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Property Price Trends in Chennai

Last updated: September 4 2017
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  • Re : Property Price Trends in Chennai

    Originally posted by k11 View Post
    Market is slow and stagnation ahead - totally agree. But do not agree on some of the above statements.

    Capital values on luxury housing do not depend entirely on rental values.

    Truly well do people do not care about rents or yeilds.
    They buy it for end use, 2/3/4/nth home. They will keep it locked, use it for holiday home, business trips, etc.

    Renting, yeild calculation and all, is what regular IT/NRI/Upper middle class people do.
    Most of this population do not buy luxury flats, they buy in suburbs or buy in cheaper apartments in city.
    Let's exclude people who have most of their portfolio in RE.

    There is a difference between regular people and actual rich people.
    There are many people who have money in businesses, stocks, career (sports/celebrity/politics), etc.

    Folks with money do not calculate yeild on expensive cars, foreign trips, jewellery, parties, weddings, etc.
    Luxury flats are sold as lifestyle choice not necessarily as investment.

    The number of people who are making the big money are increasing.
    It was a rapid increase in earlier years as the economy boomed. Once the economy improves, they will go up.

    India is new to this type of luxury housing. Chennai is well behind Mumbai and Delhi.
    There is a big demand, many people are moving up the ladder and there is a demand for such units.

    I do not think we call all the housing projects in Chennai as luxury.
    That is a wholly different topic. Let me not deviate.

    By the way, most high end Apts in growing markets like Hong Kong, Singapore, Shanghai, etc yeild under 2-4%.

    Let's not use rental yeilds as barometers.
    Use Economy, rising incomes, dispoable incomes, increase in number of rich people or ultra rich people.


    I might have used many confusing terms - semi rich, rich, truly rich, ulta rich, etc.......
    Putting a numerical bracket around these is very difficult and even I am having hard time even thinking about it.

    I think most expensive apts in the city cost around 10-15C.
    So if you do not have atleast 50C you cannot call yourself rich in Chennai. That number will keep on increasing.

    There are many politcos, movie stars, sports folks, industrialists, businessmen, etc who have 250-1000 crores(white/black) in every single city in India. There are people in villages with that much money.
    In Chennai, I think these guys must be 5000 or more.
    Politcos from various parties alone might make up a huge chunk.
    Adding rural surrounding areas, nearby states you might be looking at roughly double the number.

    Then you have certain people who are in thousands of crores.
    It would be a small number but they do play a big role too buying up entire buildings.
    What you are saying is true outside TN. In Chennai or TN the number of people having more than 250 crores are very less. The ratio of super rich is very low in TN compared to Kerala or other states. City wise forget Mumbai or Delhi even hyd,Bangalore or kochi has lot of super rich but very less in chennai and almost nil in other parts of TN.

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    • Re : Property Price Trends in Chennai

      Originally posted by chennaidesi
      In Chennai or TN the number of people having more than 250 crores are very less. The ratio of super rich is very low in TN compared to Kerala or other states. City wise forget Mumbai or Delhi even hyd,Bangalore or kochi has lot of super rich but very less in chennai and almost nil in other parts of TN.
      The point is, it is clear that there is no fundamentals to the asset class that can support this valuation. Fundamentals being alluded is the 'wealth effect' and the resultant flow that arises out of the same - all of these are very anecdotal and questionable.

      Often when fundamentals run out, such theories usually prop up. For long, Vancouver market was propped up by inflow of HongKong immigrants on the premise that they will keep buying no matter what the price is. Same way, San Francisco Bay Area RE market is through the roof now and the theory goes, Chinese investors are buying and will keep buying and there is FB/Twitter wealth effect, is the rationale dished out to support such over priced assets. It is easy to get carried away but it is tough to take the view against the grain and see the nonsense behind such theories and realize the fact that the asset prices cannot be supported by 'flows' in a sustained fashion.

      We all know how the asset values predicated on 'flows' end up - classic example is our Indian Stock Market and FII flows.
      Last edited by maverick007; March 29 2014, 08:09 PM.

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      • Re : Property Price Trends in Chennai

        Originally posted by maverick007 View Post
        We all know how the asset values predicated on 'flows' end up - classic example is our Indian Stock Market and FII flows.
        Assuming, FIIs originally had $200 Bn investments in Indian stocks, if FIIs pump in another $10 Bn to raise Indian Stock Markets by 10%, subsequent withdrawal of merely $1Bn by FIIs will result in losing 10% of stock indices. So their $209 Bn will go down to $188 Bn. So removal of merely $1Bn can decrease total investments value by about $21 Bn! ROFL!

