1

VALUATION OF LANDLOCKED PLOTS BASED ON JUDICIAL DECISIONS

Jigesh J. Mehta
B.E.(Civil), M.S. (USA), LL.B.
M.Val (ISTAR, V.V.nagar)
Surat (Gujarat)
(F 18099)
Time and again, there have been
discussions on various domestic forums
regarding
valuation
of
landlocked
properties for purposes of secured
lending, compensation, sale or rent
fixation, to name a few. And since a vast
majority of members of the valuer
fraternity in India are mainly engaged in
the practise of bank valuations, the
arguments generally tend to boil down to
the point as to whether or not a valuer
should issue a valuation report or
completely reject the assignment since it
would be extremely difficult to enforce the
security interest created in such a
landlocked plot.
While it is the foremost duty of the valuer
to ensure that the interest of the lending
institution or bank is not jeopardised and
adequately highlighting the demerits or
handicaps of a landlocked parcel, let us
also not forget that mortgaging or
extending charge over a landlocked
property may not be the only parameter
considered in sanctioning a bank facility.
Inspite of the hazards attached to the
recovery from disposal of landlocked
properties, lenders do sometimes obtain
such a plot as security (either as primary
or collateral) against loan after weighing
other criteria.
After all, financial
institutions have their own policies and
risk-bearing capacity or appetite.
As valuers, we all acknowledge the
concept that No Rights, No Value.
Alternatively, we understand the fact that
as long as the rights and interests of the

owner in a landlocked plot are not

extinguished, such a property will
definitely have some value that may be
realised on its transfer.
1.
INTRODUCTION
In real estate, "landlocked" piece of land
refers to a parcel of property that has no
direct legal access road, so the only way
on or off the property (i.e. routes of
ingress and egress) is to cross the land
owned by someone else. Landlocked
properties are surrounded by land that is
owned by others on all sides. Sometimes
the property can be bounded by water or
terrain on one or more sides and one may
not have legal access to the property.
One may obtain street access to a
landlocked
property
through
an
easement which is a legal provision
giving the owner of a landlocked property
the right to cross someone else's land.
The most secure easements are written
into the deeds of both the landlocked
property and the property used for access.
Landlocked property usually results from a
landowner subdividing his property into
one or more parcels with no public roads
in between. Government authorities may
also inadvertently create landlocked
property when a new highway is built with
no entry or exit alongside a piece of
property.
Municipal
corporation
or
urban
development authority will not allow
building to take place on landlocked
parcels (without documented arrangement

for access), which further reduces their

value.

are sold at bargain

neighbouring owners.

Lenders will often refuse to write loans to

buy, build or improve homes on
landlocked property. That's because a
lack of public access can translate to a
lack of public services -- notably police
and fire protection. That lack of access
also makes such properties unattractive to
buyers.

For landlocked properties, a valuer should

invariably inquire into two aspects (1)
How did the present owner or his
predecessor acquire the subject plot and
what was the consideration given, and (2)
Who are the owners of the contiguous
properties whether the owner of
landlocked parcel himself also owns any
of the immediately adjoining properties?
Answers to these issues will assist the
valuer in his approach to valuation and the
lender to make necessary arrangements
with the advice of legal counsel.

Land-locked lands are such lands having

no independent means of access (refer
figure). These are plots without frontage,
i.e. they do not abut on any road.

prices

only

to

2.

Plot B closed in by neighbouring plots on

all sides without independent access to
any road, has limited market confined to
owners of neighbouring plots. Owner of
plot B is at the mercy of his neighbours.
Unless he can obtain access through the
lands of his neighbours by negotiation, he
has to dispose off the land to any of his
neighbours. Either he has to pay through
his nose for the access or sell the land at
a throwaway price as such lands are
useful to the adjoining owners only, and
demand for the same will be limited only
to them (refer Assemblage and Plottage
discussed below). Consequently, they will
fetch very low price due to restricted
availability of buyers.
Since all sales/transactions registered are
not mapped and easily available in the
public domain in our country, it is rather
difficult to find comparables of landlocked
plots. But generally, landlocked parcels

