Hi Friends,

I had been to the FAIRPRO '09 Fair.My Impression after seeing, is that prices are stagnating for all ongoing projects and builders are trying hard to hold them up.

Prices are 10-20% lower for new projects in the pipeline and for ready to occupy flats.

The discount offered at the stall was very less and were in the range 150-500 Rs/sqft max.

For the benefit of fellow members I am posting the project/price details of some of the properties.



Akshaya Foundations

Adora - OMR - 3750/sqft
Aikya - Adyar - 12500/sqft

Alliance Group - Orchid Springs - 3199/sqft

Arihant Foundations

Heirloom - Thalumbur - 2499/sqft
Escapade - Thoraipakkam - 4150/sqft
Villa Viviana - Maramalai nagar - starting from 1 Crore

Asvini Foundations

Amarisa-phase1 - Ramapuram - 4500/sqft
Amarisa-phase2 - Ramapuram - 4250/sqft
Akshita - Madipakkam - 3800/sqft

Casa Grande

Riveira - Palikkarnai - 3450/sqft - before discount 3600/sqft
Silver Oak - Perungudi - 4300/sqft - before discount 4500/sqft
Madhuban - Madipakkam - 3300 /sqft - before discount 3500/sqft
Mylapore - R.K.salai - 12500/sqft
Plots
Ponmar -785/sqft - before discount 825/sqft
Maraimalainagar - 790/sqft - before discount 825/sqft

CeeDeeyes - Chenni Pattinam

Basic Rate - 1600/sqft All Inclusive - 2075/sqft

Chaitanya shanthiniketan

Sunnyvale - Ayanavaram - 4850/sqft
Serena - Rajkilpakkam - 2550/sqft
Gardenia - OMR - 1900/sqft
Green Park - Chitlapakkam - 3300/sqft

DLF

Gardencity - 3200/sqft - was told slash in prices expected in coming weeks.

Doshi Housing

Etopia I and II - Perungudi - 3895/sqft
Nakshatra - Tambaram - 2995/sqft - Completion May 2010
Tranquil - Velachery - 5500/sqft - Completion February 2010
Trinity park - Santhoshpuram,Vengaivasal - 3195/sqft - Completion April 2009
Serene Couny-Villas - Santhoshpuram,Vengaivasal - 2200,2600/sqft
LlanStephan - Chetpet - 9000/sqft - Completion May 2009
Sri Mahalakshmi - Ayanavaram - 4495/sqft - Ready to Occupy

ETA

Rosedale - OMR - 3100/sqft
Le Chalet - Villas - Sriperambudhur - 26 Lakhs - 37 Lakhs

Hiranandani Upscale - 4200/sqft

Hiranandani Palace Gardens - 3475/sqft

Indus Housing

anantya - Navalur,OMR - 2299/sqft + 400(other charges)
riviera villa - Navalur,OMR - 90 Lakhs onwards
habittera - urapakkam,GST - 2399/sqft + 400(other charges)
amber - Saidapet - 4750/sqft

Jain Housing

Ankush Prakas - Kilpauk - 7500/sqft - Ready to occupy
Amrit Kailash - Strahns Road - 4500/sqft - Ready to occupy
La Gardenia - Nungabakkam - 7500/sqft - Ready to occupy
Ansruta - Valluvarkottam, nungabakkam - 10000/sqft - Ready to occupy
Antariska - Kodambakkam - 4500/sqft - Ready to occupy
Eiffel Garden - Vadapalani - 4250/sqft - Ready to occupy
Saagarika - M.R.C Nagar, sea facing - 10000/12500 - Ready to occupy
Green acres - Pallavaram - 3900/sqft - Ready to occupy
Abhishek - Selaiyur - 3500/sqft - Ready to occupy.

