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Property Price Trends in Chennai

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  • Re : Property Price Trends in Chennai

    Originally posted by ferret View Post
    Clairvoyant, can you please tell me the going price of land in Kamakoti Nagar Pallikaranai which is only about 4km from Velachery?
    Sorry Ferret. Currently I'm not in the market for land and no clue on Pallikaranai.

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    • Re : Property Price Trends in Chennai

      http://.bloomberg.com/news/2013-11-2...al-estate.html

      India’s slowing economy has left its big cities with a glut of office space, pushing up vacancy rates, freezing development and prompting some builders to convert commercial projects into housing.
      Vacancy rates in the financial center of Mumbai and capital New Delhi topped 20 percent in the third quarter, the highest in Asia after Chengdu, China, where 32 percent of offices are empty, according to broker Cushman & Wakefield Inc. Six Indian cities are among the 10 office markets with the worst vacancies in the region, according to Cushman.

      Demand for offices in India has been declining as Asia’s third-largest economy -- labeled a “dream market” by Warren Buffett two years ago -- faces the slowest expansion in 11 years, the fastest inflation rate among large emerging markets, and the risk of its debt ratings being cut to junk. New supply in the country’s seven major office markets, including Mumbai, Hyderabad and Bangalore, fell to the lowest in almost two years in the three months to Sept. 30, broker CBRE Group Inc. said.
      “India is faced with an intimidating macro-economic landscape,” said Anshuman Magazine, chairman of CBRE South Asia Pvt, in New Delhi. “Companies remained cautious, a trend which continued to inhibit office leasing activity across the country.”

      India’s economic growth probably held below 5 percent for a fourth straight quarter, the longest stretch in data going back to 2005, according to a Bloomberg News survey.

      Reduced Demand

      Until two years ago, India was a darling of global investors with the economy expanding more than 9 percent in the year ended March 2011. That spurred 55 million square feet (5.1 million square meters) of new office space across the country’s key cities in 2010, according to CBRE, which began compiling the data that year. That compares with 29 million square feet in 2011 and 30 million square feet in 2012. For the first nine months of this year, 23 million square feet were added.

      The building boom ended as economic growth fell by 50 percent and companies and investors showed little confidence in a government battling corruption scandals. ArcelorMittal and Posco scrapped plans for $12 billion of investments, while global funds pulled $12.3 billion from Indian bonds in the five months to October. Buffett’s Berkshire Hathaway Inc. exited an insurance distribution venture this year.
      “Developers have been delaying their projects to keep pace with the reduced demand,” Sanjay Dutt, executive managing director for South Asia at Cushman in Mumbai, said. “The economic conditions have forced fresh demand to be even more subdued than expected by most.”

      Cheaper Rents

      The increase in empty office space has made rents in New Delhi and its surrounding areas, known as the National Capital Region, and Mumbai less costly. Mumbai was ranked sixth and New Delhi 13th for the cheapest rents in business districts in Asia-Pacific cities, according to a report from Chicago-based Jones Lang LaSalle Inc. in August.

      Average prime office rents in Mumbai’s Bandra Kurla, a business area north of the city that is home to UBS AG and Citigroup Inc., were $581 per square meter a year, while rents in Delhi were $374 per square meter, the Jones Lang LaSalle data showed. Rents in Hong Kong were the highest at $1,486 followed by Beijing at $1,004. A square meter is almost 11 square feet.
      Average rents in Mumbai rose 0.5 percent in the second quarter from the previous one, while they were unchanged in New Delhi, according to Jones Lang LaSalle.

      ‘Price Correction’

      “Indian cities have not recovered from the rental and price correction of between 20 percent and 40 percent from the peak in the third quarter of 2008, while other business districts in Asia-Pacific have performed better,” said Ashutosh Limaye, Mumbai-based head of research at Jones Lang LaSalle India. “The oversupply created in Indian cities kept rents and prices in check.”
      Bangalore, the south-Indian city that has established itself as a technology hub, has the largest office market in India with about 100 million square feet, according to CBRE. The city, the National Capital Region and Mumbai account for about 65 percent of the office real estate market, according to the broker.
      Bangalore -- home to Texas Instruments Inc., the largest analog chipmaker, and Qualcomm Inc., the world’s largest maker of chips used in phones -- posted the steepest decline in office space added to the market, falling by about 90 percent in the September quarter from the previous three months, CBRE said. The National Capital Region had an 80 percent slide, while new office supply in Mumbai dropped by more than half, it said.

      Rising Vacancies

      Rising vacancies and declining rents are prompting developers to put off projects. DLF Ltd. (DLFU), India’s biggest publicly listed builder, is holding off building new office towers until it sees a recovery in demand, Ashok Tyagi, group chief financial officer of the Mumbai-based company, said on a conference call with analysts on Oct. 31.
      “The uptake of leasing is slow,” Tyagi said on the call. “We have enough capacity for the next 18 to 24 months, if not longer. We have land for further construction, but we need to see how demand shapes up.”
      DLF shares have declined 35 percent this year compared with the 39 percent drop by the CNX Realty Index, which tracks 10 real estate companies. DLF’s second-quarter net income dropped 28 percent to 1 billion rupees ($16 million) as higher construction and interest costs crimped profitability.

