Hi, I am an average chennaite trying to find an afforable house/flat in Chennai. Thanks to our real estate friends and our so-called REAL ESTATE EXPERTS, I am unable to find even a decent flat even despite the fact that I have been looking at farway suburbs like Potheri.. (situated near GST ROAD) I was surprised to see that the homes in the locality were priced around 28-38 lakhs per flat (Flats ranged only around 670-970 square feet). The most alarming fact was that these projects have not even commenced construction.

When I asked the concerned real estate broker on why the houses were priced at such high rates (Around 3000 rupees per square feet), he gave me a sarcastic look and told me that IT is booming (The standard excuse) and IT folks were very eager to buy "Cheap and Luxurious homes".
I am tired of real estate developers repeating the same lame excuses for hiking their rates. I wish to project a sample scenario to explain why IT folks or others cannot afford the homes in Chennai.


Let's take a typical example of an IT couple.
Considering the cut off salaries of 6 lakhs per annum for an average IT associate, I am safely placing the average salary of a couple at around 1lakhs (50k from husband + 50k from wife). Remember this is the highest aggregate at executive level (People with 4-5 years of experience in IT).

Total salary after taxes and other deductions such as PF, Gratuity, PPF etc: 1,00,000 - 15,000 = 85,000

Considering that companies have an average variable pay for each employee, let's deduct 15-20k as variable pay (This is a minimum amount and may exceed 10k depending on companies) 7.5+7.5k = 15,000

Total salary after deducting PF, Variables, and other deductions = 1,00,000 - 15,000 (PF + DA) - 15000 (minimum variable pay for IT couple) = 70,000 INR

As every IT home has Airconditioner, Fans, Fancy Television sets, Computers, Washing Machines, and other gadgets, the electricity bill per month would amount to 4000.

Also, as IT people eat out most often and travel together, they will spend a minimum of 6000 in their expenses (Check the fancy eateries like Pizza Huts, Mcdonalds, KFCs, and Subways in your area and you will see what I mean).

Every IT Home has a maid with salaries ranging from 1500-2000, also Groceries and other stuff are a mandatory expenses.

After these deductions (70,000 - (4000 + 6000 + 2000)), salary comes to around
Total Salary after expenses = 58000


Now, since most IT folks have a car. And most often, they have taken a car loan to buy the car, consider the EMI to around 6000 to 8000 depending on the car value.

Plus, you have petrol expenses too - 2000 rupees for an average couple (This estimate is true for most couples).

Total salary after Car EMI + Petrol Expenses (58000 - (6000 (Minimum EMI amount) + 2000 )) = 50000

Now, considering the fact that the IT couple have a new member in the family (Child) - Medical expenses per month would be 2000-3000 (I have included this as per month expense as delivery expenses are one-time expenses, but cost around 30,000 - 60000 depending on the hospital. So, keeping 30000 as the minimum, 30,000/12 = 2500 rupees per month)


Total salary after deducting hospital expenses = 50000 -2500 = 47500

Now, if the couple plan to buy a decent 1000 square feet flat in Chennai, they need to shell out an average amount of 40-45 lakhs (Conservative estimate) within the city, or 35-40 lakhs, if the property is in the suburbs.

So, minimum RMI ranges from 40000 - 45000 as per the loan amount.

Fixing 38000 as the minimum loan amount, total salary after Home Loan EMI will be = (47500 - 38000) = 9500.

I have included only the mandatory expenses for an average IT couple. THere are other expenses involved such as Medical expenses for elder persons in the family, school fees for the child when he/she grows up, inflation etc.... Considering this, an IT couple will end up with barely 2k if they are lucky.


Now, finally, I ask my question?

Is Chennai realty really afforable? Do IT people really have the power to purchase homes and complete their loans till the last EMI?

What is the guarantee that another recession wont come?

What is the guarantee that your salary will go from tens of thousands to lakhs to crores? Till 2000, a person took 20 years to get a salary of 10000-15000. Today, the starting salary for a fresher is greater than 10000. However, the average salary of an IT professional still hovers around 70000-80000 even after 10 years of IT growth. Infact, it has depreciated after the companies faced recession.


What is the guarantee that your realty prices will appreciate further. Come one, already lands are going at prices well over crores of rupees. An average house in Chennai costs around 1 crore (More than 4500 per square feet). The average income of a Chennaite has still not exceeded 25000 (Please folks, when I say average Chennaite, I mean people outside of IT.)