Jamals

Orchid - Palikkarnai - 3500/sqft
Palazzo - keelkattalai - 3700/sqft
Grandeur - Velappanchavadi(near saveetha dental college) - 3200/sqft

KGEYES

3 Projects on L.B.Road, Thiruvanmiyur - 6650/sqft
Delmare - Beach road,Thiruvanmiyur - 7000/sqft
Carolina - Velachery,Taramani - 4500/sqft
Swathi - Sastri Nagar,Adyar - 8500/sqft
Kalakshetra - 8000/sqft

Landmark Constructions

Tiara - Perungudi - 4000/sqft - Completion on August 2009
Aston Ville - Vadapalani - 5500 sqft - Completion on July 2009
Tudors Place - K.K.Nagar - 6500/sqft
The Address - Adyar - 11500/sqft
The Grange - Palavakkam - 7500/sqft
Cenralia - Chrompet - 2950/sqft - prelaunch
Gem Towers - AnnaNagar - To be launched.
Mahalakshmi Heights - Ashok Nagar - To be launched

L&T Estancia
Construction in Progress
1st-3rd Floor - 3950/sqft
4th -12 floor - floor rise charge of 20/sqft for each floor
13th - 17th - 4450/qft

L&T Eden Park - 3600/sqft

Mantri Synergy - OMR
2800/sqft - with 20/floor rise
Special offer - First Floor - all inclusive
1140 sqft - 33,67,000
870 sqft - 28,50,000

Navin Housing

Dayton Heights - Nelson Manickam road - 6500/sqft + 30/sqft floor rise from 2nd floor
Subha Mangala - Ramapuram - 4200/sqft
Brookfield - Nanmangalam - 3500/sqft
Merrylands - Medavakkam - 3500/sqft

Olympia Opaline - 3441/sqft - spl budget flats available

PACE Builders

Anna nagar west - 4195/sqft - before discount 4495/sqft
Selaiyur - 3195/sqft - before discount 3495/sqft
Valasarvakkam - 2795/sqft - before discount 3295/sqft

PS Srijan

The Grand - Velachery - 5250 sqft - before discount 5500/sqft - Floor Rise applicable from 4th floor

Rajparis

Harmony - Medavakkam - 3100/sqft

Rajarathnam Constructions

RC Prince Gardenia - Perambur redhill road,Kolathur - 3600/sqft

Rajkham

Independant houses - Ayyapathangal - 2600/sqft

Real Value

Sai Skanda - Velachery - 4200/sqft
Sai Surya - Palikaranai - 3800/sqft
OMR opp SIPCOT - 13.20 Lakhs onwards

Shriram Properties

Trishakti - SIPCOT - 2750/sqft
Shankari - 1990/sqft

Sidharth foundations

Tulip - k.k.nagar west - 4800/sqft - completion march 2009
Natura - medavakkam - 3100 /sqft - completion july 2009
Visvaleela - Annanagar - 8500 /sqft - to be launched
Dakshin - Urapakkam - price TBD - to be launched
upcoming projects in porur, thoraipakkam, rajkeelpakkam, mogappair.

SIS

Safaa - Urappakam - 3150/sqft

SSPDL

Crescent - Kelambakkam - Vandalur Road - 2500/sqft
Upcoming 2 villa project one in OMR and one in Sriperambathur.

Sumanth & Co

Thiruvanmiyur - 6000/sqft
Besant Nagar - 11500/sqft

TVH

Lumbini square - Pursaiwalkam - 5500/sqft + 30/sqft floor rise from 5th floor
Ouranya Bay(Premium) - OMR,Padur - 3100,3200 + 25/sqft floor rise from 5th floor
Ouranya Bay(Budget) - 2bhk - 20 Lakhs
3bhk - 30 Lakhs
Ekanta - Coimbatore - 3100/sqft
Revata - Mogappair east - 4500/sqft
Kamya - K.K,Nagar - 7000/sqft
Metro Golden Nest - Sriperambathur - 1bhk - 15 Lakhs
2bhk - 22 Lakhs
3bhk - 28 Lakhs