ASSEMBLAGE, PLOTTAGE AND

MARKET
FOR LANDLOCKED
LAND
ASSEMBLAGE is the process or act of
combining/consolidating/assembling/joinin
g two or more parcels of land from
multiple owners (usually, but not
necessary contiguous) into one new
parcel under the same ownership so as to
be available for use as a larger single
parcel, thereby resulting in an increase in
value.
The goal is to obtain enough land for a
particular development in mind, or to
conduct the assemblage as a speculative
venture, in order to sell the larger parcel
for more money than it cost to purchase
the smaller parcels. This increase or
increment in value created due to the
assemblage or combination/integration of
two or more sites under unified ownership
to produce greater utility is called
PLOTTAGE VALUE.
The "market" for such landlocked piece is
not a buyer who would want this land as a
stand-alone parcel. Rather, the "market"
(participants) is land owners who buy
contiguous parcels for assemblage. It's
"market" value is what people pay for

similar poor access/frontage/visibility type

sites.
2.1

Estimating assemblage value for

buyers and sellers
While this article is mainly focused
on valuation of a landlocked plot in
isolation, it is also necessary for
valuers to understand the economic
theory for arriving at the assemblage
value when an owner of landlocked
property intends to buy a specific
property
right
from
adjoining
property.
Why would an abutting property
owner (or a neighbouring property
owner) be willing to pay more than
current market value to purchase an
abutting property? Why would an
investor pay above market value to
assemble property for a specific
use? Why would someone pay a
premium for a specific property right
(i.e. driveway easement, parking
easement, etc.)? The answers are in
the simple economic theories of
supply and demand.
The buyer wants a specific finite
product creating demand. The seller
holds the only commodity that will
work for the buyer creating the
supply. In an active market with
steady demand and supply, the two
reconcile an exchange of the
product in the form of a price, hence
creating the current market value of
that product. However, if the seller
is not willing to sell, the point of
equilibrium of the exchange has to
shift in order to reach a point where
both parties can make a satisfying
exchange.
For an abutting /
assembling property owner, this
often means a premium has to be

paid to entice the seller to make the

exchange.
3.

ECONOMIC
THEORY
AND
VALUATION OF LANDLOCKED
PLOT
As explained by J.A. Parks, the value of
land is governed by the economic
principles of demand and supply. The
supply of landlocked land is constant
whilst the demand varies according to the
number of the adjacent owners. Land
situated on a main road for sale is capable
of having an unlimited number of
prospective purchasers, while land-locked
land can likely be sold to one of the
adjoining owners. It cannot be imagined
that any outsider would be purchasing
land-locked land unless he knows that he
can come to some arrangement with one
of the adjoining owners concerning an
access to the land.
In the case of land-locked land
surrounded by a builtup area, the value to
the owner is nil and the value to the
adjoining owners is the price they are
willing to pay.
Land-owners are not
philanthropists and they are not likely to
pay more than they need for land, and in
such cases the value cannot be more than
one quarter the belt value of the land.
Authors Dr. Namavati and Ashok Nain
discuss about such landlocked sites in
suburbs where agricultural land has been
put to use. As long as the area in the
neighbourhood remains agricultural, an
owner of a landlocked land may not have
difficulty in reaching his land by foot-tracks
passing though others properties. As
soon as these lands become ripe for
building purposes, a different state of
affairs exists and the problem of
landlocked land comes in the forefront.
When roads are proposed in the
Development Plan of a local authority and

land-locked plot is to get access when

such roads are constructed, the valuation
will be based on instances of sales of
lands fronting the roads, deferred for the
period of availability of the D.P. Road.
4.

JUDICIAL
DECISIONS
ON
VALUATION OF LANDLOCKED
PROPERTIES
Some
of
the
Court
judgments
recommending discounts to the tune of
25% to 75% for valuation of landlocked
parcels are briefly discussed below.
Valuers will appreciate that since The
Land Acquisition Act was one of the
earliest enactments relating to real estate
in India, several of the valuation principles
evolved from decision of Courts in these
matters.
(i)

Ramchandra Marotrao Avachat vs.