        I don't see similar scenario in Realty, buts it funny the way stock indices work, when observed in short periods.

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        • Re : Property Price Trends in Chennai

          Originally posted by chennaidesi View Post
          What you are saying is true outside TN. In Chennai or TN the number of people having more than 250 crores are very less. The ratio of super rich is very low in TN compared to Kerala or other states. City wise forget Mumbai or Delhi even hyd,Bangalore or kochi has lot of super rich but very less in chennai and almost nil in other parts of TN.
          I do not think this might be true. Though I have never visited the other cities of TN (except Pondy and Ooty), I think there are quite a few people with that kind of money.
          Mumbai or Delhi is no comparison. But the number of folks with money should be similar to other cities and areas.

          Elections is coming, each MP seat they will spend at least 200C, that is a lower end number. In hotly contested places, money will flow. Politics is expensive.
          Lets come to businesses. There might be at least top 50-100 businessmen in each small city, Owners almost always own a huge stake. The small city/town guys, we might not hear about, but they have generated a huge amount of wealth.



          Originally posted by Septaa View Post
          Very well put argument and agree to the T investment in luxury apartment is not based on rental yield and it is never will be in future . affordability will never a big issue for buyer in this segment also liquidity could be issue for some but not for all .

          may be big issue money in other investment asset than RE is the biggest factor imore important then liquidity issue it also sentimently and financial RE it not a very attractive asset class at the movement

          Just another interesting observation over few drinks with few friends we observed there is very big inverse correlational between stock market and RE in India. We all know money moves from one class to another asset class what more interesting is big stock market moves up RE is down and vice versa this is true from 1991-2014
          For some of the people who buy the luxury apts, it is not a RE vs asset class.
          It is not a investment vehicle, it is a place to live, own and enjoy. For some, the paper value of the house is immaterial, they do not sell them just because market is slow.
          Home ownership is held with high pride around the world. In India it is a status symbol.

          Who calculates depreciation, returns and all in a luxury car dealership, or at airport before going for vacation, or when planning a massive wedding, etc. I am sure people with lot of money look do not look at housing the same way.




          Lets comeback to forum members - Market is slow, will be slow for some more time - I do not think people would refute that. I would like to know how many are selling their homes and moving into rental homes. I am sure many of you will keep on holding even when you know there is going to be no return or even if it slightly decreases in value. Instead other asset classes, even a plain bank FD might beat the returns.

          Here is my take,
          The people who are into stocks, RE investments/speculation, yield chasers, etc are mostly focused on suburbs betting on upcoming areas. Even many builders are stretched thin on such projects. Suburban projects are not like city projects, city projects are done fast they get built under 2 years, some big ones would take 4-5 years. Suburban projects takes decade sometimes. It is not easy, laying roads, underground pipelines, foundation, etc. Even selling such projects with thousands of apts across hundreds of acres is hard.
          Suburban builders might be forced to sell at discount bringing down rapidly the prices for houses in that area, might even cause a domino effect.

          You are going to see crashes in speculative places before you would come across some of the more expensive locations. GST/OMR will see reduction before you see sales on Boat Club/Poes Garden.

          Good example on Aynambakkam. I do not know where it is, should be another speculative place. I thought I saw threads here on that area.

          Comment


          • Re : Property Price Trends in Chennai

            I feel projects that are in multiple phases of development, the builders may delay subsequent launch of phases. If there is compilation to launch, it would be priced less that the previous phases. The most affected parts could be remote not developed / under development
            areas and suburban. As far as plots are concerned, there will be stagnant pricing going forward at least 2 to 3 years. This may continue till the new govt at settle down and make real progress on development.

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            • Re : Property Price Trends in Chennai

              Originally posted by k11 View Post
              I do not think this might be true. Though I have never visited the other cities of TN (except Pondy and Ooty), I think there are quite a few people with that kind of money.
              Mumbai or Delhi is no comparison. But the number of folks with money should be similar to other cities and areas.

              Elections is coming, each MP seat they will spend at least 200C, that is a lower end number. In hotly contested places, money will flow. Politics is expensive.
              Lets come to businesses. There might be at least top 50-100 businessmen in each small city, Owners almost always own a huge stake. The small city/town guys, we might not hear about, but they have generated a huge amount of wealth.





              For some of the people who buy the luxury apts, it is not a RE vs asset class.
              It is not a investment vehicle, it is a place to live, own and enjoy. For some, the paper value of the house is immaterial, they do not sell them just because market is slow.
              Home ownership is held with high pride around the world. In India it is a status symbol.