Even despite excluding lower classes and lower-middle class, the other salaries classes still earn only around an average of 40,000 - 50000 per month. Whereas the average EMI for a 40 lakh loan amount comes equivalent to the salary of the average chennaite.

Please think and reply.

Kindly do not come back with the IT Salaries will increase bullshit. FYI, I work in a highly reputed MNC. Salaries here only increase around 5-10% per year....... And morever, IT PEOPLE ONLY FORM 10-20% of the whole Chennai Population.
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  • True, but what is the use?

    I have been searching for a property in chennai for almost an year now... I have also been thinking the same all this long, even now... But, what is the use?

    1 year back, properties in Siruseri were being sold at ~2000/sq.ft. Today, even that has increased to ~3000 to 3500. The rate increases in other areas is understandable. We have only been thinking its high and not getting anywhere...

    I have decided to just move ahead and find a decent property and invest in whatever is affordable at this time - it is definitely going to go up in the next 2/3 years.

    But, the bigger problem now is in getting to know of the good / decent projects - good ones dont get advertised much...

    Instead of thinking if its affordable or not, just move on and buy whatever is possible.
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  • Prices have kept up with Inflation. We went through a period of Hyper-Inflation during the early 2000's.

    1995 to now, prices should have gone up 5 - 7 times (10-12% increase).
    There is no use comparing old prices to now. Rs2 coffee now costs Rs15 or more. Maruti car was luxury, now Beemers are.

    Prices eased out a little bit in late 2009. But thats it. With the recovery, the prices seems to have gone up. Look at NHB residex, price have tripled from 2007.

    The fact is prices can go much higher. I will list out why.


    1. Madras is smallest city compared to other metros. 174sqKm has 46 lakh people. One of the highest densities. Sea is one one side and factories & lack of infrastructure in north and south-west makes it hard to expand. We do not have satellite cities like Noida & Gurgaon (OMR is more like a suburb). More people are going to migrate, farmer's son in a village with college degree will not go back to farming but come to city and work here and buy a home here.

    2. Low FSI. Along with Bombay, we have one of the lowest FSI in the country.

    3. Low returns in Stock Market. Demand for hard assets.

    4. Const material prices could shoot up once the global economy turns. Labor is already getting expensive day by day.

    5. Inflation is a big factor.


    I still find older flats to be a good value. New homes are priced around 70%-90% more.
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  • Originally Posted by shk007
    u can get property for 30 lac in medavakkam or pallikaranai , y r u going to GST


    Hi - can u list out a few options? I have been looking in the area but no luck. I managed to find out some studio apartments in indiabulls greens....approx 500 sq ft Rs.4000/- per sq f

    Purvia Windermere all 2 bhk are sold out.3bhk's are way too expensive.....
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  • Prices are bit above Inflation

    K11 > you are right to an extent, but RE prices are bit above inflation especially in Chennai. So there is a minute correction expected. I have doubt even in this case due to the Govt land guidance rates going up.

    RE rates may not go down anywhere in Chennai or surroundings unless some unexpected political or economic events within India or World happens.

    Otherwise there might be slight ups or downs in land rates in specific localities on the needs of buyer or seller. Land owners will hold on to the price.
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  • Houses are really not affordable. Prices are skyrocketing, average salaried person could just dream about owing an apartment.
    We discussed a lot about correction since 2 yr, but it never happened at all.
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  • Correction.....NEVER in Chennai according to me....you could see my join date in this forum..dates back to 4+ yrs ......some were predicting correction back then.... sometimes up to 80 % correction was predicted......read old posts for urself..then doomsday theories...but alas no correction in Chennai for last 7 yrs...rates stagnated for a few months and again increased
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  • About the only reason to own a house/flat for investment purposes in Chennai is for the speculative price appreciation. If you are a landlord, it is a terrible proposition to buy a flat in order to rent it out. Typical rental yields in Chennai proper are extremely poor. For example a new 2+ BHK flat in a desirable Chennai location such as Adyar etc will sell for around Rs. 1.2 crore. The rental on this will be around Rs. 35000 per month. This translates to a rental yield of around 3.5%. Depositing the same money in a bank fixed deposit will give about 9-10% interest. Thus the speculative return from appreciation must be at least 5.5 to 6.5%.
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  • 3.5% is not a bad rental yeild. Most people in other parts of the country do not get this.

    4% is decent deal, anything close to or above 5% is spectacular.

