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- Originally Posted by k11This is what happened post 2010. City outperformed suburbs rapidly.
DLF in Egmore went from 8.7K to 16K now. DLf is just an example, there are many that gave crazy reuturns.
Did any suburb generate this kind of return?
You are indeed right that City (CBD) has much outperformed the Burbs in last 24 months. Maverick is right in that land should be compared (rather than flats) but even land has done too good in city (last 2 years) But past trends are not indicative of future IMHO and my view is in next 3 -4 years, Burbs close to CBD (read as newly added areas to City Corporation) should do better than rest. The one sign i see is - supply is starting to increase in "City" even as cost of construction is Going up and purchasing power will start muting once the economic/wage inflation slowdown effect(which is indeed there) rolls down.
Now over to those disagreeing with me !!CommentQuote0Flag
- Originally Posted by wiseman
As far as I'm concerned the bear case has only been postponed because of the liquidity deluge from the West (first time since Roman Empire :)) and so you got lucky. But the flip side of it is that the crash would be so much more sudden and violent and this one needs to be careful about. So stop pushing your luck and sell early (instead of going on threatening to sell and not selling) because you could simply get stuck till the next boom when you would be 10-15 years older and not interested in RE anymore! :)
IMHO - Whenever we talk about Slowdown or Fall in RE prices across city/across India, we should refer to one period in recent history when we had such a fall..
I am referring to the period 1997-2002, when RE prices were sluggish, fell in many places across city and the market was dead/stagnant..
In 2001, new apartments were sold in Mylapore/Alwarpet for Rs 1800 psqft, whereas the rate was Rs 2000 psqft in 1998.
The reason for the 1997-2002 slowdown, was real interest rates (bank FD rates minus inflation rate) were much on high side, so it made perfect sense for a investor to stay on sidelines and earn risk free return of 12%..
That is not the case right now for sure. Real interest rates as of now are effectively negative, since Government is publishing false figures on inflation.
With rampant populism and free for all democracy in place, there is total resistance to any governance that avoids subsidies and fiscal deficit, so don't see any sound case for lower inflation..
Which means, irrespective of what happens externally, in India, it does not make sense to ditch hard assets for cash - at least till next year....CommentQuote0Flag
- Originally Posted by ramki830Maverick is right in that land should be compared (rather than flats) but even land has done too good in city (last 2 years) But past trends are not indicative of future IMHO and my view is in next 3 -4 years, Burbs close to CBD (read as newly added areas to City Corporation) should do better than rest.
I agree with you and Maverick, Land prices are a better barometer.
But the problem is Land in CBD is always sold/bought with a huge premium and colored money. So people are expected to overpay.
I know a Bungalow listed near my place went for 1.5-2C per ground above the market price, it was a 2G plot so the buyer payed 4C net over the value. So there is huge demand, so when a house comes in with a right location and size, people fight over it and thus gets sold higher. I am sure our market value would get redefined by such transactions.
What builders pay is a decent estimation as they have to fork out most in white through auctions.
Land prices in suburbs and even outskirts of city can be determined, but CBD is pretty much a black hole, close to impossible to give a range.
I agree with @ramki, outskirts are the next best opportunity. I think the western part of the city would be the next bet as the prices are low there.CommentQuote0Flag
Can you pls list the newly added areas in City Corporation?
- The municipalities that would be part of the expanded Chennai Corporation are Kathivakkam, Tiruvottiyur, Manali, Madhavaram, Ambattur, Maduravoyal, Valasaravakkam, Alandur and Ullagaram-Puzhudhivakkam.
The town panchayats are Chinna Sekkadu, Puzhal, Porur, Nandambakkam, Meenambakkam, Perungudi, Pallikaranai and Sholinganallur.
The panchayat unions added are Edayanchavady, Sadayankuppam, Kattapakkam, Theeyampakkam, Mathur, Vada Perumbakkam, Surapet, Kathirvedu, Puthagaram, Nolambur, Karambakkam, Nerkundram, Ramapuram, Mugaliwakkam, Manapakkam, Kottivakkam, Palavakkam, Neelankarai, Injambakkam, Karapakkam, Okkiam Thoraipakkam, Madipakkam, Jaladampet, Semmanchery and Uthandi.CommentQuote0Flag
- The euphoria and euphemism around Chennai RE returns and potential unnerves composed investment return- Chennai was famous for! It's a fact- returns were good in past many years- but, to expect similar pattern is anyone's guess.
