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Property Price Trends in Chennai

Last updated: 4 weeks ago
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  • Re : Property Price Trends in Chennai

    I am a core Chennai-ite but do agree that development has to spread to other tier 2 cities. But the hard and harsh truth is that is not going to happen in short term. Why?

    It is true of all poor/third world nations, development is concentrated in few tier one metros/cities only and tier2 cities lack development. The reason being infrastructure and poor state of public finances. Heritage, culture, history, people are all good, but hard infrastructure is basic requirement for economic development. Even Chennai CBD infrastructure is not so great, but for a population of 4 million , we can give 3.5 marks out of 10. What about other cities? Maybe basic infra is in place, but that is all for current population of 1.5 to 2 million. These cities simply cannot take even half a million more people without breaking down.

    By infra i also mean connectivity and logistics - Chennai rocks on same with right location and big harbour, NH connecting to leading states and rail connectivity . So a Hyundai or a Renault can source from smaller cities but cannot set a main factory in tier 2 cities.

    Likewise, Chennai has the cosmopolitanism that enables big service sector MNCs (IT cos) to recruit easily. A IT MNC can easily convince a person from NE India or Gujarat or AP to work in Chennai. It will be hard to do same with a company based out of Madurai.

    Like someone told - madurai has madurai people, kovai has kovaiites, tiruchy has tiruchi people - but chennai is home to all people from all places in TN plus other south indians too. This is why this city has grown , from 5 lakh population in 1950 to present 75 lakh or so.

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    • Re : Property Price Trends in Chennai

      With Tambaram bye pass road looks like a realty now will it change the fortunes of camp road area.

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      • Re : Property Price Trends in Chennai

        Hi Friends,

        I am really glad that this thread is still attracting healthy discussions. I am not writing much nowadays becuase I am finding myself becoming repititive. With so many new members contributing I dont find anything more to add to whats being already said.

        I am writing now to share a news with all of you. I have compromised in my search and have stuck a deal balancing my affordability and long term dream of owning a home meeting my lifestyle requirement.

        I came across a 2 BHK flat in K.K.Nagar (bordering Ashok Nagar) through an acquintance. It was ready-to-occupy joint-venture project and belonged to land owner.I was able to finalize it for around 6.5k/sqft. They were looking for someone who can close the deal quickly and in white. I am glad it was a win-win situation for both of us. With new launches at 10k/sqft in the area, I feel it was a VFM deal. We have already let it out for 20k/month. Meanwhile I have also booked a premium lifestyle apartment in a high rise project in OMR. It is scheduled to be delivered in 2016-2017.

        A brief backstory about my search for new members..

        In the year 2009, When I had started this thread, My requirement was for a house in 2014/2015 and me being a risk averse person I wanted to purchase with zero debt. I had decided to start saving and investing back and focussing more on my profession meanwhile looking for good deals. The world economy then was going though a dull phase and the RE market that had peaked in 2008 had already corrected 10-15% and went on to correct further upto 30% in late 2009.We were staring at a global depression and it was expected that governments take into consideration rising fiscal deficit and look at liquidification of assets. What we actually saw was unprecedented, We saw bailouts and QE after QE pushing inflation to the brink and further deepening the crisis in the hope we can tide over it. Noone knows how its all going to end.. Anyways, By 2010-2011, It was evident that in India, we were not looking at depression but at stagflation and possible hyperinflation. Thankfully I was prepared and I had started investing in bullion and making small land investments. my returns from my investments were always in positive. Looking back with the benefit of hindsight, late 2009 seemed to be the best time to buy.

        Now fast forward to 2012, Prices all over chennai has recovered to the 2008 levels and in some places new project are being marked up 30-40% over the 2008 peak rates. With the guideline value now revised, It provides us a new baseline to calculate and compare. Suddenly It became irrelevant to argue that the price is inflated when the government value is more or less the market price. With this change in perspective, the unjustifiable price suddenly became legitimate. I couldnt anymore overlook it.

        While reviewing my portfolio, It occured to me that I had to have minimum 50-60% or more in Real Estate and Bullion. With the government going in for elections next year, I am anticipating lots of populist measures and huge liquidity in the market pushing inflation higher.My decision is motivated primarily due to the fear of onset of hyperinflation in the market. I have to protect my savings and I had to take a call considering my affordability,professional and personal priorities and limited choice available. I am happy that I have stuck to my affordability and location principle and not compromised on them.

