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Property Price Trends in Chennai

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  • #31

    #31

    Re : Property Price Trends in Chennai

    Vens velachery flat

    I don't agree with the appreciation calculation. If real estate only appreciated at 10% why wouldn't everyone put it in Savings Bank instead of taking a loan at a higher interest? Real Estate on an avarage, appreciates about 15% p.a. Generally Real Estate in Chennai grows at 15% p.a. Calculate with a Rs.450 / sq.ft in 1989.

    Comment

    • #32

      #32

      Re : Property Price Trends in Chennai

      Originally posted by abk View Post
      some of the reasons u have given r what i also have been arguing about 'oversupply in chennai in only far off places'.

      the mass psyche is also termed as the 'present bias' the thinking that what is happening will continue till eternity.

      the same exprts who said the sensex will touch 30000 in a yaer or two are
      saying 12000-15000 levels now.
      the same experts who predicted that IT hiring on OMR will be huge and require huge no of houses and predicted a requirement of 50000 houses on OMR.
      now they are ranting and comparing this with 1929.
      common sense does not allow me to believe them.

      ALL THESE YEARS THEY HAVE ONLY PREDICTED HOW THE ECONOMY SHOULD BEHAVE RATHER THAN HOW IT BEHAVES.
      drawing parallels between slumps and economies(nations) is senseless.
      every economy has its own inherent strengths and weakness.every situation was different.
      the world moves at a diff pace now than in 1929.distances have disappeared,
      borders are imaginary,in short the world has shrunk and things have changed to unimaginable levels since 1929,how could you compare them.

      what happened then need not necesarily happen now.

      everybody here agrees chennai prices have not crashed yet compared to
      other places.there is a difference among geographies,chronologies and effect of the same.
      exactly,everything cannot be compared.the situation,circumstances and
      the world itself is on a diff plane now when you compare it with 1929.
      like japan is stagnating for 19 yrs doesnt mean india will stagnate for 19 years

      zimbabwe may not be replayed in india.

      Comment

      • #33

        #33

        Re : Property Price Trends in Chennai

        Originally posted by jhulafranky View Post
        I don't agree with the appreciation calculation. If real estate only appreciated at 10% why wouldn't everyone put it in Savings Bank instead of taking a loan at a higher interest? Real Estate on an avarage, appreciates about 15% p.a. Generally Real Estate in Chennai grows at 15% p.a. Calculate with a Rs.450 / sq.ft in 1989.
        No second opinion that fixed deposits are the safest and if done systematically,in long term huge returns can be gained due to the compounding effect.Thats how my parents saved money.

        RE returns may vary from region to region and depends on when you get in and when you get out.You gain the maximum returns when you sell in the boom or hold it long enough to see 2,3 complete RE cycles.

        In the case of availing home loan and investing in RE, We are not dependant only on the RE returns.

        The point is,By taking loan you are leveraging on the banks money in an attempt to gain more wealth than you could possibly do by investing your own money.

        For instance

        Suppose you are a salaried person having 25 lakhs savings and would want to invest it and gain good returns.

        You can buy a property outright using the money and expect 15-20% p.a. returns.

        But if you opt for 20 lakhs loan from the bank and 5 lakhs downpayment to buy the house,meanwhile parking the other 20 lakhs in a FD.

        At the end of 20 years, your FD would have given great compounded returns.Your property would have grown and given you returns around 20% p.a. and the cost of borrowing is only 10% p.a.

        Moreover, you get Tax benefits on the money you are repaying to the bank.

        By this way, you are diversifying and making your money work more than it normally does.
        Last edited February 19 2009, 12:11 PM.

        Comment

        • #34

          #34

          Re : Property Price Trends in Chennai

          Originally posted by nabishek View Post
          No second opinion that fixed deposits are the safest and if done systematically,in long term huge returns can be gained due to the compounding effect.Thats how my parents saved money.

          RE returns may vary from region to region and depends on when you get in and when you get out.You gain the maximum returns when you sell in the boom or hold it long enough to see 2,3 complete RE cycles.

          In the case of availing home loan and investing in RE, We are not dependant only on the RE returns.

          The point is,By taking loan you are leveraging on the banks money in an attempt to gain more wealth than you could possibly do by investing your own money.

          For instance

          Suppose you are a salaried person having 25 lakhs savings and would want to invest it and gain good returns.

          You can buy a property outright using the money and expect 15-20% p.a. returns.

          But if you opt for 20 lakhs loan from the bank and 5 lakhs downpayment to buy the house,meanwhile parking the other 20 lakhs in a FD.