VGN Group

Minerva - Mogappair,Nolumbur - 2975/sqft
3 in 1, 4 in 1 - 3800/sqft
Mahalakshmi Nagar,Thiruverkadu - 3500/sqft
Plots
Mugalivakkam - 52 Lakhs/grnd
Selaiyur - 50 Lakhs/grnd
SPKoil - 34 Lakhs/grnd
Katankulathur - 22-27 Lakhs/grnd

Yuga Homes

Shem Park - chemmenachery - 3300/sqft
Upcoming in Koyambedu, R.A.Puram(8000/sqft)



There are lots of properties and also lots of potential buyers.There is sure a sense of uncertainity among the builders and also the buyers on when to make the next move.It was evident that correction in RE prices have started to happen.

Requesting members to respond with their thoughts on the current trend.
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  • Originally Posted by wiseman
    Super Abishek. This merits some time on analysis.

    Would there be one on volumes as well? That should tell quite another story.

    Besides, these are rack rates. If only there was a story on how much one can squeeze today as compared to 2008,would have given a much more informative story.

    We must be thankful for what we got and not keep hankering about the completeness of data like on developed countries.

    cheers


    No luck with data on volumes yet.I shall post if I come across one.

    The following is the link to a 3 month old news



    We surely hear that the number of sales and registration at various offices have come down drastically when compared to the same time last year.

    Originally Posted by Natarajg007
    Nabhishek, Very interesting...Can you provide me the source. A few years ago when I searched for such info, they turned out to be guideline values and not realistic. So please provide the link to the source. Thanks in advance.


    The above posted price are only indicative market rates and are compilation from a bi-annual magazine called "A Guide to Chennai Real Estate" by priya publications.
    CommentQuote
  • Thanks for the source info. You have done a great job sharing it anyway!
    CommentQuote
  • Abhishek,

    Thanks for posting the prices rates.

    I'm expecting that prices will correct to inflation adjusted 2004 level, starting from now.
    CommentQuote
  • Now I will use Nabhishek's data to show why all that I have said all along for months, screaming from roof tops was right and why those who refuted me had no sense. Many of those have tried to talk as if I was crying for Saligramam and against say Mylapore (as if was my property vs Wise property!). Remember I have too many properties and I dont have a single vested interest. Just that I use certain examples in discussions.
    Now based on the NABHISHEK TABLE (will call it NT henceforth) I have taken the top values for the locations to make life simple.
    Location 2009 2005
    Abhiramapuram 8000 4500
    Saligramam 5000 1750
    Let us just compare this year 2009 with say 2005. Just a blind comparison.
    In 2005 cost of construction was around 800psft and now it is around 1000psft. To calculate land price as I have discussed in many locations
    Land price = (Flat price - Cost of construction) x FSI
    FSI I will assume is 1.5 both in 2005 and 2009 though it can be 2 in 2009 but not always.
    So in Abhiramapuram in 2005 price of land was (4500-800)*1.5=5550psft. In Saligramam at the same time price was (1750-800)*1.5=1425psft. The ratio of land prices of Abhi and Sali in 2005 was 5550:1425=3.89:1
    Doing the same calculation in 2009 with Construction price increased to 1000 psft,the ratio of Abhi to Sali is 10000:6000=1.4:1
    What does this show?
    It was better to have invested in Saligramam than in Abhiramapuram between 2005 and 2009.
    This is exactly what happens in a growing economy. While prices climb up from the Centre outwards with the centre mostly being costlier than the outer regions the growth outwards tries to catch up with the centre. Let us call this Natarajan Effect after me (LOL!). So in conclusion over periods of time Mylapore, RK Salai etc will lose importance to Saligramams, KK Nagars, Kottivakkams etc which again will lose importance to Urapakkam, Thirunindravur, Kovilambakkam etc.
    Ofcourse the radial movement is restricted. So dont extend this and assuming Land in Tindivanam is the best bet. It is not. You might never even get to sell a plot in Tindivanam for Rs 1 psft in a dull market!
    CommentQuote
  • Where is the truth