    You are also forgetting the increase on the price of the asset. If you get 5% increase in the price of the flat (conservative number - just below inflation) and 4% rental yeild, you have already equalling FDs at 9%.
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  • Please read my post -- I do talk about price appreciation. But you cannot take the benefit of the price increase until you sell the house. Also the increase is not guaranteed; ask people in other cities. With an FD your principal is guaranteed to be returned to you. It is comparatively risk free.
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  • no point in crying

    Hi Aswin,

    Your analysis is good in estimating the income and expenses of a typical family......you may be correct partially but based on your limited analysis if you conclude that the chennai real-estate is a bubble then it is not correct....

    The price increase of Real estate is all over India and all over tamilnadu and not Chennai Alone....and hence it is not local it is prevalent all over the country....

    The Demand - supply factor plays a major role in this.....

    I am an NRI in Gulf for more than 3 years and in fact I am searching for an apartment but not fitting in within my budget in a decent place in City......

    Chennai RE market is not affordable for average chennaiite like me.....but if You really want to buy it then you should see how people are buying :

    From my little analysis , I put forth the following for your info :

    1. People generally ACCUMULATE AND POOL their savings for about 3 years to pay the down payment and the balance thru loan
    2. Other assets money is also being poured into Real estate market (such as selling of old land or old house or old flat or GOLD or other instruments )
    3. NRI's money from all over the world
    4. Rich/ upper middleclass people are much more in number in 2012 than in 2002 and hence there are people to buy.
    5. India's growth story continues amid widespread scandals and poor infrastructure .....by 2017 India's GDP is set to double from the present 1.5 Trillion and hence we can safely assume that RE prices may also become double approximately by 2017
    6. Money from relatives and others are also pouring in towards real estate....In otherwords there is a definition of Inflation in Economics
    "INFLATION IS DEFINED AS TOO MUCH MONEY CHASING TOO FEW GOODS"
    Here the "goods" means Real estate and since too much money is chasing real estate assets, the prices are on the rise...
    7. India's population is increasing.......we are more in number.....and hence more people can afford now than in 2002
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  • Demand supply assumption is misleading in RE context.

    Demand exists , but only for affordable housing, and the supply that exists leaves a majority of aspirant home buyer out of equation due to unrealistic prices.

    I may have wish to own a house but am i willing to pay unreasonable prices?.
    NO , Even if could afford it.

    Real Estate is now driven by speculative interests rather than end user demand, hence the price escalations.
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  • well i wud like to have my 2 cents as a disappointed RE prospective buyer...

    some places like madipakkam, pallikaranai and OMR have been made out to be GOLD.. why? only one manager of a popular RE agency was frank enuff.. He said only 2 things, "this place is close to OMR ", "ppl dont complain abt rates. they keep buying"

    Well I dont agree to both points personally and i dont look for these points in a property.. For me what counts are: good connectivity(freq. buses/train), decent options for super markets/veggie shops , banks, schools, good residential area (no slums next door) define a "Good area". I do find some places like these but placed too high.. as bad-drainage and poor ground water beats these positives. These shud be what other look for too.. but alas we dont question the buyers..

    Next.. Ppl buy "canned water" which is thot of as divine water.. which is actually just sucked of directly from some wells and some very bad stinky lakes (i have see OMR lorries which just load thier containers directly).. and dump into our offices and homes.. Sometimes hardly treat it.. So RE guys just say.. "Sir.. why do u need metro water, u can just buy canned water like the rest of em".. and i am made to look as tho i am asking for too much :)

    When ppl told me abt OMR and how its this IT highway i was imagining Blore.. but I found myself falling on my face.. Stacked up IT companies.. hardly an Uber malls or Big department stores for home needs.. How can a place have so much population.. A really money spinner for Govt and the ppl in chennai, can be so drab when it comes to infrastructure.. I dont even want to start abt the "Off OMR" localities..

    Perungudi the dump yard of ages, is now Gold. Ppl ready to live in highly polluted environment just becos its close to Adyar/Thiruvanmiyur.. and now RE guys are plannign Villa after villa there..
    I asked a director of a big RE firm, to tell me why I shud go for Perungudi.. "He stuttered and said its close to Adyar and ppl keep buying... no ones complaining" .. What abt the safety of kids who play there, and the air they breath??

    DOshi has the audacity to sell houses next to Dump yards in perungudi and Pallikaranai and that too at premuim rates and he is over booked.. He shud have been begging for us to buy..