The Collector Nagpur, Bombay
High Court, 21 April 1989 (AIR 1990
Bom 348).

price as other lands because (a) its

location lies beyond industrial plots facing
Delhi-Mathura Grand Trunk Road which
are proper and suitable for setting up
medium scale of industries, (b) it has no
access to either G.T. Road or any other
road, (c) its extent being as large it will
involve loss of land for roads and
expenditure in turning them into industrial
plots of the size, (d) it would involve also
considerable cost in purchasing valuable
land for making a road to reach the G.T.
Road.
The said minus factors, if are taken into
account, necessarily they reduce the
value of the land considerably and on a
rough estimate its reduced value could be
put at 3/5th (or 60% of) value fixed for
regular plots (i.e. 40% rebate).
(iii)

Mumtaz Ali Khan (Deceased) vs.

The Collector, Rampur, U.P.,
Allahabad High Court, 3 May 1995
(AIR 1996 All 71).

The land under acquisition is still an

agricultural land situated at an interior
place
having
no
approach
road
whatsoever.
Apart from the peculiar
situation, one has to cross the railway line
and a nallah in order to reach the land
under acquisition. These factors cannot
be ignored while fixing the value of the
land in question. Taking this aspect into
consideration as well as the development
charges, we feel that the Tribunal was
justified in deducting 3/4th of the value of
the land while granting compensation to
the appellants.

This is a case of completely locked plot of

land. In modern days, a land which is not
accessible, is practically worthless.
Pedestrians may go but people having
vehicles will refuse to go. So for a modern
civilized man, this land was practically
useless. This fact of the situation of the
land in dispute has been correctly taken
note of. The situation of the land is very
peculiar and that has a lot to do with the
assessment of the compensation at a very
diminished rate as done by the Special
L.A.O.

(ii)

(iv)

Printers House Pvt. Ltd. vs.

Saiyadan, Supreme Court of India,
14 October 1993 (1994 AIR 1160).

This area of 73 kanals and 2 marlas is

completely locked on all sides and has no
direct ingress to the Delhi-Mathura Grant
Trunk (G.T.) Road.
If 73 kanals 2 marlas was to be sold in the
market, it could not have fetched the same

C.E.S.C. Ltd. vs. Rupkumar

Barik and Others, Calcutta High
Court, 17 February 2003 (AIR 2003
Cal 195).

The plot which was acquired for CESC

was wholly landlocked. It seems to us
that if the acquired plot of land were to be
sold in its landlocked situation and status,
it would be very difficult, well-nigh

impossible to get a buyer. Where will one

find a buyer for 3 bighas of land which has
entrance into it only by air space and a
helicopter?
If by answering this question we were to
say that the value of the land acquired is
zero or pitifully low, we would go against
the dictates of common sense. Although
we are not permitted to make any
guesswork, it is easy to see that the
CESC quite confidently took this land,
because they were confident in ultimately
obtaining an agreement with Purbasha
Housing Estate (in the north) for allowing
the passage of their vehicles to the public
service utility sub-station. Although an
ordinary private purchaser might not have
been so confident, the democratic
pressures which support the public utility
no doubt gave them this confidence.
The simple conclusion is that the CESC
chose something cheap because they
were confident they could make do with it.
We are aware that it is a mere guesswork;
we are also aware that when we do make
this guesswork, the acquiring of the plot in
a landlocked situation makes a lot of
sense in the common sense world.
In our assessment, adjustment of 25% or
so, which has a little spectrum this way or
that, would appropriately takes care of the
landlocking factor. The correct view would
be that if a person going to shop finds that
all his purposes would be served by a
cheap commodity, then he has a right to
buy that cheap commodity and pay a
small price for it.
(v)

Special Land Acquisition Officer

vs. The Divisional Controller,
Bombay High Court, 11 December
2006.

About 40% of the overall land parcel of

adjoining plots is landlocked and
therefore, separate land rates are applied

to bifurcated areas land with access

road and that without access road.
Landlocked property is valued at 53% of
the land rate for valuation of lot with
access (i.e. 47% rebate).
(vi)

Somnath Chakraborty and Anr. vs.

Appollo Gleneagles Hospitals Ltd.
& Others, Supreme Court of India,
23 July 2014.