    Given the above post, why has there been a price decline in 2008 to 2009 period.
    a. The price decline if you check NT is pronounced in Developed areas like Adayar, Harington road, Boat club etc.
    b. The reason is simple. In these places land prices did not move up so much as hyped by builders. So flat prices have fallen while real land prices have not. The builders greed was exposed in these places. Even today they have not lost but on hiper super profits. In these cases the formula I have discussed above fails. Builders in 2008 were using a construction cost of even 4000 or above which was ridiculous. There profit margins were just tooooooo much.
    c. In other places like Tiruvanmiyur prices have actually shot up in 2009 from 2008. Why? That is because of hype. So someone who used to be crazy about Adayar (say like me given that I lived most of my childhood in IIT campus! until 21) decided that given Adayar being crowded and costly what is the diff between Adayar and Tiruvanmiyur and paid a similar price. So Tiruvanmiyur developed at the expense of Adayar (like Saligramam or West Mambalam did at the expense of T Nagar...some of these day not there)!Also notice that Valmiki Nagar a silly offshoot of Tiruvanmiyur has a declining price. That is because these are SPECULATIVE ZONES in the CRZ. Some fools prefer them though documentation is always funny in these places on the east of ECR.
    d. Anamolies exist like price in URapakkam. 3300 psft there is higher than Valasaravakkam or Kottivakkam which are right in the city. This is where idiots of Chennai participate. Now idiots and ites are rhyming. These idiots choose to buy outside the city without any sense! While I wont disagree that many places in Kottivakkam are CHERIish it does not mean that the place is unliveable. It is documentation that becomes an issue in these places sometimes. However no guarntee is there on documentation in Urapakkam either.
    In summary prices are not linear like what Wisey expects all to believe. Prices have risen in some areas in 2009 and fallen in some. The reasons are many and blind bear hopes and blind bull hopes are all parts of stupidity.
    Remember, invest in property for long term growth or for living, the latter being most sensible. Speculating on property is best left to strong hands with contacts. Finally if you buy a flat for renting and appreciation alone, then even god cant save you. THINK BEFORE YOU ACT IN REAL ESTATE ELSE YOU ARE STUCK IN QUICKSAND. The right investment can be better than the best and the worst more painful than you can imagine. So for the simpleton buy a Realestate ONLY IF YOU NEED IT.
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  • I failed to add one more info. Prices will fall for flats like the DLFs and the rest. These guys have behaved so badly with construction cost in my formula kept very high and unnatural. In other words they used to take 300% margins. They need to come to 10% margins. So when buying BRANDED FLATS think a million and one times before signing in. Remember you might be having many exiting this segment in times of job losses.
    CommentQuote
  • This is a good start anyway ...

    Originally Posted by nabishek
    No luck with data on volumes yet.I shall post if I come across one.

    The following is the link to a 3 month old news



    We surely hear that the number of sales and registration at various offices have come down drastically when compared to the same time last year.



    The above posted price are only indicative market rates and are compilation from a bi-annual magazine called "A Guide to Chennai Real Estate" by priya publications.



    Abishek,

    There are some nit-pickers who will go on and on about how the front of the house which faces the sea should be double the price of the back of the house which faces Saligramam.

    That is neither here nor there. And this nit-picking helps no one since analysis is (and generally should be) a pointer to trends which are general.

    After all, if I give you the precise rate for every alternate house in Thiruvanmiyur, how is that any more helpful than the current indicative price? Both of them will, in the end only give you indicative direction - which is what everyone wants.

    People on this board want to know, above all, whether the price is near a level which provides good value for money. Then they want to know if the ttrend in prices is flat, down or up.

    As you can see, all of these are approximations and generalizations and only need consistent data, not necesarily highly accurate ones. If you provided a 5% error rate consistently, the data would be just fine for analysis as the error rate carries thru and the level of conclusions we need should be met. So, lets stick with what we can practically lay our hands on instead of constantly cribbing about what could have happened!!! ;)

    What you have provided is more than adequate to provide fairly good hi-level analysis of whats happening. And thanks for that.