          At the end of 20 years, your FD would have given great compounded returns.Your property would have grown and given you returns around 20% p.a. and the cost of borrowing is only 10% p.a.

          Moreover, you get Tax benefits on the money you are repaying to the bank.

          By this way, you are diversifying and making your money work more than it normally does.
          Dear Friend,

          A good and logical view expressed.

          ks2071746

          Comment

          • #35

            #35

            Re : Property Price Trends in Chennai

            good for invstment but for 1st house......

            Originally posted by nabishek View Post
            No second opinion that fixed deposits are the safest and if done systematically,in long term huge returns can be gained due to the compounding effect.Thats how my parents saved money.

            RE returns may vary from region to region and depends on when you get in and when you get out.You gain the maximum returns when you sell in the boom or hold it long enough to see 2,3 complete RE cycles.

            In the case of availing home loan and investing in RE, We are not dependant only on the RE returns.

            The point is,By taking loan you are leveraging on the banks money in an attempt to gain more wealth than you could possibly do by investing your own money.

            For instance

            Suppose you are a salaried person having 25 lakhs savings and would want to invest it and gain good returns.

            You can buy a property outright using the money and expect 15-20% p.a. returns.

            But if you opt for 20 lakhs loan from the bank and 5 lakhs downpayment to buy the house,meanwhile parking the other 20 lakhs in a FD.

            At the end of 20 years, your FD would have given great compounded returns.Your property would have grown and given you returns around 20% p.a. and the cost of borrowing is only 10% p.a.

            Moreover, you get Tax benefits on the money you are repaying to the bank.

            By this way, you are diversifying and making your money work more than it normally does.
            I see the first house as an insurance for bad times.if you have a house you can in all conditions earn enough for your bread.and hence you should pay maximum for a house and own it.with the EMI you save you can invest in FDs or cumalative depositsor any other avenues.
            this is the advice of my grandpa,he says bcoz he owned a house even his loss in business was taken care of in the course of time and he from his house started a appalam mfr and did well.the point is if you dont own a house
            you should start buying one.

            Comment

            • #36

              #36

              Re : Property Price Trends in Chennai

              Originally posted by abk View Post
              I see the first house as an insurance for bad times.if you have a house you can in all conditions earn enough for your bread.and hence you should pay maximum for a house and own it.with the EMI you save you can invest in FDs or cumalative depositsor any other avenues.
              this is the advice of my grandpa,he says bcoz he owned a house even his loss in business was taken care of in the course of time and he from his house started a appalam mfr and did well.the point is if you dont own a house
              you should start buying one.
              Dear Friend,

              I agree. The first house is a good investment in most cases which will come to your help/rescue at the time of need, may be after some years, may not be in the near future.

              ks2071746

              Comment

              • #37

                #37

                Re : Property Price Trends in Chennai

                If the house is for self use, the question of profit or loss doesnt apply at all.It is bought on need based and is not bought as an investment keeping ROI in mind.Thats a different ball game altogether.

                The catch in taking a home loan, is that one has to commit themselves long term to repay the amount.They are largely betting on their monthly income.If they are unable to keep up, It may sweep them of their feet and the risk of ending up without the house and all the savings looms large.People should properly assess risk before plunging in.

                Buying a first home using debt should be avoided.If one cannot afford it now, save enough to buy one later.meanwhile you can rent it.

                Buying a house on loan to save on rent is not a great idea.while you can move to another house for lesser rent you cant do so in paying EMI.

                Bank loan should be availed only if you want to leverage.

                One should invest only their savings and not their life by stretching their limits in the greed to become rich quickly.

                Every Investment instrument is profitable provided the money is invested in the right proportion and the money is closely monitored.

                The proportion how to diversify depends on the risk taking capacity of individuals.There are people from different strata of life and same rule does not apply to all.

                When I see Builders and Banks still pushing loans to unwary buyers.I feel the urge to explain what getting into loan really means and what are the pros and cons of it.

                Getting into Debt and living on credit is not easy and fashionable.The old generation knows it better and we are beginning to learn it the hard way.

                In this forum, I am just trying to share the knowledge i have gathered while trying to understand how the market works and learn more from other experienced members.
                Last edited February 19 2009, 04:46 PM.

                Comment

                • #38

                  #38

                  Re : Property Price Trends in Chennai

                  Originally posted by nabishek View Post
                  If the house is for self use, the question of profit or loss doesnt apply at all.It is bought on need based and is not bought as an investment keeping ROI in mind.Thats a different ball game altogether.
                  Abishek,

                  Its nice to read your postings & really has good insight .