        Whether I have profited from my waiting or not, whether my decision is right or wrong. Only Time can tell. My experience has been a roller-coaster ride and my feelings at the end are mixed. Neverthless, It is the best I could have taken in my current situation.No Regrets.

        I take this opportunity to thank all friends here for your support and guidance. I hope my experience is of use to everyone reading this thread and helps them take an informed decision. Thank you all very much once again.

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        • Re : Property Price Trends in Chennai

          @nabhishek, Thanks for sharing your awesome story. Looks like things worked out well for you. 6.5K/sq.ft at KK Nagar is one heck of a deal. Good luck.

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          • Re : Property Price Trends in Chennai

            Hyperinflation scenario is real and its impact on RE is inevitable. Lot of smart folks comparing rental yield and other factors to un justify the price. Though they are right in their opinion, they don't get that there are unprecedented level of money printing going on by various govt. Having a hugh population, the govt having a nightmare of maintaining robust job growth and economy. The direction would be more reforms and mainly attracting foreign money with the hope of eventually attracting domestic money to sustain. One has to be realistic when comes to price and get into the deal with the balanced mind.

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            • Re : Property Price Trends in Chennai

              Hyperinflation cannot do much on already inflated asset prices - on relative basis, its impact will be marginal compared to assets that are reasonably priced . So to think that inflation tide will carry all boats with it is wishful thinking - an another way to justify "this time it's different" story. There is no voting on which opinion is smart. To each his own. There are better assets to protect you from hyperinflation and RE (CBD ) is the most expensive one among them.

              Mav

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              • Re : Property Price Trends in Chennai

                Come again?!

                Originally posted by maverick007 View Post
                Hyperinflation cannot do much on already inflated asset prices - on relative basis, its impact will be marginal compared to assets that are reasonably priced . So to think that inflation tide will carry all boats with it is wishful thinking - an another way to justify "this time it's different" story. There is no voting on which opinion is smart. To each his own. There are better assets to protect you from hyperinflation and RE (CBD ) is the most expensive one among them.

                Mav
                I would like to illustrate how Hyperinflation DOES have a phenomenal effect no matter whether the current price is high or not.

                Lets assume normal inflation is 12% per annum. After 10 years Rs.5000 psft current price asset will cost Rs.15500 psft.

                Lets go by one standard definition of Hyperinflation (annual inflation rate of over 50% - could be much much higher if you take real cases from history)

                At this rate of inflation, assuming RE keeps up with inflation at least, after 10 years, price will be Rs.288,325 psft.

                Are we saying the two are the same, just because current "feeling" of price being too high? Current feeling of "high" price has no bearing on future inflationary trend. When your rupee is crashing 50% every year, the hot RE areas (with limited supply) will even beat inflation numbers by a large margin, becoming literally priceless in rupee terms.

                Of course, at some point, other assets (like consumable commodities and even gold and silver) continue to have relevance (gold/silver can be exchanged for essential consumables and will in fact become money as they are universally accepted as money) while RE simply becomes completely illiquid as people literally run out of cash to buy at those astronomical prices. Here I agree.

                cheers
                Last edited December 8 2012, 04:15 PM.

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                • Re : Property Price Trends in Chennai

                  Wiseman, welcome back to chennai.

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                  • Re : Property Price Trends in Chennai

                    Originally posted by wiseman
                    Are we saying the two are the same, just because current "feeling" of price being too high?
                    They are not. I stand corrected. My assumption was the return of higher inflation of 90's and not the hyperinflation (Zimbabwe type) - where the currency has no value. With hyper inflation, we have much bigger problem in hand and the true hedge against hyper inflation is having assets in other currencies than simply having illiquid hard assets in the currency that will be in annihilation due to hyper inflation. Liquid hard assets(precious metals) would reign supreme over the others.

                    Mav

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                    • Re : Property Price Trends in Chennai

                      Originally posted by maverick007 View Post
                      They are not. I stand corrected. My assumption was the return of higher inflation of 90's and not the hyperinflation (Zimbabwe type) - where the currency has no value. With hyper inflation, we have much bigger problem in hand and the true hedge against hyper inflation is having assets in other currencies than simply having illiquid hard assets in the currency that will be in annihilation due to hyper inflation. Liquid hard assets(precious metals) would reign supreme over the others.

                      Mav
                      I suspected you had high inflation in mind. I still couldn't resits attempting to lay out the difference between high and hyper (as I understand it).

                      The difference is between facing an angry cat (which can do some damage) to an angry tiger (which can do a whole lot more damage)!

                      cheers

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