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Property Price Trends in Chennai

Last updated: July 14 2020
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  • Re : Property Price Trends in Chennai

    Originally posted by sridharchennai View Post
    I live right behind this old Sky scrapper, the quality of this building is pathetic and atleast 30% of the flats are vacant in this building, I don't know why
    Seeing the massive repairs going on I asked the watchman, he said internal plumbing water leak may have resulted cement render cracking. I don't think he knew the real problem.

    Comment


    • Re : Property Price Trends in Chennai

      This was published on Hindu sums up real estate in India avoid this investment class for time being at 5 to 7 tears
      With reference to the article, “What drives property prices,” property prices are high because most of the black money is invested in real estate. Property prices have gone beyond the purchasing power of the middle class. Look at the inventory levels in big cities — they are extremely high. No one lives in most of these apartments.

      In any other business, prices would have fallen to a level where liquidation of these inventories would have allowed the working capital to recycle in the system. Since the sources of black money are perennial and the owners have no compelling reasons to cash out the return (where else will they invest this cash?), real estate prices keep rising. Such bubbles would have burst in most markets but the real estate bubble in India is made of black money, so it will not burst. It will just make finding housing more difficult for the people.

      I have the following reasons for not buying property: Prices are much higher compared with what you pay in developed countries; if you could buy there. Even in places such as Dubai, which has got excellent infrastructure, the cost of real estate is much cheaper than my place (Chennai). At least in Chennai — I think the same holds good for most other cities — there is absolutely no infrastructure and amenities to support such a huge growth in high-rise buildings. It may come in future but it will take another 10 to 15 years.
      RE overpriced still fancy then 4% yield is must anything less is overpriced

      Comment


      • Re : Property Price Trends in Chennai

        Only black money hoarders can buy in such markets just to "maintain" the price levels. There are such transactions in all major projects (about 10-20 such transactions to consolidate market price) which are normally born by the proxies of builders (most likely the Marketing Directors or Project Managers - their relatives etc...). But the price can crash only when the genuine end use buyers stop buying properties for the next 10 years.I am sure they can rent far cheaper than the EMIs and can freely move from one place to other. People must stop buying apartments and go only for individual houses so that market can correct themselves. Apartment prices are skewing the market rates with FSI and other parameters which are typically exploited by big time builders.

        Comment


        • Re : Property Price Trends in Chennai

          The TN government earned a record revenue of Rs 8,055.74 crore in 2013-14 in stamp duty. Which equate to 100000 cr total transaction white so black could be another 50000 cr so total 1.5 lakhs cr really surprised by the figure
          RE overpriced still fancy then 4% yield is must anything less is overpriced

          Comment


          • Re : Property Price Trends in Chennai

            IMO the best factor to determine if we r in bubble factor in an asset DSCR ( Debt service coverage ratio).

            First I will discuss Sydney market which saw a property bubble in 2005. In 2014 media is saying Sydney is in bubble phase. Now lets do some analysis in 2005 Sydney median apartment price was around 375000 mean rent was 220 per week and interest rate was 7.5% so let's calculated DSCR total annual rent is 220*52 = 11440/375000= 3% so DSCR is 7.5/3= 2.5 ratio so Sydney market hit bubble by 2005 price drop to on average 30% to 40% apartment sold in 2005 for 375000 was available for 225000. Today Sydney median unit price is 525000 rent is 475 per week interest rate is 5.2%. So let's calculate DSCR total annual rent is 475*52 = 24700/525000= 4.7% so DSCR is 5.2/4.7 = 1.10. So IMO Sydney market in 2014 is nowhere near bubble phase.

            Now India I will do the same analysis in market which I am familiar with in this case chennai suburb nungambakkam. Now nungambakkam is top suburb in chennai in 1984 unit cost per sqft was around 250 per sqft rent was around 3 per sqft PM and interest rate was around 18% So let's calculate DSCR total annual rent 3*12 = 36 per sqft 36/250 = 14.4% so DSCR is 18/14.4 = 1.28 Ratio in 1994 unit cost per sqft was 1200 rent was around 8 per sqft and interest was 14% so annual rent was 96 per sqft so DSCR was 96/1200= 8% so DSCR was 14/8 = 1.75 Ratio in 1995.
            Now 2004 rent per sqft was 15 pm price was 3000 per sqft and interest rate was 8.5%. DSCR in 2005 is 15*12= 180/3000=6% so DSCR was = 8.5/6 = 1.41 ratio better then 1995 now 2014 rent is around 30 per sqft price per sqft is 18000 interest rate is 10.5% so DSCR is 30*12= 360 so rental yield is 360/18000 = 2% so DSCR is 10.5/2 = 5.25 Ratio.

            So healthy DSCR is around 2 we r at 5.25 so IMO RE overpriced and asset is in bubble phase big time.

