Writing after quite some time in the forum... Had few unanswered questions within self and thought I would put them in here for an open discussion.

I have been (passively) looking, following up (and slowly gathering cash) the Chennai RE (with the idea of buying a land to construct a house). In the process, I have been looking various plots, some flats, some newly built independent houses, some pre-owned independent houses, etc. I am not able to come to a conclusion about the behavior of the market as such. Has anyone experienced/thought in the same lines?

Few of my experiences:
- Local politician cum ex-mason turning into a realtor building duplex homes claiming them to be 'architect designed' - spec - 1000 sqft land, 1400 sqft constuction near Zamin pallavaram, and quoting them for 40L, 41L, 43L, 45L on consecutive weeks. End of Month 1, only one remained unsold as he claims. Anybody with a common sense wouldn't dare go near that crappy construction, over priced (land prices in that street around 40L). Who on earth is buying them and where is the value for money in that?
- Multiple brokers dealing the same property and quoting different prices and if shown some seriousness towards the property, they redirect us (mostly) towards a big broker or POA or owner who in turn is setting a very high rate (have experienced this few times). Their claim for pricing is that the last sold ground rate + 2/3 Lacs. They don't even have clues of the basis on which they hike the prices.
- Many land / building owners asked me to move on / provoked on more questions. In few cases, I was told indirectly that they could easily get NRI customers who buy without even seeing the property.
- Quality of construction is awful in many many cases. Premium builders do that well, but charge more. There are only countable players in the market who does a decent construction for an average price.
- Few buyers that I have seen took the property purchase as easy as a Bravia TV pickup on a six month EMI and easily got into the deal.
- Surprisingly, many of the property owners are not agreeing for a loan with nationalised banks quoting the reasons like delay, too many queries etc. One of my friends bought a land and the promotor insisted to go with a loan from a private bank which had already approved their project and my friend had gone for that and after some time, when he tried transferring the loan to SBI, they refused saying that their legal panel has found some problems with the land documentation and apparently it was found that his land area consisted of some poromboke land as well which he had already utilized for construction.
- Spending capacity of individuals have gone up drastically / everyone seem to be rich. Am I missing doing something that they do extra (legally, ethically) ;)
- I have seen deals going through in one day. Visit on the previous day along with me, booking on the next day (without me! ;))

Are we not really considering this 'Value for Money' point?
Middlemen seem to drive the market and costs. One of the many many brokers that I had dealt with said that he has closed 10 deals so far with at least 1% brokerage from both parties.
Guideline value seem to have no value.

Will there be any regulation at all from the Government on this sector?

I am tired.
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  • Originally Posted by gone_mad
    Writing after quite some time in the forum... Had few unanswered questions within self and thought I would put them in here for an open discussion.

    I have been (passively) looking, following up (and slowly gathering cash) the Chennai RE (with the idea of buying a land to construct a house). In the process, I have been looking various plots, some flats, some newly built independent houses, some pre-owned independent houses, etc. I am not able to come to a conclusion about the behavior of the market as such. Has anyone experienced/thought in the same lines?

    Few of my experiences:
    - Local politician cum ex-mason turning into a realtor building duplex homes claiming them to be 'architect designed' - spec - 1000 sqft land, 1400 sqft constuction near Zamin pallavaram, and quoting them for 40L, 41L, 43L, 45L on consecutive weeks. End of Month 1, only one remained unsold as he claims. Anybody with a common sense wouldn't dare go near that crappy construction, over priced (land prices in that street around 40L). Who on earth is buying them and where is the value for money in that?
    - Multiple brokers dealing the same property and quoting different prices and if shown some seriousness towards the property, they redirect us (mostly) towards a big broker or POA or owner who in turn is setting a very high rate (have experienced this few times). Their claim for pricing is that the last sold ground rate + 2/3 Lacs. They don't even have clues of the basis on which they hike the prices.
    - Many land / building owners asked me to move on / provoked on more questions. In few cases, I was told indirectly that they could easily get NRI customers who buy without even seeing the property.
    - Quality of construction is awful in many many cases. Premium builders do that well, but charge more. There are only countable players in the market who does a decent construction for an average price.
    - Few buyers that I have seen took the property purchase as easy as a Bravia TV pickup on a six month EMI and easily got into the deal.
    - Surprisingly, many of the property owners are not agreeing for a loan with nationalised banks quoting the reasons like delay, too many queries etc. One of my friends bought a land and the promotor insisted to go with a loan from a private bank which had already approved their project and my friend had gone for that and after some time, when he tried transferring the loan to SBI, they refused saying that their legal panel has found some problems with the land documentation and apparently it was found that his land area consisted of some poromboke land as well which he had already utilized for construction.
    - Spending capacity of individuals have gone up drastically / everyone seem to be rich. Am I missing doing something that they do extra (legally, ethically) ;)
    - I have seen deals going through in one day. Visit on the previous day along with me, booking on the next day (without me! ;))