    Anyways, there are some interesting conclusions coming up in the analysis that I'm attempting. Will share it shortly!!! :D

    cheers
    CommentQuote
  • Dear friend,

    I eagerly await your further analysis for my benefit.

    ks2071746:)
    CommentQuote
  • RE Boom (or) Gentrification

    Friends,

    Chennai like many other cities around the world witnessed a urban phenomenon called "Gentrification".

    It is the process were affluent middle/higher income individuals enter a lower class area and displace the lower income people already residing there.

    Some of the aspects are as follows

    Source:Wikipedia



    Positive aspects of gentrification

    1.The original property owners profit from rising home prices.

    2.When people own the home they live in, instead of rent, it creates greater stability for the local area. Poor residential areas in large cities tend to have a high turnover rate of tenants.

    3.When an area is gentrified, the number of vacant houses is drastically reduced because of the increased demand for housing. Rising rents and property values make repairing abandoned buildings more profitable.

    4.With a greater number of people living in the area, there are greater amounts of currency being circulated locally. The increase in spending encourages further growth of both businesses and residential areas. These new local businesses may provide local jobs for the working class.

    Negative aspects of gentrification

    1.The cost of renting a residence in the area increases significantly, resulting in a displacement of local residents and in a reduction of affordable housing.

    2.Families that cannot afford the increased price of housing in the gentrifying neighborhood may move to surrounding areas, which puts pressure on affordable housing supply across the region.

    3.Some previous residents may be unable to obtain housing at a price that they can afford and thus become homeless.

    4.Certain businesses catering to a particular segment of population may shut down once that population is displaced.

    5.The increase in the property values of a neighborhood rarely increases the living standards of the low-income residents of the area.

    6.There can be tension between newer and older residents.



    Gentrification, is one of the major reasons why value of RE appreciates over period of time.

    Normally once the basic infrastructure develops in a location and it becomes liveable , the place attracts residents from other places to come and settle there.

    Over a period of time all facilites like schools,shops come up and the locality becomes self sustained and provides all benefits.

    Earlier gentrification used to happen when people with higher income and profession choose a location over the other due to various factors.

    People Today move into locations whichever is viable to their capacity(may be I should say over exerted and bank funded capacity) and near to their place of work.They dont wait for the infrastructure to come up instead see it as an investment opportunity and buy as early as they can.

    People started focussing on facilites within the apartment complex and speculated on infrastructure development plan announced like ring road, metro rail etc to compensate for what is not available from the government as yet.

    People are ready to pay the rate that they would pay for a well developed locality for such projects.

    Though nothing seems wrong in it, the problem lies in whether the spiralling growth will continue and the demand will persist.

    If the demand diminishes and the newly invested people start pulling out due to loss in jobs and loan repayment issues.

    There may not be equal number of people and end users to fill in their places to sustain the growth and demand.

    To understand better

    Lets take two people A and B who have each one ground of land in a locality.Both had purchased the land at X amount.

    Now a person P comes and buys the land from A at Y amount.So now A is richer than B by Y amount, but still A and B are of same worth because B owns a land that can be sold greater than Y amount.

    If Person P wants to exit the investment due to other liabilities.
    But if the new person P wants to sell the land for more than Y amount, will Person B be able to buy the land from P??The answer is No.

    Person P should look out for a person who can buy from their own money and not on money that is leveraged.In sense to find someone similar to himself.

    The chances are high that anyone like Person P will be in a similar position like him and wont be able to purchase the property.The end user market has shrunk.Therefore Person P will be forced to exit taking some losses and sell to whoever is willing to take the property.

    Doing so Person P will become poorer and so would Person B whose worth has relatively come down.As for Person A, chances are high that using half the money he would have bought another property further in the outskirts.

    The lack of diversification of kind of people staying in such localities will have a huge impact on the sustainabilty of RE price and the business that developed due to the sudden demand and activity.

    Due to the imbalance that would set in.There are possibilities of sharp corrections/crash in RE.We are already seeing this in many pockets(demand/supply mismatch).