            I challenge all RE bulls debunk my analysis
            RE overpriced still fancy then 4% yield is must anything less is overpriced

            Comment


            • Re : Property Price Trends in Chennai

              Originally posted by Septaa View Post
              IMO the best factor to determine if we r in bubble factor in an asset DSCR ( Debt service coverage ratio).

              First I will discuss Sydney market which saw a property bubble in 2005. In 2014 media is saying Sydney is in bubble phase. Now lets do some analysis in 2005 Sydney median apartment price was around 375000 mean rent was 220 per week and interest rate was 7.5% so let's calculated DSCR total annual rent is 220*52 = 11440/375000= 3% so DSCR is 7.5/3= 2.5 ratio so Sydney market hit bubble by 2005 price drop to on average 30% to 40% apartment sold in 2005 for 375000 was available for 225000. Today Sydney median unit price is 525000 rent is 475 per week interest rate is 5.2%. So let's calculate DSCR total annual rent is 475*52 = 24700/525000= 4.7% so DSCR is 5.2/4.7 = 1.10. So IMO Sydney market in 2014 is nowhere near bubble phase.

              Now India I will do the same analysis in market which I am familiar with in this case chennai suburb nungambakkam. Now nungambakkam is top suburb in chennai in 1984 unit cost per sqft was around 250 per sqft rent was around 3 per sqft PM and interest rate was around 18% So let's calculate DSCR total annual rent 3*12 = 36 per sqft 36/250 = 14.4% so DSCR is 18/14.4 = 1.28 Ratio in 1994 unit cost per sqft was 1200 rent was around 8 per sqft and interest was 14% so annual rent was 96 per sqft so DSCR was 96/1200= 8% so DSCR was 14/8 = 1.75 Ratio in 1995.
              Now 2004 rent per sqft was 15 pm price was 3000 per sqft and interest rate was 8.5%. DSCR in 2005 is 15*12= 180/3000=6% so DSCR was = 8.5/6 = 1.41 ratio better then 1995 now 2014 rent is around 30 per sqft price per sqft is 18000 interest rate is 10.5% so DSCR is 30*12= 360 so rental yield is 360/18000 = 2% so DSCR is 10.5/2 = 5.25 Ratio.

              So healthy DSCR is around 2 we r at 5.25 so IMO RE overpriced and asset is in bubble phase big time.

              I challenge all RE bulls debunk my analysis
              Septaa,

              Whichever yardstick you use, Its clear that RE is over priced. It is not just now, but has been overpriced for the past 5-6 years. Lets take nungambakkam for example - I hear the current rate for new lanuches is around 22K/sqft. Just two years back it was 12K/sqft and that itself was highly priced comparatively at that time. The problem with such analysis is no one knows whether now is the peak or if there is higher top. The dilemma is always will the bubble burst now? or will it grow even bigger? When one waits for the price to reduce but sees it moving upwards for no reason, isnt it natural tendency for a buyer to feel its better and less risky to ride the bubble than miss the bus?

              Would like to know from you if you have any method to identify a burst is imminent? Thanks.

              Comment


              • Re : Property Price Trends in Chennai

                Originally posted by nabishek View Post
                Septaa,

                Whichever yardstick you use, Its clear that RE is over priced. It is not just now, but has been overpriced for the past 5-6 years. Lets take nungambakkam for example - I hear the current rate for new lanuches is around 22K/sqft. Just two years back it was 12K/sqft and that itself was highly priced comparatively at that time. The problem with such analysis is no one knows whether now is the peak or if there is higher top. The dilemma is always will the bubble burst now? or will it grow even bigger? When one waits for the price to reduce but sees it moving upwards for no reason, isnt it natural tendency for a buyer to feel its better and less risky to ride the bubble than miss the bus?

                Would like to know from you if you have any method to identify a burst is imminent? Thanks.
                IMO DSCR and supply demand r best indicator for any asset valuation. In case of Indian RE black money plays a very important. Also supply of money in this industry is drying up big time NRI have started building RE portfolio in country they r based that is reason the biggest buyers in Dubai Uk USA r Indians
                RE overpriced still fancy then 4% yield is must anything less is overpriced

                Comment


                • Re : Property Price Trends in Chennai

                  Ramchi's article link,
                  Indian home prices fell most among 52 nations, IMF says - The Times of India
                  Global Property Guide's analysis of India says that because of high inflation, a comparison of house prices at nominal rates might give a misleading result. At inflation-adjusted rates prices, it says, prices have actually fallen in 21 of these 26 cities.
                  When you consider Inflation and Rupee value depreciation, the returns have been muted.
                  But in this forum, most folks do not look at these two factors, we generally focus in nominal rupee terms.