    Are we not really considering this 'Value for Money' point?
    Middlemen seem to drive the market and costs. One of the many many brokers that I had dealt with said that he has closed 10 deals so far with at least 1% brokerage from both parties.
    Guideline value seem to have no value.

    Will there be any regulation at all from the Government on this sector?

    I am tired.


    I tend to agree with your comments. With land price in city quoting anywhere between 1.25C to 3.5Cper ground (depending on the area).. I am not sure who has so much money to buy land / apartment beyond 75 Lakhs.. Even 75 L would be stretch considering the middle class / upper middle class income.. Anyways, regulation would certainly be a welcome move if govt plans.. However, they way it is is because of politicians and others connected it wanted it this way to hide black money.
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  • Originally Posted by gone_mad
    Writing after quite some time in the forum... Had few unanswered questions within self and thought I would put them in here for an open discussion.

    I have been (passively) looking, following up (and slowly gathering cash) the Chennai RE (with the idea of buying a land to construct a house). In the process, I have been looking various plots, some flats, some newly built independent houses, some pre-owned independent houses, etc. I am not able to come to a conclusion about the behavior of the market as such. Has anyone experienced/thought in the same lines?

    Few of my experiences:
    - Local politician cum ex-mason turning into a realtor building duplex homes claiming them to be 'architect designed' - spec - 1000 sqft land, 1400 sqft constuction near Zamin pallavaram, and quoting them for 40L, 41L, 43L, 45L on consecutive weeks. End of Month 1, only one remained unsold as he claims. Anybody with a common sense wouldn't dare go near that crappy construction, over priced (land prices in that street around 40L). Who on earth is buying them and where is the value for money in that?
    - Multiple brokers dealing the same property and quoting different prices and if shown some seriousness towards the property, they redirect us (mostly) towards a big broker or POA or owner who in turn is setting a very high rate (have experienced this few times). Their claim for pricing is that the last sold ground rate + 2/3 Lacs. They don't even have clues of the basis on which they hike the prices.
    - Many land / building owners asked me to move on / provoked on more questions. In few cases, I was told indirectly that they could easily get NRI customers who buy without even seeing the property.
    - Quality of construction is awful in many many cases. Premium builders do that well, but charge more. There are only countable players in the market who does a decent construction for an average price.
    - Few buyers that I have seen took the property purchase as easy as a Bravia TV pickup on a six month EMI and easily got into the deal.
    - Surprisingly, many of the property owners are not agreeing for a loan with nationalised banks quoting the reasons like delay, too many queries etc. One of my friends bought a land and the promotor insisted to go with a loan from a private bank which had already approved their project and my friend had gone for that and after some time, when he tried transferring the loan to SBI, they refused saying that their legal panel has found some problems with the land documentation and apparently it was found that his land area consisted of some poromboke land as well which he had already utilized for construction.
    - Spending capacity of individuals have gone up drastically / everyone seem to be rich. Am I missing doing something that they do extra (legally, ethically) ;)
    - I have seen deals going through in one day. Visit on the previous day along with me, booking on the next day (without me! ;))

    Are we not really considering this 'Value for Money' point?
    Middlemen seem to drive the market and costs. One of the many many brokers that I had dealt with said that he has closed 10 deals so far with at least 1% brokerage from both parties.
    Guideline value seem to have no value.