              Who calculates depreciation, returns and all in a luxury car dealership, or at airport before going for vacation, or when planning a massive wedding, etc. I am sure people with lot of money look do not look at housing the same way.




              Lets comeback to forum members - Market is slow, will be slow for some more time - I do not think people would refute that. I would like to know how many are selling their homes and moving into rental homes. I am sure many of you will keep on holding even when you know there is going to be no return or even if it slightly decreases in value. Instead other asset classes, even a plain bank FD might beat the returns.

              Here is my take,
              The people who are into stocks, RE investments/speculation, yield chasers, etc are mostly focused on suburbs betting on upcoming areas. Even many builders are stretched thin on such projects. Suburban projects are not like city projects, city projects are done fast they get built under 2 years, some big ones would take 4-5 years. Suburban projects takes decade sometimes. It is not easy, laying roads, underground pipelines, foundation, etc. Even selling such projects with thousands of apts across hundreds of acres is hard.
              Suburban builders might be forced to sell at discount bringing down rapidly the prices for houses in that area, might even cause a domino effect.

              You are going to see crashes in speculative places before you would come across some of the more expensive locations. GST/OMR will see reduction before you see sales on Boat Club/Poes Garden.

              Good example on Aynambakkam. I do not know where it is, should be another speculative place. I thought I saw threads here on that area.
              I had earlier enquired about VGN the sale manager quoted 25000 soft launch however news is they did not get any booking so presently the launch price is reduce to 22000 with few free bees work out to 20% discount. May be Ceebros 16000 launch is effecting.Or The stress on the balance sheet 400cr plus High interest NCD issue in favour On Ajay Piramal company ???????????
              Also news in the market One big South Indian private financier has underwriter in RE big time I am talking about 100s of apartment he underwrite has stopped underwriting any new project Booz his position is weakened with low cash flow and he is not able to exist his underwriting stock in secondary market.
              Last edited by Septaa; March 29 2014, 11:08 PM.
              RE overpriced still fancy then 4% yield is must anything less is overpriced

              Comment


              • Re : Property Price Trends in Chennai

                Originally posted by k11 View Post
                Ido not think this might be true. Though I have never visited the other cities of TN (except Pondy and Ooty), I think there are quite a few people with that kind of money.
                Mumbai or Delhi is no comparison.

                Elections is coming, each MP seat they will spend at least 200C, that is a lower end number. In hotly contested places, money will flow. Politics is expensive.
                Lets come to businesses. There might be at least top 50-100 businessmen in each small city, Owners almost always own a huge stake. The small city/town guys, we might not hear about
                .
                I have traveled extensively in TN and have relatives and friends in most southern Dst (From Tirchy to Kanyakumari) & Western Dst(Erode to Nagarkovil)

                Most CBE wealthy people tend to invest most of their locally.

                However wealthy business people from Tuticorin, Shivakasi & Erode tend to invest a small of personal wealth mostly in Chennai acres plus couple of bungalows on land.

                The remaining gets invested in to vast track of land in their regional areas (outside their towns) for current or future business use.

                PRP,VMM,VPArumugam,MKA,2x Periyasamis,Duraimurugan,OPS,Even JJ has most of the assets in regional areas

                Most business & Political class of regional TN has some hedges on Chennai Acreage for liquidity & Washing - but yet to hear they have bought flats & Villas (hard to wash)

                800 acre on NH 7 outside Viruthunagar or 500 acres on NH 47 outside Erode/Bhavani will take longer to sell than 40 acres near Padapai or Thirumullaivyol, where AP developers will grab it for Layouts in few weeks.

                Those guys usually have 1 or 2 traditional houses for personal use in Chennai but invest in washable acreage.


                Originally posted by k11 View Post
                Good example on Aynambakkam. I do not know where it is, should be another speculative place. I thought I saw threads here on that area.
                Ayanambakkam (near Thiruverkadu) is a not speculators camp, It is lower middle class & middle class buyers driven by first home ownership dream.

                Typical buyer is a middle class renters, Goverment staffs, small business owners buy their first land to build their first own house.
                They buy land payoff private loans & Jewell debts for few years and then again get a bank loan, PF loan to build then move.
                Last edited by Economist; March 29 2014, 11:12 PM.

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                • Re : Property Price Trends in Chennai

                  Good post, Eco.
                  The only tamil family in one of our smaller complex is from southern TN. From a town which was in news for various reasons. They use the flat for monthly visits, sometimes twice a month. They run various businesses, I think even have links with a leader of a local party. They come in a car north of 1C, we have four luxury cars in building, this one is biggest. There is couple of more families like this in a building next to ours. I am seeing a lot of rich southern TN folks nowadays buying prime properties in the city. That is why I was commenting to @chennaidesi that southern TN have some rich folks.