The Court-appointed valuer took into

account the three sale instances and the
value per cottah was found to be Rs.25
lacs, Rs.58.34 lacs and Rs.24.30 lacs
respectively. The valuer ultimately arrived
at the sum of Rs.25,04,188 per cottah
after providing the landlocked allowance
and the petitioner as well as respondents
were in agreement with this valuation.
It can be seen from the foregoing
decisions that the Courts have allowed
discounts of 25% to 60% in valuation to
account for the landlock factor whereas
the additional discounts in these cases are
attributable to other factors such as large
size, inferior/interior location and other
demerits. On the other hand, most Indian
authors have recommended a discount of
75-80% in value (of lands with access to
roads) for landlock factor itself, but these
views are not supported by judicial
decisions or explained by comparable
evidences.
5.
CASE STUDY
For academic purpose, consider the case
of 1237 sq. m. of non-agricultural, landlocked land of bearing Final Plot no.28
(Northern subpart) of Town Planning
Scheme no.25 (Khokhra Mehmdabad
Extension) at Ahmedabad in Gujarat
State. This property is situated behind
F.P.no.27 at Lal Bahadur Shashtri Road
within old developed locality of Khokhra.
It is just one plot behind 132 feet wide
Ring Road near Hatkeshwar Circle and
falling within the municipal limits. (Refer

aerial image and part plan).

This developed neighbourhood with mixed
use for residential and commercial
purposes has middle and higher middle
class locality. The subject property falls
within R1 Zone as per the prevailing
development plan of AUDA/AMC and here
the permissible free or base FSI is 1.8
with an additional 50% FSI or 0.9
available in the form of chargeable FSI;
thus, the total allowable FSI is 2.7 for
normal plots abutting TPS roads.
Subject property (under the owners
vacant possession) of freehold tenure
constitutes the Northernmost part of
F.P.no.28 and does not have direct access
to any of the T.P.Scheme roads as can be
seen from the four boundaries.
North

South

East

West

- Shree Aryavrat Society on land

bearing F.P.no.26 (abutting on
60' wide TPS Road)
- Jay Surajba Society on land
bearing F.P.no.28 southern part
(abutting 132 wide Ring Road)
- Open land bearing F.P.no.27
(abutting on 132 wide Ring
Road)
- Jay Kishan Society on land
bearing F.P.no.30 (abutting 40
wide TPS Road)

Since the subject land has no direct

access to any road, if its potential is to be
exploited, then the only option available is
that it can only be jointly developed along
with any one among the four locking
lands. It is further observed that since
three of the four adjoining (locking)
properties
comprise
of
developed
societies which may or may not grant
easement right, only the eastern property
which is an open plot that offers
probability of joint development with the
landlocked plot disregarding an outsider
speculative investor. Thus, the subject
property
suffers
from
restricted

marketability
participants.

due

to

limited

market

Considering relevant factors, the unit rate

of the subject property is estimated at
around Rs.25000-35000 per sq. yard if it
were directly abutting TPS roads of 40,
60 or 132 wide road. In light of the
circumstances for the subject landlocked
property, it is opined that the normal
prevailing market rate of Rs.25000 per sq.
yard be discounted by 75%, i.e. only 25%
of the normal prevailing market rate is
adopted for the property under reference.
Therefore, Present Value of owners
freehold interest in land
=
25% of Rs.25,000 per sq. yard. x
1479 sq. yards
=
Rs.92,44,000
6.
CONCLUSION
The percentage of discount to be
decided/allowed may vary depending on
the other merits and demerits of each
case, and hence there cannot be a
common or generalized formula to arrive
at the percentage of discount in all cases.
7.
(i)

REFERENCES
Theory & Practice of Valuation, A. K.
Mitra, Eastern Law House, 1980.

(ii)

Principles & Practice of Valuation, J.

A. Parks, 5th Edition, Eastern Law
House, 1998.

(iii)

Theory & Practice of Valuation, 5 th

Edition, Dr. Roshan H. Namavati,
Lakhani Book Depot, Mumbai, 2010.

(iv)

Valuation Principles and Procedures,

2nd Edition, Ashok Nain, Dew Drops
Education Pvt. Ltd., Kolkata.

(v)

Data inputs from Valuer Mr. Ketan

Brahmbhatt, Ahmedabad, 2015.

(vi)

Estimating assemblage value to help

buyers and sellers, John Galvin,
New England Real Estate Journal,
August 2013.

Google Image of neighbourhood of subject property

SITE

Part Key Plan showing location of Northern Part of F.P.no.28

Photograph of Northern Part of F.P.no.28