    Will there be any regulation at all from the Government on this sector?

    I am tired.


    Thanks gone_mad for the very reflective post of todays scenario.I also strongly feel that its high time some sort of transparency comes into the sector.The market is so hideous and manipulative, it scares the wit out of you to such an extent that it prevents you from getting convinced and taking a decision. Especially once you get used to asking questions you expect them to be answered before hitting the "Buy".

    Its not so with majority of buyers.They think the earlier you buy a house the better its for life.If they are able to afford one, they are more than happy.In the last few years low interest rates of housing loans and increasing salaries has increased the affordability of the middle class multifolds and taken prices to the peak.The black money and dormant demand is helping price to sustain at their level without correcting significantly.

    What I hear is the high-price land transactions are happening due to mostly outsiders who are buying in Chennai.It comprises of NRI's, HNI from other states, and landlords from tier-II cities like salem, coimbatore etc.First time buyers are looking only at 25-40 lakhs flats segment.

    I think projects saying its sold out is a ploy.I keep hearing that builders have taken huge loan at very high interest rate from private financiars and are feeling the pressure.Builders are still facing huge cash crunch.With interest rate set to rise, it will only be more pro-buyer in coming months.Even today, if you offer to pay 85% of the flat cost upfront you can get 10-20% flat discount directly from the builder.It only shows that builders have not been able to liquidate their inventory as they are claiming to have.

    Regarding VFM, RE purchase has always been a costly proposition.You will never get a good property for the correct price.It will always cost you a premium.So its important to factor that extra 10-15% in to your budget and then start searching.

    If you want a value deal and the current price is affecting your affordability, currently you have no option but to wait till sanity returns.The market is currently being dominated by the "greedy".Only when the scale tilts towards the "needy", such good value for money deals will become reality.

    Not able to wait and can afford today?factor the risks-choose the best property in good location, negotiate hard , dont over-leverage and then take a plunge.The long term benefits will compensate todays percieved monetory loss.
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  • augury

    nabishek - thanks for that elaborate reply. Absolutely agree with the prevailing insanity (not all cases, I mean) in the market.

    I am no analyst, I am no bull, I ain't bear either. My instinct says that all the foul play will come to an end soon in one way or other. Something has always prevented me to look at those high value flats/properties (Affordability is another matter). Chennai could grow as Asia's Detroit, but I strongly feel that there will be a correction in many unworthy places (not all). We would know the success of the new city kinds (Inno Geo city for instance) then.
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  • Gone mad (original poster) has summed up the current situation. I feel this will not change atleast in the near future. I would like to add some comments and invite opinion/thoughts please:
    1- Good established locations in city such as Adyar, Besant Nagar, Alwarpet, parts of Kilpauk, Egmore, Nungambakkam, T.Nagar, RA Puram etc etc- I have extensively researched.
    Firsthand, new apartments seem to be invariably big in size ie, 1500 sqft and above. Naturally price tag is 1.5-3 crores.
    It is debatable as to how many can afford, who buys these is another question.
    * What do forum members feel regarding this?
    * In many other related blogs/forums we do not hear about these projects

    2- In these areas resale apartments are an option- however people think a lot as even these are, depending upon location, UDS, amenities, age etc, costing between 6-9 thousands per sqft

    3- Developing areas are always an option but infrastructure will take time

    4- Last but not the least, finding genuine sellers, avoiding dealers/brokers would be ideal. Deal with sellers, that is if you can clearly identify them , directly.
    My experience with dealers echoes the same feelings posted by gone-mad.

    Discussions welcome.
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  • gone mad, nabhishek have posted very interesting discussions reflecting in people minds in recent years. Now good salary increases, low interest rates, strong remittances from NRIs etc were reasons behind this new valuations in properties. I am using the word new and not high valuations because when comparing excellent job opportunities in recent years and uncertainty in jobs in 1980's, 1970's. Good incomes today compared to previous decades, there is more confidence in buyers and hence this is seen these new valuations.