    When true developement/infrastructure catches up in the locality and the community gets organized,established and balanced.There will be synergy again.The price will rise again and surpass its previous values.
    CommentQuote
  • Originally Posted by nabishek
    Friends,

    To understand better

    Lets take two people A and B who have each one ground of land in a locality.Both had purchased the land at X amount.

    Now a person P comes and buys the land from A at Y amount.So now A is richer than B by Y amount, but still A and B are of same worth because B owns a land that can be sold greater than Y amount.

    If Person P wants to exit the investment due to other liabilities.
    But if the new person P wants to sell the land for more than Y amount, will Person B be able to buy the land from P??The answer is No.

    Person P should look out for a person who can buy from their own money and not on money that is leveraged.In sense to find someone similar to himself.

    The chances are high that anyone like Person P will be in a similar position like him and wont be able to purchase the property.The end user market has shrunk.Therefore Person P will be forced to exit taking some losses and sell to whoever is willing to take the property.

    Doing so Person P will become poorer and so would Person B whose worth has relatively come down.As for Person A, chances are high that using half the money he would have bought another property further in the outskirts.

    The lack of diversification of kind of people staying in such localities will have a huge impact on the sustainabilty of RE price and the business that developed due to the sudden demand and activity.

    Due to the imbalance that would set in.There are possibilities of sharp corrections/crash in RE.We are already seeing this in many pockets(demand/supply mismatch).

    When true developement/infrastructure catches up in the locality and the community gets organized,established and balanced.There will be synergy again.The price will rise again and surpass its previous values.


    Good Analysis Abhishek. Well done.

    Your conclusion is same as Wiseman's predictions done little earlier.

    Both you are (in) same (line) ?.

    Keep doing well.
    CommentQuote
  • Originally Posted by nabishek
    Friends,

    Chennai like many other cities around the world witnessed a urban phenomenon called "Gentrification".

    It is the process were affluent middle/higher income individuals enter a lower class area and displace the lower income people already residing there.

    Some of the aspects are as follows

    Source:Wikipedia



    Gentrification, is one of the major reasons why value of RE appreciates over period of time.

    Normally once the basic infrastructure develops in a location and it becomes liveable , the place attracts residents from other places to come and settle there.

    Over a period of time all facilites like schools,shops come up and the locality becomes self sustained and provides all benefits.

    Earlier gentrification used to happen when people with higher income and profession choose a location over the other due to various factors.

    People Today move into locations whichever is viable to their capacity(may be I should say over exerted and bank funded capacity) and near to their place of work.They dont wait for the infrastructure to come up instead see it as an investment opportunity and buy as early as they can.

    People started focussing on facilites within the apartment complex and speculated on infrastructure development plan announced like ring road, metro rail etc to compensate for what is not available from the government as yet.

    People are ready to pay the rate that they would pay for a well developed locality for such projects.

    Though nothing seems wrong in it, the problem lies in whether the spiralling growth will continue and the demand will persist.

    If the demand diminishes and the newly invested people start pulling out due to loss in jobs and loan repayment issues.

    There may not be equal number of people and end users to fill in their places to sustain the growth and demand.

    To understand better

    Lets take two people A and B who have each one ground of land in a locality.Both had purchased the land at X amount.

    Now a person P comes and buys the land from A at Y amount.So now A is richer than B by Y amount, but still A and B are of same worth because B owns a land that can be sold greater than Y amount.

    If Person P wants to exit the investment due to other liabilities.
    But if the new person P wants to sell the land for more than Y amount, will Person B be able to buy the land from P??The answer is No.

    Person P should look out for a person who can buy from their own money and not on money that is leveraged.In sense to find someone similar to himself.

    The chances are high that anyone like Person P will be in a similar position like him and wont be able to purchase the property.The end user market has shrunk.Therefore Person P will be forced to exit taking some losses and sell to whoever is willing to take the property.