                  Originally posted by Septaa View Post
                  I had earlier enquired about VGN the sale manager quoted 25000 soft launch however news is they did not get any booking so presently the launch price is reduce to 22000 with few free bees work out to 20% discount. May be Ceebros 16000 launch is effecting.
                  Septaa,

                  I am not a big fan of VGN project. It has lot of risks.
                  VGN is not a big time luxury builder. They have never done any luxury buildings.
                  So it is not like buying from DLF, Lodha, etc.
                  I doubt even if they can execute such project and sell the units successfully.

                  The building is on main road, so you will have to take a unit above 7-10+ floor to avoid noise. The builders do not include floor rise charges in the pricing. Also this might be a 2.5 FSI project, so might have more units. If you like the area you should look at residential streets like Pyrcrofts Garden, Kothari Rd, Haddows Rd, Wallace Garden, Rutland Gate, etc.
                  This building is in a corner, the smaller street facing ones should be fine. Again there is a lot riding on the building design and layout. I feel it is way too big for a builder like VGN with no experience or track history on executing such projects.

                  I put the VGN project fair value at 20-22K + Floor rise + charges = 24-26K
                  They should pre-launch it at 17k.
                  25K soft launch is crazy. There should be bigger discount for early investors.

                  Ceebros project in Egmore is a totally different area.
                  I would not compare Ceebros with this VGN or Akshaya Private project. Atlantis is definitely two tiers lower than these when it comes to location.
                  Last edited by k11; March 30 2014, 03:14 AM.

                  Comment


                  • Re : Property Price Trends in Chennai

                    Originally posted by Economist
                    The remaining gets invested in to vast track of land in their regional areas (outside their towns) for current or future business use.
                    ^^^ Correction: It should read " speculated in to vast track of land in their regional areas (outside their towns) for current or future business use."

                    Originally posted by Economist
                    However wealthy business people from Tuticorin, Shivakasi & Erode tend to invest a small of personal wealth mostly in Chennai acres plus couple of bungalows on land.
                    Mostly in acres and that too in Chennai suburbs? Crazy! They do not seem to have much clue. They should have most of it in High Streets. Chennai has only few investment worthy Places - Poes/BC/Wallace. Are you sure they have invested their couple of Bungalows in those places ? If not, they are not invested in Chennai. Period. How come they are wealthy and connected but do not know the best kept secret of wealth creation ?

                    Aside:
                    Brand new apartment available in Ceebros, Kairali in Nageswara Road , Nungambakkam - ~1600 sqft for 2.6 crore was on classifieds by the builder. Looking from the price it must be from a 'Low Street'. Or must have deviation or FSI violation.
                    Last edited by maverick007; March 30 2014, 08:16 AM.

                    Comment


                    • Re : Property Price Trends in Chennai

                      Originally posted by k11
                      Lets comeback to forum members - Market is slow, will be slow for some more time - I do not think people would refute that. I would like to know how many are selling their homes and moving into rental homes. I am sure many of you will keep on holding even when you know there is going to be no return or even if it slightly decreases in value. Instead other asset classes, even a plain bank FD might beat the returns.
                      How many or what % from above will be in the class of below?

                      Originally posted by k11
                      Who calculates depreciation, returns and all in a luxury car dealership, or at airport before going for vacation, or when planning a massive wedding, etc. I am sure people with lot of money look do not look at housing the same way.
                      Miniscule % or even near zero. It is largely irrelevant to the size of the real estate market even in core CBD. What this market does has no correlation to the rest of the market or even the economy, sometimes. I see no merit in discussing this segment or even bringing such topics, which may not find audience here. For most in the forum, who invest in RE, must be doing from their hard earned savings and some may be wealthy too - but unlikely to be a mindless splashing class, for whom the societal status comes from the 'address' presumably and not from who they are as a person, as projected above. They would not spend mindlessly and do measure where their investment is going. Hence, depreciation, returns and more importantly, they think before they invest. When they think and the money invested is a substantial % of their net worth, above matters.

                      16000-20000 psft is no where near luxury in CBD - except the price that is. You still get only 4 walls and a roof and possibly a CBD address in a high street, mediocre street or a notch lower. If one wants to double check, please visit the specifications of Ceebros - Kairali. Discussion that started for this segment veered towards the luxury segment which has no relevance.
                      Last edited by maverick007; March 30 2014, 08:10 AM.

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