    However in some locations even with narrow streets (mylapore, parts of T nagar), water stagnating, open over flowing dust bins, cars parked on road side etc. prices are touching the moon when compared to previous generation standards. People still buy in such narrow streets/places to be inside city, inspite of good infrastructure and far better facilities available in new locations in city outskirts. Some old habits don't change even among new generations.

    Very difficult to predict each buyers behavior as no 2 humans are same right?

    But I strongly agree that buying a property should be planned for years. It is not Bravia TV, otherwise the buyer may become a character inside the Bravia TV.
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  • Thanks for the post friends ! The title 'No value for money' will be apt ! As rightly said the market is driven only by brokers and political wheeler dealers ! And anybody from a grocery shop man to a goverment officer can be a agent... and everybody wants to have a pie !!! And whither guideline values, approvals ets...
    The banks are hand in glove with the RE companies in fleecing the unwary public !! So, let the buyer beware !!!
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  • I agree, in general, on the various points discussed.
    1. Yes, first home buyers (incl. those having total monthly income of around 80k-1 lac) are looking at max of 50-60 lacs apartments. So, any property above say Rs.75 lacs is bought by NRIs / HNIs / Investors for investments and monthly rental return purpose.
    2. Unfortunately, when prime areas in city become costlier through every transaction, its impact is felt in neiboughoods and suburbs eventhough they may lack infrastructure. So, the well to do affluent who afford to buy 2nd, 3rd, 4th home in city, pushes the cost in suburbs as well and the middle and upper middle income group rush to grab their affordable pie before its lost.
    3. While some areas/corridors (like OMR etc) have grown on the fundamentals of IT growth, SEZ etc., many other locations far distant from city have also become costlier, physically remaining in the same state as they were decades ago and with no credible immediate future infrastructure/business growth or with vision 2020 2030 etc.
    4. I also wish there's more semblance and rationale to RE growth. But, with our overall economy growing YoY, the demand for RE, be it from user, second home buyer, long term investor or for monthly rental return, will remain on positive territory. After the bull run from 2003-2007, the market had been in stagnation stage in 2008 & 09, and now consolidating. So, at best, correction may happen, not a free fall like US.
    5. The industry has to be regulated. Currently, the govt. is bothered only about charging the registration fee and maintaing the record. The brokers should be certified with code of conduct, registration should be more transparent and identity of owner should be fool proof and verifiable easily so that multiple sale of same property is avoided, all records such as regn., revenue record (patta) are all updated parallely and a single document should be proof of title for all purposes, etc.etc.
    6. With a well grown and governed stock market, speculation is still prevalent. So, speculation in real estate which is unregulated will remain.
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  • Originally Posted by nabishek
    Thanks gone_mad for the very reflective post of todays scenario.I also strongly feel that its high time some sort of transparency comes into the sector.

    Regarding VFM, RE purchase has always been a costly proposition.You will never get a good property for the correct price.It will always cost you a premium.So its important to factor that extra 10-15% in to your budget and then start searching.


    Not able to wait and can afford today?factor the risks-choose the best property in good location, negotiate hard , dont over-leverage and then take a plunge.The long term benefits will compensate todays perceived monitory loss.


    Nachinu sonnapa Abisheik.

    It appears you don't like to beat around the bush.
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  • what is value for money ?

    how can we calculate value for money for any commodity ...let alone RE.

    are you sure the price u pay for g'old or petrol is value for money ?

    no product has obsolute value ...its all relative. in RE the parameters controlling the price are more probably - can we say in 2000 the prices were reasonable ....how?
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  • good properties are hard to come by

    Dear friends,

    Iam in agreement with the comments of Gone_mad and Nabishek.
    However, it must be said that good properties are hard to come by
    during the best of times.If one is able to identify a good property which meets one's requirements within the budget,then it is better not to wait
    for a possible stabilisation of prices in the future.

    regards
    unlikely
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