      Turning Residential

      To counter the decline in demand, some developers, such as Oberoi Realty Ltd. (OBER), India’s second-largest by market value, are considering converting plans to build offices into residential buildings.
      “Commercial assets are struggling,” said Chairman Vikas Oberoi.
      Many developers have converted their commercial projects into residential because they provide positive cash flows upfront, Oberoi said. The company will explore the option “where it’s structurally possible for us to do so,” he said.
      Oberoi shares have dropped 34 percent this year, after returning 37 percent in 2012.
      “The change from commercial to residential is happening across India,” said Magazine at CBRE. “As a lot of people overestimated the demand in commercial, in some places they will find it easier to convert to residential and get their cash flows going.”

      Economic Outlook

      DLF switched to plans for housing from office for a 17.5-acre (7-hectare) plot in central Mumbai before deciding to sell it to the Lodha Group last year, according to Cushman. The conglomerate Adani Group’s project in Mumbai and developer VRaheja Construction’s redevelopment of a slum in Mumbai’s north also are among those shifting from offices to residential, the broker said.
      India’s economy may expand 4.8 percent in the year through March 2014, the slowest pace since 2003, according to a survey by the Reserve Bank of India. Gross domestic product rose 4.6 percent in July through September from a year earlier, compared with 4.4 percent in the prior quarter, according to the median of 25 estimates in a Bloomberg News survey ahead of a report due on Nov. 29.
      The nation’s credit rating may be cut to junk next year unless national elections due by May lead to a government capable of reviving growth, Standard & Poor’s said in a Nov. 7 statement.

      Bangalore Offices

      Not all are refraining from adding supply. RMZ Corp., the largest office developer in south India, is building offices outside of the central business district in Bangalore, catering to the information technology industry and tenants looking for cheaper offices, said Raj Menda, managing director at RMZ.
      RMZ, which received $300 million of investment from Qatar’s sovereign wealth fund this year, has 98 percent of its office assets in secondary business locations, Menda said.
      “We are on a terrific acquisition spree,” Menda said in a phone interview. RMZ, based in Bangalore, is buying office buildings in cities including Bangalore, Chennai, Pune, Hyderabad and the National Capital Region, he said.
      Bangalore is also home to Goldman Sachs Group Inc.’s third-largest office globally, while Nissan Motor Co. and Renault SA’s local units have their offices in Chennai.
      Private-equity funds are favoring India’s office market because of attractive yields and an anticipated pickup in demand as the economy shows signs of stabilizing. The rupee has gained 9.5 percent from a record-low Aug. 28, while overseas investors returned to buy $17 billion of stocks this year.

      GIC, Ascendas

      GIC Pte, Singapore’s sovereign wealth fund, and Ascendas Pte said Nov. 19 they plan to invest as much as S$600 million ($483 million) in Indian commercial property.
      Blackstone Group LP and HDFC Property Ventures Ltd., the private-equity unit of India’s largest mortgage lender, made a $367 million investment in Bangalore-based Embassy Group in February, according to data from Venture Intelligence, a research firm that tracks private-equity investments in India.
      Private-equity investors are looking at assets that offer stable yields, with returns from 8 percent to 10 percent on an annualized basis, coupled with some capital appreciation at the end of their holding period, which could be seven years to 10 years, Shashank Jain, executive director of transaction services at PwC, said in a phone interview from Mumbai.

      A pickup in demand enough to relieve some of the office glut may be slow in coming. Annual supply this year is estimated at about 40 million square feet, while demand will be for about 25 million square feet, according to data from Cushman.

      Every year progressively, office absorption has been declining since 2011,” Magazine at CBRE said. “The current office supply may take about two years to get occupied.”
      Last edited November 26 2013, 11:49 AM.

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      • Re : Property Price Trends in Chennai

        Home buyers expect prices to fall in the next 6 months as indicated by housing sentiment index that fell by 20 per cent during July-September compared to the previous quarter, according to a survey by Indian Institute of Management Bangalore and property portal .
        The Housing Sentiment Index (HSI), jointly developed by IIM-Bangalore & , is based on an online survey of prospective home buyers in eight major cities of India -- Delhi, Noida, Gurgaon, Mumbai, Chennai, Hyderabad, Pune and Bangalore.
        "Home buyers across the nation expect real estate prices to fall over the next six months. The aggregate Housing Sentiment Index (HSI) dropped to 93 from 117 in the previous quarter, a decline of over 20 per cent," IIMB and , which is part of Times of India Group, said in a statement.
        A HSI of 100 suggests that buyers expect prices to remain at current levels, while values lower (greater) than 100 suggest that buyers expect prices to fall (rise).
        "An aggregate HSI score of 93 for the 8 cities surveyed indicates expectation of a price fall over the next 6 months. The index fell from 117 last quarter, which indicates a shift in sentiment among prospective home buyers," it added.
        Buyers in Bangalore still expect prices to marginally increase (HSI=106) while buyers in the other 7 major cities expect prices to fall, with Mumbai having the lowest HSI score of 81. The Telengana crisis seems to have hurt buyer sentiment in Hyderabad badly as its HSI score fell by over 30 per cent to 83, the report said.
        "The trend is strong in all the eight cities that were surveyed and reflects a shift from the previous quarter when buyers expected price rise to continue," the statement said.
        The percentage of buyers who expect prices to fall by more than 10 per cent has almost doubled from 14 per cent of sample last quarter to 25 per cent this quarter.
        "Not surprisingly, more buyers are willing to wait, with almost a third of our sample willing to wait more than a year before buying a property. The expected waiting time has increased to 9 months, something that does not augur well for the inventory-heavy industry," the report said.

