An investigation and a model of rental valuation for business properties in Tehran City Tax Affairs Organization

The present paper aims at exploring rental valuation of business properties.According to Iranian tax laws, rental valuation of properties should be done by aReal Estates Valuation Committee. This committee divides Tehran city into 162blocks and allocates a rental value/square meters in each block. The presentresearch is firstly aimed at determining indices and factors affecting the rentalvalue of business properties and at presenting an appropriate model for valuation.Then, we test a hypothesis indicating that “the valuation procedure applied byINTA is inefficient” and compare our proposed model with INTA’s method. Thestatistical population of this research includes all business units acting legallywithin the geographical area of Tehran. Through some interviews and reviews ofliterature, we have characterized 16 indices as possibly affecting the valuation ofrental value. Then, through developing a questionnaire to be filled up by experts ofTehran City Tax Affairs Organization, 9 indices have been separated as the mostimportant factors. In order to develop the model, after selecting a sample of 383,the 9 indices in question have been measured. Then, in order to develop andvalidate the intended model, we have calculated the Spearman’s correlationcoefficient along with Kendall’s coefficient in the significant level of 0.01 leadingto the separation of 6 indices followed by running a linear multiple regression andthe administrating the STEPWISE methodology. In the nest stage, estimated rentalvalues have been calculated using both our proposed model and INTA’smethodology. The two sets of values have then been compared against the actualmarket rental values. The final stage of the research includes testing the“proportion of success” hypothesis (p) as well as testing the hypothesis of“comparison of proportion of success in the two populations” (p1-p2) in order toverify the research hypotheses.