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RE business in Chennai collapsing

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RE business in Chennai collapsing

Last updated: August 17 2009
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  • Re : RE business in Chennai collapsing

    Originally posted by nabishek View Post
    I accept RE spurts happen and thats the reason for long term 20-25% CAGR , I generally use 20% CAGR to get the feel of the price in a locality.So, I tend to agree with your calculation.

    My calculations are just approximations to understand the direction RE market is heading and based on anticipation of what could happen.The outcome we will never know until the dice has stopped rolling, till than we can all keep guessing numbers.

    I see Chennai as follows

    Chennai Proper - Area within corporation limit - possible correction 10-15%

    Chennai Suburbs - Areas within the proposed new corporations and CMDA limits - possible correction 20-30%

    It will make sense only to buy an independant house or land here than going for a flat and paying for the high construction/builders cost.Flats with good UDS is worth pursuing.

    Chennai Suburbs - Areas outside corporation within CMDA limits. - possible correction 30-50%

    There are lots of areas whose price rose as collatarel benefit along velachery, Porur, Tambaram etc.

    These locations have decent infrastructure but not complete in anyway.People who are living here are still original residents and vacant plots are available in plenty.

    Fit for only land purchase and independant house.

    Chennai Outskirts - Areas adjoining OMR/GST/Bangalore and kolkata Higways. - Crash >50%

    These areas are pure speculation.Only certain areas will flourish and live to the hype.

    Fit for only land purchase as investment for long term.

    OMR - Tightly coupled with IT industry

    For example in siruseri out of all the big projects coming up, Only 2 projects have proper approvals and are in line to completion in time.With IT seeing slump most would want only to rent these flats.

    I am expecting these unsold flats to be rented out by the builders themselves when completed or available at subsidised rent through the companies.

    Bangalore Highway - Electronic corridor and Proposed airport is the USP.

    If there is news that the proposed airport is dropped (I dont know till now, whether the project even actually took off).Then the price would plummet.I hear most of the industries there are laying off and cutting down on production.

    GST road - Has the potential, but no real developments yet.

    Very well connected by road/rail and the best bet for investment for long term in my opinion, any future township would come up only along here.I would ideally wait for TNHB to anounce some schemes and try to get a plot there.
    yes the numbers game is just approximation and subject to the perspective of individuals.

    I do see chennai the way you see but with some diff

    I see a lower fall less than 20% in the chennai suburbs within CMDA limits as infra is developing in these areas like good schools,health care and the "more,spencers and reliance fresh" .and the affordability is better here
    so is the groundwater.
    i actually see a higher correction in the premium segment (flats onlly) in chennai city limits (albiet temperory) bcoz of sentiments. but overall i see chennai to have a lot of headroom for the prices to rise in comparision to the other metros.where the prime places rates are 400-600% more than prime places of chennai

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    • Re : RE business in Chennai collapsing

      If you want to know why Chennai is still trailing behind the other metros in price, the market for delhi, mumbai and bangalore,even pune potentially, is much bigger than Chennai market. Ask your North Indian friends esp. those who don't live in Chennai, at least 7 out of 10 can't think of themselves living in Chennai. It is sad, but it is true. We somehow have failed to attract these market participants.

      (I am from TN and I am a prospective buyer in Chennai, if you think I am an outsider).

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      • Re : RE business in Chennai collapsing

        Is Chennai market bigger than Delhi and Mumbai ?

        Originally posted by abk View Post
        but overall i see chennai to have a lot of headroom for the prices to rise in comparision to the other metros.where the prime places rates are 400-600% more than prime places of chennai
        If you want to know why Chennai is still trailing behind the other metros in price, the market for delhi, mumbai and bangalore,even pune potentially, is much bigger than Chennai market. Ask your North Indian friends esp. those who don't live in Chennai, at least 7 out of 10 can't think of themselves living in Chennai. It is sad, but it is true. We somehow have failed to attract these market participants.

        (I am from TN and I am a prospective buyer in Chennai, if you think I am an outsider).

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        • Re : RE business in Chennai collapsing

          Dont be Greedy Again

          RE prices has raised not in line with the growth of the country with allowed tolerence and bound to 40-60 percent correction.Seeing the land/flat prices,40 % correction will happen even in prime places like Adyar AnnaNagar RAPuram .Rs 10000 per SQFT is ridiculous & the job trend and EMI repayability & bank margin will bring it down to below Rs 6000 per SQFT levels.Sure it will reach Rs 6000 levels in two years though it may see some resistance early & finally succumb.