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        • Re : Property Price Trends in Chennai

          I am waiting to see if the prices fall. I have been holding off buying because of this. But if this doesn't happen in chennai then my wait will be in vain

          Sent from my GT-I9505 using Tapatalk

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          • Re : Property Price Trends in Chennai

            Some people are waiting for the prices to fall through out their life

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            • Re : Property Price Trends in Chennai

              I started my wait just 2 months back!!

              Sent from my GT-I9505 using Tapatalk

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              • Re : Property Price Trends in Chennai

                Originally posted by newbiebuyer View Post
                I started my wait just 2 months back!!

                Sent from my GT-I9505 using Tapatalk
                2 months is not a wait, it is a hunting period.

                i was looking for a property( over 3 years) to see the prices almost doubling. so don't hunt or look for more than 6 months especially if it is your first property where profit or loss is just on papers. Either price rise or fall, will not impact you.

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                • Re : Property Price Trends in Chennai

                  The harsh realty of regulation

                  P. SAHEL

                  In recent times, the clamour to grant infrastructure status to the real estate sector has been on the rise. Once the government accords industry or infrastructure status to the sector, it will lead to a simplification of procedures and speedier approvals for projects.

                  , A developer of a project is required to comply with a long list of regulations. These include getting approval of development plans and building plans, and ensuring compliance with fire, pollution control, electricity, environment, water and so on.

                  approval process

                  As per World Bank’s statistics on Dealing with Construction Permits, a developer in India has to procure 34 different approvals before a residential project can get off the ground. This is a massive procedural burden when compared with developed economies, where not more than 15-16 approvals are needed. In fact, it is high even by emerging markets standards — in Brazil it only takes 17 permits, in South Africa 13 and in China 28. There is a need to define at what stage of approval the developer can start marketing his project to consumers.

                  As per CREDAI-Jones Lang Lasalle Real Estate Transparency Survey 2011, getting regulatory approval for the construction process takes two to two-and-a-half years in India. The financing cost increases as well — and is passed on to the buyer.

                  Fast approval of all such clearances would become a distinct possibility if the sector is granted industry status. It would ensure that projects can get a single-window clearance for regulatory requirements instead of getting them independently from various agencies, wasting time. Industry status would also lead to relaxation of lending norms to the sector.

                  Access to capital is the biggest need for many developers today as banks are reluctant to offer a credit line to many projects currently under development. Such constraints force developers to borrow from non-banking institutions at exorbitant rates of interest. It is not uncommon for builders to borrow at 18-24 per cent.

                  This aggravates their cash flow and makes it onerous for them to service those debts. Industry status will facilitate real estate loans at a lower rate, boosting the confidence of the sector.

                  Beneficial effects

                  Given the contribution of the real estate sector to the health of the overall economy, the demand for grant of industry status is justified. The industry is known to contribute approximately 6 per cent to our GDP and is known to be the next biggest employer after agriculture. A host of ancillary industries such as steel, cement, paint, brick, building materials, consumer durables and so on are known to be dependent on it.

                  A study by credit rating agency ICRA shows that the construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the Indian economy.

                  A unit increase in expenditure in the real estate sector can generate a fivefold increase in income.

                  In view of the contribution of the real estate sector, the sooner it is granted industry status the better it will be for the health of our economy.

                  Granting infrastructure status to the real estate sector will help it get off the ground.

                  (This article was published in the Business Line print edition dated November 30, 2013)

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                  • Re : Property Price Trends in Chennai

                    Hi all. Does anyone know what is the current rate per sqft for areas around Siruseri? Please reply soon if you know. I am planning to book a flat soon. Thanks in advance.

                    Sent from my GT-I9505 using Tapatalk

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                    • Re : Property Price Trends in Chennai

                      Originally posted by newbiebuyer View Post
                      Hi all. Does anyone know what is the current rate per sqft for areas around Siruseri? Please reply soon if you know. I am planning to book a flat soon. Thanks in advance.

                      Sent from my GT-I9505 using Tapatalk
                      Area around siruseri say Navalur to padur rates varies between 3000 psqft to 8000 per sq ft.

                      Main road properties on an average close to siruseri cost minimum 4000+ per sq ft except for Hiranandani and Abov which are priced higher. Above is only the base price and other charges may be applied by builder which will easily cost another 7+ lakhs depending on the amenities.

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