                  Coming to bubble or not,
                  I see a huge number of financially savvy NRIs piling on Indian RE despite having much better umpteen alternative investment options across the world, not just in RE but equities, bonds, etc.
                  There should be a reason why these guys are piling on. Think about it for a moment.
                  Pool of buyers is ever increasing.
                  So it is not just the locals but everyone is getting in.

                  Now why would they do that if Indian RE is expensive and unaffordable.
                  I think Indian RE is not in a bubble. There is still ways to go, there are many buyers.

                  People buy plots for capital gain or flats for rental income.
                  Everyone wants to rent out - now that will affect rental market. Many houses but few renters.
                  Lower rents are good for economy, it will bring housing costs down for people who cannot afford.
                  Rents can still be lower and prices will get higher. More than end user demand, buyer demand is more important.

                  Residential rental yeilds need to come down to 1% or so before we panic, I think it is now 2-4%.
                  NRIs and Locals are ready to take in low returns.

                  Most do not have opportunity cost or interest cost. So even 1% is +ive for them.
                  Most of the investors do not borrow money or have other avenues.
                  First time and some small % of buyers might take in loans but most do not.

                  I tend to see that prices are still very good. But we have some oversupply situtation in certain cities and areas.
                  If a 40L Apt or plot 5 years ago was cheap, 80L for same Apt/Plot is cheap today. Market is slow, but might improve.
                  What you are seeing is still low prices or same as 5 years ago on average in most areas, considering inflation/interest costs. There is lot of room to go, before we can call the prices are high.
                  We just need to take a look at it differently.

                  Comment


                  • Re : Property Price Trends in Chennai

                    Originally posted by k11 View Post
                    Ramchi's article link,
                    Indian home prices fell most among 52 nations, IMF says - The Times of India

                    When you consider Inflation and Rupee value depreciation, the returns have been muted.
                    But in this forum, most folks do not look at these two factors, we generally focus in nominal rupee terms.


                    Coming to bubble or not,
                    I see a huge number of financially savvy NRIs piling on Indian RE despite having much better umpteen alternative investment options across the world, not just in RE but equities, bonds, etc.
                    There should be a reason why these guys are piling on. Think about it for a moment.
                    Pool of buyers is ever increasing.
                    So it is not just the locals but everyone is getting in.

                    Now why would they do that if Indian RE is expensive and unaffordable.
                    I think Indian RE is not in a bubble. There is still ways to go, there are many buyers.

                    People buy plots for capital gain or flats for rental income.
                    Everyone wants to rent out - now that will affect rental market. Many houses but few renters.
                    Lower rents are good for economy, it will bring housing costs down for people who cannot afford.
                    Rents can still be lower and prices will get higher. More than end user demand, buyer demand is more important.

                    Residential rental yeilds need to come down to 1% or so before we panic, I think it is now 2-4%.
                    NRIs and Locals are ready to take in low returns.

                    Most do not have opportunity cost or interest cost. So even 1% is +ive for them.
                    Most of the investors do not borrow money or have other avenues.
                    First time and some small % of buyers might take in loans but most do not.

                    I tend to see that prices are still very good. But we have some oversupply situtation in certain cities and areas.
                    If a 40L Apt or plot 5 years ago was cheap, 80L for same Apt/Plot is cheap today. Market is slow, but might improve.
                    What you are seeing is still low prices or same as 5 years ago on average in most areas, considering inflation/interest costs. There is lot of room to go, before we can call the prices are high.
                    We just need to take a look at it differently.
                    Chennai market u can safely say it is end user driven market..... Hence central chennai price will see not much correction however any other market take south chennai is over supply and over priced so big correction is possible....IMO lot of empty unit
                    In regards to NRI I strongly believe change is coming second generation r selling all investment made by there parents they see not much value owning asset in India.
                    RE overpriced still fancy then 4% yield is must anything less is overpriced

                    Comment


                    • Re : Property Price Trends in Chennai

                      Originally posted by Septaa View Post
                      Chennai market u can safely say it is end user driven market..... Hence central chennai price will see not much correction however any other market take south chennai is over supply and over priced so big correction is possible....IMO lot of empty unit
                      In regards to NRI I strongly believe change is coming second generation r selling all investment made by there parents they see not much value owning asset in India.
                      I do see a lot of NRIs from western and other developed countries, many on this forum itself taking trips to India, spending so much time to scout for RE. This forum is proof.
                      Now they have other investment options as well, but there is a reason why they are all piling on to Indian RE even if the returns in the last 4-5 years have not been good.
                      They say RE is expensive in forums but continue to buy at even higher prices.

                      Chennai is end user market compared to NCR, MMR, BLR, etc, Agree.
                      But most sales are happening to non-end users.

                      Plots at sky high prices continue to remain barren. Flats in high rises are unoccupied, looking for renters.

                      End use sales are small fraction.
                      Most are bought for investment purpose.

                      I think the prices can go much higher as the investment demand increases irrepective of End use.

                      Comment

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