          Seeing the high prices in prime places & huge availability in OMR, people will move towards OMR and places like Adyar RAPuram will see correction in prices.People are learning lessons seeing the high EMI default and will avoid getting into lifetime burden.

          From Perungudi to Padur - Huge availability .

          IT and ITES seeing correction in revenue generation ,increased competition in retaining clients and reduced billing rates & cost cutting & downsizing & layoffs will fool the people who still hoping to see upward trend in RE prices not only in Chennai but any place in India.

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          • Re : RE business in Chennai collapsing

            Dear friends,

            I gather, there was some news item in SUN TV on late evening news time on DLF on 28/03/2009. It seems buyers agitating to get back their money paid, DLF saying they will refund after deducting a whopping Rs.4 lakhs or so? Any update from those members and guests knowing this issue on the plight of the buyers who trusted DLF and out their hard earned/took at high interest rates money? In fact, I expected some big news coming out in the English & Tamil dailies in the last couple of days, but nothing came up in any paper? I wonder why no news on this?

            ks2071746

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            • Re : RE business in Chennai collapsing

              Yes, Perungudi to Padur, about 30 KM. Both sides take about 3 KM. So about 126 sq km of land is available even if 30% is considered as not usable or already in use

              Huge parcels of land. What they are going to do when IT is down?

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              • Re : RE business in Chennai collapsing

                Originally posted by Nataraajg007 View Post
                Yes, Perungudi to Padur, about 30 KM. Both sides take about 3 KM. So about 126 sq km of land is available even if 30% is considered as not usable or already in use

                Huge parcels of land. What they are going to do when IT is down?
                grow brains

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                • Re : RE business in Chennai collapsing

                  Originally posted by ks2071746 View Post
                  Dear friends,

                  I gather, there was some news item in SUN TV on late evening news time on DLF on 28/03/2009. It seems buyers agitating to get back their money paid, DLF saying they will refund after deducting a whopping Rs.4 lakhs or so? Any update from those members and guests knowing this issue on the plight of the buyers who trusted DLF and out their hard earned/took at high interest rates money? In fact, I expected some big news coming out in the English & Tamil dailies in the last couple of days, but nothing came up in any paper? I wonder why no news on this?

                  ks2071746
                  Dear friends,

                  I have subsequently got into the posting by nataraaj on this on the news item in Economic Times dt. 29/03.. Thanks.

                  ks2071746

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                  • Re : RE business in Chennai collapsing

                    dear ks
                    newspapers get ad revenue from dlf so dont expect any bad news about dlf to be reported on papers

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                    • Re : RE business in Chennai collapsing

                      Originally posted by wiseman View Post
                      Abishek,

                      Absolutely correct. So we have the logic for a 50% fall by the principle of "reversal to the mean". But we are forgetting another observation. When there are huge swings away from the mean, and there is reversal to the mean, there is an excess in that direction which tends to take the trend beyond the mean for a short while. So, while you are correct that 50% is what the thumbrule says, there may be a swing which goes beyond 50% for some time before swinging right back. That would be a golden opportunity to pick property at bargain prices!

                      cheers
                      Dear Wiseman,

                      I came across some interesting articles, which talks about the volumes and corrections thats already happening.

                      It says that the real correction/decline thats happened since last quarter is not clear because there's no significant sale happening.

                      Another Interesting article is as follows which reiterates what you have been predicting so long.

                      I have a doubt regarding the "reversal to the mean" logic.Hope you could clarify.

                      without getting too mathematical about it.To plot a normal distribution graph none of the data like mean,variance or standard deviation is easily for available RE.

                      So plotting two line graph, one for the mean and the other for the market rate against years(time).we can observe that the market rate is way above the mean.

                      You are suggesting that the market rate will swing below the mean before stabilizing and overlapping again at the mean.

                      I feel that since the correction is not continous and linear we may see lot of plateau regions where the price stagnates for years while the mean catches up with the market rate.

                      Has this swing below the mean happened before?And was sale happening at that price?

                      The reason why I ask this is, if RE price rides on the mean, it would become the most safest investment with zero variance and totally risk free.It sounds too good to be true.
                      Last edited March 30 2009, 03:24 PM.

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