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The purpose of this research is to ascertain the extent to which the income capitalization approach reflects the pattern of emerging rental income in Enugu property market.

The survey research design was used in this study. Data from the field was gathered through a data collection pro forma administered to 40 valuers in Enugu metropolis in the manner of conducting interviews. This study used key valuation details of 54 sampled income generating properties valued by the respondent valuers between 2015 and 2022 using the income capitalization approach. The same sampled properties were then revalued by the researchers using annuity due assumption/formulas of the income capitalization approach. Descriptive and inferential statistics were used to analyze the data.

The study revealed that the income capitalization approach used by most valuers in Enugu does not reflect the property rental income pattern prevailing in Enugu property market where rents are paid in advance. The study further shows that the application of the income capitalization approach for valuation of annually in-advance property rental income cash flow results in a higher capital value of 3.49% in Enugu property market.

The limitations to this study are that past valuation done by valuers were used in the analysis instead of actual property sales and a relatively small number of sampled valuers and properties are used in the study The implication of the study is that ordinary annuity assumptions or formulas is inaccurate and not suitable for valuation of income generating property in an emerging market like Nigerian where timing of cash flow is annually in advance. Based on the result of this study it seems that ordinary annuity approach negate the principle of estimating value using income capitalization method by converting future cash flow from income generating property into an estimate of property value.

The study advocates the adoption of the use of annuity due formulas in the valuation of income generating properties in Nigeria as its practice standard to avoid undervaluation as this assumption is logical and provides more accurate value due to prevailing lease structure and rent payments patterns in the country. The implication of the study is that the use of ordinary annuity assumptions or formulas is inaccurate and not suitable for the valuation of income generating property in an emerging market like Nigerian where timing of cash flow is annually in advance.

This is one of the very few empirical studies carried out in Nigeria to ascertain the extent to which the income capitalization approach used by valuers reflects the rental income pattern that prevails in the Nigeria property market.

Valuation for compensation on land and buildings compulsorily acquired for public purposes is statutory. The Land Use Act (LUA) of 1978 now cited as Laws of the Federation of Nigeria, CAP l5 LFN 2007, stipulates the use of Depreciated Replacement Cost (DRC) Method in the valuation for compensation purposes for building and installation. The purpose of this paper is to criticize the application of the DRC technique in the valuation by acquiring authority as it does not arrive at fair market value and adequate compensation in Nigeria.

The method adopted for the study was a case study of real world valuation for compensation. Data used in the study were gathered mainly from government ministries and agencies responsible for land acquisition and compensation purposes. They included the Ministry of Lands and Housing, Land Use and Allocation Committee, and Ministry of Works and Transport. Market data on rental value, sales prices and other relevant data were collected from firms of professional that deal in real property.

The result of the study reveals that valuation by acquiring authority using DRC methods as prescribed by the LUA does not reflect market value and it is inadequate to put the claimants in the position they were before the acquisition. As such, most victims expressed dissatisfaction with the amount paid to them, which sometimes result to crisis, conflict and prolonged litigation, resulting in delay in executing or abandonment of the intended project.

The study is limited to only one case study on acquisition and compensation for land and buildings with particular reference to Akwa Ibom State. This limitation does not invalidate the result as the law is applicable to the whole country.

The implication is that the LUA needs to be review to fair market value as basis of valuation and payment for site value as well as the constitution to add “adequate” to Section 44 (1a). This will reduce the incidence of many communities and land owners protest against the decision of government or its agents to acquire their land for public purposes.

The methodology meets the requirement of the law regarding compulsory land acquisition and compensation in Nigeria: The LUA of 1978. Using three scenarios: the valuation by acquiring authority, claimant’s valuers and independent valuers to illustrate the critique of the methodology, the result shows the inadequacy of compensation.