    Doing so Person P will become poorer and so would Person B whose worth has relatively come down.As for Person A, chances are high that using half the money he would have bought another property further in the outskirts.

    The lack of diversification of kind of people staying in such localities will have a huge impact on the sustainabilty of RE price and the business that developed due to the sudden demand and activity.

    Due to the imbalance that would set in.There are possibilities of sharp corrections/crash in RE.We are already seeing this in many pockets(demand/supply mismatch).

    When true developement/infrastructure catches up in the locality and the community gets organized,established and balanced.There will be synergy again.The price will rise again and surpass its previous values.

    You know what Nabhishek. Gentrification is the reason that Mylapore a fishermen colony today continues to be a congested locality with some gentry claiming it is nice to live in RK Salai!
    CommentQuote
  • Originally Posted by nabishek


    According to me, The price correction for flats should happen in the following phases.

    Phase 1- Correction of Fancy Prices - Reputation of builders will not be able to demand more than 5-10% premium of market price.

    Phase 2 - Correction to Market Price - Falling back to the 2007 price, from when the land prices are stagnating.

    Phase 3 - Correction to Right(Real) Price - Falling back to the inflation/returns adjusted project launch price(read as 2004/2005) with acceptable builders margin and correct FSI factoring.

    We are already in phase 1 officially, and in phase 2 at the negotiation desk.

    The cue for me that we will be entering phase 3 is sharp reduction in rentals and increase in number of new/1-3 years properties for resale.Both we are beginning to witness now.

    If and only If after all the above corrections has happened and we still dont see any increase in demand.

    We will see a Hibernation period i.e 1 - 2 years of very less bu ying/selling activity.More properties coming on resale.No new projects being launched.Projects under construction getting indefinately delayed.Prices for flats will see severe crash and hit rock bottom.The land prices will continue to stagnate and may see significant corrections.During this period purchasers will be spoilt by choice.

    Morning walk period - The industry would witness a brief warming up period.There will be interest and lots of activity and hustle at the end users.New projects will be once again launched and RE will set foot for its next brisk walk, a healthy one.


    Friends,

    Earlier in one of my posts in this thread, I was talking about phase 1, phase 2, phase 3, hibernation and morning walk period in price correction.

    Now that we have some data, I would like to use that to explain where we stand.

    Lets take the peak price for each year for Adyar,I am choosing adyar because its well within the city and is at the start of the infamous IT corridor.

    2004 - 2350/sqft
    2005 - 2800/sqft
    2006 - 4500/sqft
    2007 - 10000/sqft
    2008 - 13000/sqft
    2009 - 10000/sqft.

    Phase 1

    On Prima facie one can see and identify that price has been stagnating at 10000/sqft since 2007.The 2008 rate was just the quoted rate and not the market rate.

    The same trend can be seen for many other localities within the city.

    So, any 20-30% fall from 2008 price is a farce, the rise never happened to fall.

    Its clear 2007/2008 was the peak.

    Phase 2

    In 2009, At 10000/sqft for a flat, the land price in adyar should be as follows

    Assuming 1.5 FSI and 1500/sqft construction and other charges including builders margin.

    (10000 - 1500) * 1.5 = 12750/sqft. i.e. 3 Cr/Ground.

    On checking the property portals to understand whats the correct market rate, one can find land available in adyar starting at 2 Cr/grnd.Though most advertisements are by brokers and one can get 20-30% less than the quoted price.

    Lets assume market price of a land in adyar is 2C/grnd.i.e 8300/sqft

    so cost of a flat should be = (8300/1.5) + 1500 = ~ 7000/sqft.

    It is 30% less than 2007 price and 45-50% fall from the quoted 2008 peak price.

    Is it possible for the price to fall further?I am going to assume that price will not fall below the guideline value for a place until demand completely becomes zero.

    The average rate/sqft as per guideline value for adyar is 4500/sqft. i.e. 1C/ground.

    The cost of flat as per guideline value = 4500/1.5 + 1500 = 4500/sqft

    One can see that 2006 prices truly reflects the guideline value for the land.

