Do land rights protect?

• FAO

16.3 States should ensure a fair valuation and prompt compensation in accordance with national law. Among other forms, the compensation may be, for example, in cash, rights to alternative areas, or a combination”.

Markets – Risky Business

• How markets work?

• Valuation – a social construct which relies on transparency, data, trust and market information

• Due diligence purpose of report/valuation

• Market Value

Valuation of Unregistered land – what’s the problem?

Markets – an issue of ‘Trust’

IVSC def of ‘market value’

“Market value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.”

• Ecosystem value

• Why value?

• Revenue raising, management, investment, economic development

• State land, protected areas, communal land, unregistered parcel

Valuation of Unregistered land – what’s the problem?

Continuums

7

Land Rights, Measurement, Value/Risk

Informal Land Rights

Perceived tenure approaches

OccupancyAdverse Possession Leases

Customary Anti evictions

Group tenure

Registered Freehold

Formal Land Rights

Improvement through quality checksSource: UN-HABITAT

Methodologies

• Comparative method

• Investment method of valuation

• Cost approach (contractors test)

• Ecosystem value

• Valuation of Land – land value and development

Valuation of Unregistered land – what’s the problem?

RICS Research – Valuation of Unregistered Land

• Kenya – urban and rural

Valuation of Unregistered land – what’s the problem?

Valuation of Unregistered land – what’s the problem?

• Most unregistered lands valued were customary lands

• This is because customary lands are under form of group ownership that is as secure as having a registered title.

• Owners of unregistered private lands and those on squatter land unlikely to require their lands to be valued because of the queries on the legality of ownership

• Main purpose most valuations (18%) was for inheritance

• If a property had to pass on from the parent to children - it was not necessary to obtain fresh ownership details

• Balance of valuations for unregistered lands were for the purpose of accounting, bookkeeping or asset valuations

Can unregistered land be valued?

• Fourteen of 17 valuers said Yes, while three (3) said that it was not possible to determine values of unregistered lands

• Main reason that valuers who insisted unregistered lands could not be valued - was that land itself was never valued

• But it is the type of interests in the land that make the parcel worth the ascribed value – not whether it is registered

• But without there being a registered interest is it true that it is difficult to prepare a proper “formal” land valuation?

Valuation of Unregistered land – what’s the problem?

Conclusions and future initiatives

• Capacity building and the profession

• Political will

• Innovative methods of finance

• Fitness for purpose

• Can unregistered land be valued? It certainly can..

• Further research – RICS

Valuation of Unregistered land – what’s the problem?

Contacts

James Kavanagh & Prof Frances PlimmerDirector Land Group (Environment, Geomatics, Minerals & Waste, Planning & Development, Rural) RICS 12 Great George Street, Parliament Square Parliament Square, London SW1P 3AD T: +44(0) 207 695 1598 Web: http://www.rics.org/land Email: jkavanagh@rics.orgLinkedin: uk.linkedin.com/pub/james-kavanagh/17/48b/654/

Twitter – @jkavanagh99, #RICSland