                  Though some of the points have been already discussed by Wiseman & few others , You have discussed some more new ideas which are must-thought before making any decision on buying property.

                  Would like to thank both of you. Appreciate your posts.

                  I just to want to add on my opinion on the first-house. You have noted that first-house on leveraged fund is not advisable. Thats great . This is definitely applicable when you buy your first-house with your savings. Just because one has reasonable money , he should not commit everything on first-house . There can be other needs like HealthCare Education et all. Actually these are the people who trigger the price escalation.

                  Whats your thought on it ?

                  Also I would like to hear your opinion on >1Crore residential plots/Apartments in Chennai in any place ..be it any Besant/Anna/Gandhi/KK/RA Nagar ..Leave the commercial properties just on the bank of big roads.

                  Cheers.

                  Comment

                  • #39

                    #39

                    Re : Property Price Trends in Chennai

                    Originally posted by sethugm View Post
                    Abishek,

                    Its nice to read your postings & really has good insight .

                    Though some of the points have been already discussed by Wiseman & few others , You have discussed some more new ideas which are must-thought before making any decision on buying property.

                    Would like to thank both of you. Appreciate your posts.

                    I just to want to add on my opinion on the first-house. You have noted that first-house on leveraged fund is not advisable. Thats great . This is definitely applicable when you buy your first-house with your savings. Just because one has reasonable money , he should not commit everything on first-house . There can be other needs like HealthCare Education et all. Actually these are the people who trigger the price escalation.

                    Whats your thought on it ?

                    Also I would like to hear your opinion on >1Crore residential plots/Apartments in Chennai in any place ..be it any Besant/Anna/Gandhi/KK/RA Nagar ..Leave the commercial properties just on the bank of big roads.

                    Cheers.

                    The End users have always been from this category who buy out of their savings, The demand generated by them is genuine and I dont believe that they could have contributed much to the escalation.

                    I feel probably they would be the ones who are trapped now, looking out in far off places 50km away from the city and expecting prices would fall.

                    Following are the reasons i will attribute to the boom

                    The primary reason being

                    Availability of Easy credit and money.Nothing else happened significantly to increase the demand so much in these 4-5 years.

                    This boosted the purchasing power of the current generation to surpass their capacity and enabled them to buy more than what they really could afford.

                    There are lots of other reasons that contributed to the boom. some like

                    1.Political will to promote RE by relaxing the interest rates for home loans and providing tax exemptions.
                    2.Tie up between Banks and Builders enabling launch of mega projects and providing pre-approved loans to customers.
                    3.Entry of corporates into real estate market.
                    4.Opening of the RE market to global investors by attracting FDI.
                    5.Getting public money through stock market.
                    6.Surge in the inflow of money from NRI's into RE.
                    7.IT industry in its peak.
                    8.Industries like automobiles, healthcare flourishing.
                    9.Increase in construction cost.
                    10.Shift in focus to develop townships, and to developing areas around OMR,GST which resulted in less supply within the city.

                    Regarding the Houses priced at 1C etc.

                    As I have explained in my earlier posts, I am still trying to understand how to arrive at the correct price of a property.Its still not clear to me how a property should be valuated.There seems to be no rationale behind the way builders fix the price.

                    I calculate using the (UDS * (market rate/sqft of land)) + (builtup area * consruction cost) + registration charges + car parking + other charges.

                    generally I find market value of the land is (FSI allowed for the extent * guideline value)

                    I feel the price is inflated and is not sustainable for long.Almost most of the factors that supported the boom is now non-existent.

                    The pricelist of the properties in Fairpro is that of the peak period.Seeing it one would get the feel that the market price in adyar is 12500/sqft.

                    The reality is, there are new ready to occupy flats with high UDS(stilt + 4 floor) in Adyar at 8500/sqft negotiable while another flat in the same locality with open car park at 7000/sqft negotiable.

                    I feel the market still needs a correction of 30-40% minimum.Rentals are bound to come down.

                    In speculative locations the market could crash.
                    Last edited February 19 2009, 07:43 PM.

                    Comment

                    • #40

                      #40

                      Re : Property Price Trends in Chennai

                      Originally posted by jhulafranky View Post
                      I don't agree with the appreciation calculation. If real estate only appreciated at 10% why wouldn't everyone put it in Savings Bank instead of taking a loan at a higher interest? Real Estate on an avarage, appreciates about 15% p.a. Generally Real Estate in Chennai grows at 15% p.a. Calculate with a Rs.450 / sq.ft in 1989.
                      Actually I have posted with clear examples. REalestate grows in the long run (20years) at about 20 to 30% CAGR based on past data.

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