    Generally the market price is around 1.5 times the guideline value.Therefore the true market price should be around 1.5C+/grnd i.e. 6250/sqft

    The cost of flat at market price = 6250/1.5 + 1500 = ~ 5600/sqft.

    So today in chennai, If one can buy land at quoted price and build their own house.They save 30-50% already over market price.

    Cost of flat in adyar should be minimum 5600/sqft and maximum 7000/sqft.In anycase the rate quoted by builders in 2009 is 30%-45% more than the market price and will see significant correction.

    Only if we see Phase 2 setting in, we can assume that downward trend in RE has started.It has not yet happened in the open though there has been claims that one can get that much of discount at the negotiation table.

    Phase 3

    If Even bringing down the rates to saner level, the demand is not revived there is nothing else to protect the rate from falling back to the guideline values.

    That is falling back to 2006 prices.

    2006 prices can be also considered as inflation/RE returns adjusted 2004 prices.

    The price in 2004 was 2350/sqft, i,e assuming construction cost + other charges as 1000/sqft.

    (2350-1000) * 1.5 = ~ 2000/sqft = 48 Lakhs/grnd

    It is popularly believed that RE appreciates in line with the per capita income of a person.

    The CAGR in that case, hovers between 8-10%.

    Lets assume 10% CAGR for calculation ease.

    So, value of land in 2009 should be

    4800000 * (1 + 10/100) ^ 6 = ~ 85 Lakh/grnd = ~ 3500/sqft

    Therefore per sqft of flat = 3300/1.5 + 1500 = 3850/sqft which is in line with 2006 prices.

    I believe 2006 price provides true value for money and if one comes across a property at 2006 price + 10-15%, It is a very good buy for self use.

    The next two possible stages hibernation and morning walk are still in the speculative realm and is not applicable now.
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  • Dear friend,

    Your detailed analysis is worth reading. However, in the case of Adyar, getting 2006 price + 10-15% i.e., Rs. 5000 to 5250/sq. ft. will not be possible. At best against Rs. 10000/sq. ft. it may come down to Rs. 7500 level.

    ks2071746
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  • Originally Posted by ks2071746
    Dear friend,

    Your detailed analysis is worth reading. However, in the case of Adyar, getting 2006 price + 10-15% i.e., Rs. 5000 to 5250/sq. ft. will not be possible. At best against Rs. 10000/sq. ft. it may come down to Rs. 7500 level.

    ks2071746


    Dear KS,

    I am just exploring the possibilities and trying to strike a balance between the extremes and arrive at whats the realistic expectations.whether it will be realized or not only time should tell.

    As I have showed, if one decides to build their own flat.The rate at adyar is 7000/sqft only.We dont need any more correction to reach that price.One can very well go ahead now.

    The issue with it is, most of us dont have the means and capacity to do buy 1-2 grounds land for 1-2C/grnd and build on our own.We are waiting for the builders to slash prices to own our dream home.

    We have not witnessed correction to the market price from the builders yet, if and only if builders start offering at market price with reduced profit and demand is still dull we will have the possibility of seeing 2006 price + 10-15%.

    Lets see how things turn out.I am still waiting.
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  • Realtors Offer 40% Discount To Buyers
    To perk up the sluggish realty market, Unitech, DLF, HDIL, BPTP and others are offering a 30-40% discount on ongoing projects. Analysts assert that such projects will facilitate demand and bring in much-needed liquidity in to the industry. In the last few months, DLF has launched a project each in Hyderabad and Bangalore, totalling close to 4,000 units. DLF executive director, Mr. Rajeev Talwar said that of these, about 500 units have already been sold in the price range of Rs 1,850-1,890 per sq ft. "These prices are lower than prices in 1998," he added. Unitech has also launched a few projects in the last two months. Unitech's Uniworld Garden II in Gurgaon’s Sector 47 has been launched at Rs 3,250 per sq ft.
    17 March 2009 google.com
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