To quote few of my Buffet's favourite - "Price is what you pay. Value is what you get."
"The investor of today does not profit from yesterday’s growth."
I raised it earlier and reiterating same- there isn't any true value indicators, decisions are made on hearsay- it's alright, when the prices and impact were small. When we see rates quoted at par with international benchmark- but no infrastructure to back it up, will advise caution for all prospective new investors.
My discussion over past few weeks with people on ground, with real RE knowledge- they are all unanimous, prices are muscling out end users and transforming into speculators market. Not to mean there aren't any good opportunity for investments, but just got tough to identify now.
Kindly bear in mind the risk factors and potetial impacts on cash flow with geo-political factors. To end in optimistic note- if you're an end user/FTB , don't panic and do your due diligence- it will be worth to enter any day.CommentQuote0Flag
- With all the big RE investments mainly happening in big cities like Chennai, Bangalore, Pune etc......these cities are actually getting into infrastructure deep S#%&.
There is over saturation. Will the future infrastructure in these cities be able to support this unabated growth? Chennai has power crisis already ( cities like Coimbatore, Trichy are already having 8 hours power cut daily). TNEB is having Rs.50,000 crore debt. Power charges in Delhi are among the highest in the world due to crony capitalism and power sector monopolies..so even privatization has not sorted out the infrastructure mess as seen in Delhi's case.
Some slowdown is RE growth would be good for everyone.
p.s. Telangana crisis is a blessing in disguise for Hyderabad. As atleast this is one city which is not getting saturated and has had meaningful slowdown in RE. Also with great airport, good infrastructure and cleanliness, Hyderabad is far better then Chennai, Bangalore or Pune (except for telangana issue.).CommentQuote0Flag
- Originally Posted by trk2012With all the big RE investments mainly happening in big cities like Chennai, Bangalore, Pune etc......these cities are actually getting into infrastructure deep S#%&.
Hyderabad is far better then Chennai, Bangalore or Pune (except for telangana issue.).
You are right in that all big indian cities are in deep S### w.r.t infra, but that is even more the case w.r.to the mid sized cities.
Next summer, Chennai may have 3 hr power cut, but contrast it with 12 hour power cut in all other city corporations of TamilNadu. And with weak government finances, we may not see the tier 2 cities getting metro like projects in near future.
Ultimately it is all about money. The big cities , with all their demerits can afford to pay higher power rates, pay more for water, can afford more costlier labour and can afford costly civic projects.
That is why i feel that Chennai RE (CBD, Suburbs, exurbs etc) must be priced much higher than all other cities of TN and the gap would only increase in future.CommentQuote0Flag
- Originally Posted by k11Is this place near the MA Jacob or near VM Street outlet.
Between VM Street and City Center.
- Hi All..not sure if its been discussed lately, but i'm getting a sense talking to lot of people that prices have been rising vertically for the last 1-2 years, and the sales have slowed down quite a bit within the city.
Also approvals by CMDA have been delayed for new projects for the last 9months-1year.
There are some major revisions planned for the real-estate sector in chennai and should happen soon
1. Revision of guidance values upwards (atleast 50% up). This would impact registration and property taxes
2. Property prices in Mumbai,Delhi and Chennai are only high because FSI is low here unlike other major cities like hyd/bangalore where it has been relaxed. This might be revised too in chennai
3. City limits should be increased soon as per the projected plan. Then the city metro area would be comparable to Bengaluru or Hyd. Right now the city limit is 1/5 of both and in the new norms should be equal
4. Rental prices are not keeping up with property prices because of new options opening up on OMR and GST and availability of many newly constructed apartments.
5. Many new buyers are taking massive loans to buy houses, but are struggling with EMI pressure (my own land lady in case)...so they can't afford not to let out the apartments and also high maintenace cost ensures they have to keep it occupied. Many new 2nd sale properties are coming up at times because of these pressures or even the owners moving abroad. But 2nd sales are not happening at high prices, and sellers are willing to compromise as houses are not selling for more than 3 months.