    In another instance, a very small builder with hardly any past experince, a crappy stinking building in middle of marsh next to slums says.. "What else do u want .. this is such a good locality and out of 10 flats 9 are sold in already .. if u want take it.. bye and shuts me down".. I am thinking.. Dude I shud be shutting u off.. and believe me i went month later and he was SOLD OUT in just foundation phase.

    If ppl are so happy and think they have made a brainy decision.. then why so many resale of under construction flats, some within 1-3 yrs & posting on forums asking -- "guys have i taken right decision"..

    All might think I am not in line with this thread's discussion... but i feel our lack of knowledge of what is a good house, and not being stubborn in waiting for a project to take shape and buy, is what the RE guys are cashing in and thats why the price rise.. the RE guys, hence , kept plundering land and generated black money.. hence leading to the Guideline Value hike.. So we are indrectly responsible for this..

    Our previous generation was judicious in searching for houses and were stubborn about "real amneties" like water and drainage system and localities.. hence there are some good areas coming up..

    Jeyachandran nagar is being marketed as the next posh locality.. A good attempt.. but do u even find a handful of trees in that area.. is it comparable to the posh localities in Adyar and TNagar.. in terms of trees and a good play area for kids.. :-)
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  • Sorry all.. i am not ranting here but am disgusted with the attitude of RE firms who just dust u off when u ask anything within 47 L in Medavakkam, pallikaranai and Madipakkam.. Who shud be bossy.. Us or them ? WHo shud be desparate Us or them?

    Some of u might say.. Dude just chill.. the areas are gng to be the next Adyar .. but sorry as they say an "over night" rich guy cannot be as posh as a "long time" rich guy... All he can be is a show off.. a fake imitation.. as he doesnt really know what it is being rich.. A guy who won a lottery doesnt know the value of money like a person who has earned it..

    Similarly builders dont even know why they charge so much.. The BS abt Club house, Party hall and all that crap which hardly 10 % of the ppl look for is being slapped on us without even planting a blade of grass in the entire 1 acre ground :-)

    Again a real exp.. the same director guy in previous post.. I asked him if he had trees in his house.. he says.. oh yes.. and asked how can one leave without trees, we have a whole garden and my kids love the shade and our house is cool all the time.. and this guy sells us brick houses that get baked directly under the sun even after they are sold.. :-)

    We all search for shade of the traffic post in signals but are ok to buy huge projects that hardly have a useful tree or shade :-) we play in the car park.. wow!

    Another last topic.. abt this thing that all IT guys are responsible for all this price rise.. All i can say is the person who created this illusion is a very smart person.. An average IT guy who represents 70-80 % of the total strength can hardly buy 1 crore project (even if his spouse puts in her share)..

    We all conviniently forget the Govt staff with huge pensions and perks... (a lecturer has 30 L hard cash with him ready to buy a house).. what abt the small business men who make 1 L per month.. what abt the Marketing guys the MBA guys.. The Sales guys, the QA guys, the business ppl, the Ad guys.. these all earn so much cool bucks with high incentives and hefty hikes.. All these ppl are buying those huge 1 cr projects and the blame is being 100 % on IT guys.. cool!

    Neither an earthquake or tsunami can make the RE go down.. this will be always up and up.. The builders have houses in City with all "real amneties" and drive us all outside the proper chennai .. Wow! ask them to relocate to their own places like mahindra and oragadam.. and their family will give a thumbs down ;-)

    Keep buying plots and keep blindly taking loans and then blame the buyers for changing model and stagnant projects.. Super !

    Wish I was a RE guy.. cud have felt like a king :-)

    Thanks for reading.. if u reached up to this point..
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  • Infrastructure on OMR is bad, GST road is much better. But it is rapidly developing.

    Most places in Pallikarnai and Perungudi are stinky and unlivable. Thats why big builders avoided those areas and went further south. It is better to avoid small builders in areas like OMR.

    Vettipayyan, why don't you look for units in the city. There are a lot of re-sale units for the same price as these new OMR units. Pools and club houses are fancy but being inside the city is better. Ofcourse it is hard to find old units and not as easy as going to builders website.

    OMR and other areas on outskirts are good for an investor but hard to live in those. I saw one big high rise project in OMR go up from 4K to 5.5K in two years (40% increase). Now I think its 6K+.
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  • Yes GST is far better in terms of infrastructure compared to OMR. Even the prices that they quote for GST projects are relatively ok. But power issue is the main drawback in GST stretch beyond Perungalathur, 8 hr of power cut everyday. Donno when this situation will change.
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