6. Lack of sales in city limits is forcing builders and bankers to approach the govt to ease prices as it is affecting their business.
7. Since prices are rising so fast in outskirts builders are willing to build the whole apartment complex and slowly sell it to willing buyers at higher rates. Earlier they would match build status with payments of the buyer, but now builders don't mind hoarding or even building without having buyers in hand.
8. Ramaniyam sold 112 flats on a single day in pallikarnai across the dump yard. It seems there is panic buying as prices keep going up, but the inside story is that builders too are dumbstruck with this kind of sales where only the project board is put up and all plans in paper..people have not even seen the plots properly and the kind of stench and problems with water/sanitation that would happen in the future living directly opposite a dumpyard.
Can anybody verify these or has similar experiences??
If this is the case, then this seems typical of the peak of price rise, and if all these legislations happen then prices might start to come down or even crash in the next 1-2 years. Also once this happens or in a falling price environment builders would rush to sell their apartments at any cost..so we might experience a good buying opportunity then.CommentQuote1Flag
- You are right in most of the observations. but I feel that most of the observations are related to apartments and not Land. When we consider an apartment complex, the basic input cost for the builders are, Land cost, Construction cost and Approval cost. Most of the builders keep rising the prices not only out of greed, but also due to the raising input cost of construction materials.
There are two ways in which the cost is arrived,
1. First method is to add up all the input cost (adjusting inflation for the construction time frame) and then add up a profit margin.
2. The Second methid is to add a premium over the cost arrived using the above method, depending on the location,builder's reputation, Hype, etc.
Over the past couple of years more builders are taking the second method to arrive at the pricing, rather than the first method. This is actually causing a huge difference between actual value and cost. Most of the new apartments that are bought cannot be sold in the market for the same price, even a week later.Government's rule of charging stamp duty on actual sale value does not help either.
Another reason for the price increase is that PE funds have started bankrolling apartment complexes. These investors want heavy returns and hence the builder has not other way other than to increase the prices every few weeks. when a PE funded project raise the price, the builders nearby raise their prices to match with them and this causes a ripple effect, where in prices increase in all the projects.
I don't think there will be blanket increase in FSI across chennai. There might be an FSI increase in specific zones like Metro Corridor.CommentQuote1Flag
- Hmm..i've even heard all the major builders price their complexes after talking with each other..in fact its a cartel that decides the prices and no builder can price it independently in a area!!
But with all these changes, if the prices don't rise as fast or worse even find fewer buyers and decline or there is a hint of even a fire sale i think these builders will dump the properties fairly quickly in a falling price environment.
As for the FSI increase yeah i agree..but if sales within city limits decline because of prices then the govt has to relax the norms else we would have problems of unauthorised development and so on! Not sure why this was relaxed in Hyderabad/Bangalore though.CommentQuote0Flag
- Hyderabad took Transferrable development right route. It was introduced by Chandra Babu Naidu if I'm not wrong to facilitate land acquisition for road widening. It was a great success.
We need a sincere and sustained effort directly from CM level for something like that to happen in Chennai.CommentQuote1Flag
- TDRs is not just the only reason. Hyderabad's FSI is at 3.5 whereas it is 2.5 max in Chennai for multistory buildings on main roads. It is the same in Bangalore too. Bangalore has turned from Garden city to concrete jungle.
Delhi and NCR still follow a lower 1.33 FSI. So that means apts in NCR have more open spaces, less apts per acre and much better layouts. Of course, prices are high.
I like Low FSI cities than High FSI ones, more greenery and open spaces. I hope Chennai does not take this route.
Prices are not going up there because there is not enough population and a very large geographical area. Both BLR and HYD are very big, around 7K sq km with population spread out. Chennai is the densest city the country, after Mumbai. Hyd has much better roads than Blr, and they are also miles ahead of Chennai.
Hyd and Blr have much better suburbs than Chennai. This is one of the reasons why Chennai folks do not want to move into suburbs. 174sqkm of city still has close to 50L population. Rest of the 900 sqkm suburbs have 30L population. Extended suburbs (future metro area - 3K sqkm) will bring in another 20L population.
Demand & Supply.CommentQuote0Flag
- True I like low FSI for Chennai.CommentQuote0Flag