I have decided to avoid getting into UNWANTED discussions with folks who any way wont reform. So let me discuss the mathematics of Chennai realestate in a new Thread.
An hour ago, I called a Builder in Saligramam asking for the price of his flat. He quoted 5600 psft. I asked him about UDS and FSI and road width. He was building a clean property on 2 grounds, 8 flats with stilt and road width was 30ft. He was using an FSI of 1.67 which is perfectly understandeable.
Then I asked him " what is the price of land here ?"
Builder: 1.5crores to 1.25crores.
I: So I can offer you land there in a much better place than you are building.
Builder: I cant buy outright now sir, but 50:50 is ok.
I: How is 50:50 fine? For 3200sqft that I have you can build minimum 5000sqft even though I know you will build 5400sqft at 1.67. So what is your cost of construction?
B: 1500psft.
(Now this price is terribly high but I was ready to let him go with the price?)
I: So how can it be 50:50? You need only 75L to build 5000sqft?
B: See if I give you 2 flats worth 2500sqft you can yet get at 5600psft.
I: That is just 1.4cr for 3200sqft.
B: I can maybe give you another 10L or so.
I told him that even if I turned a builder and sold one flat I would have built the entire 4 flats but he was telling WITHOUT ANY MATHEMATICAL BACKING that he will need 1.5 flats. Then he said well I cant sell 1250sqft flat to which I said you can make 6 flats with new rules.
This went on till I said "get lost" or rather a "bye" and left him.
Now let us see the mathematics.
If I can get 5600 psft for 1 flat then cost of 1250sqft of flat is 70L. Let us assume I throw one 5L more and I will have the property ready even if I use this builder's rate of 1500psft. That rate is ridiculous and includes profits. In today's "builder in trouble" market, you can find a good contractor to build you at 1200psft.
Now if one flat sold at 70L then 4 flats cost 240L, so the builder should give you 240-75(his construction cost even at 1500psft)=175L.
He is throwing in 2 flats at 140L and maybe another 10L. So you might think it prudent to lose the 25L and take it.
However what guarantee do you have that you will get your money? Secondly in joint venture, your money is not in your hand. So if I got 150L outright now, in 2 years that will be worth 180L at 10% interest rate.
In other words, builders in Chennai are super cons! And remember, his investment is ZILCH (Zero).
So if I turned a builder with my own land, I can get the best of construction at 1200psft. Also I used 5000sft, which in reality can move to 5400sft even at 1.67 FSI. Today you can get even more since the third floor can be built after 3 years and if you keep those rights for yourself, then you got that too.
Let me ignore even the 3rd floor. With 5400sqft and price of 5600psft, I will need 5400x1200=64.8L to complete the project. I will find JUST ONE BUYER and charge him 5600psft, which means 5600x1350sft(since total built up area is 5400sft for 4 flats). I will get this 75.6L. I can use this 75.6-64.8=10.8L as pocket money for any price changes or troubles or legal charges or whatever. Net I get 3 flats all for me. I can sell them at the prevalent price after 2 years or get them booked at current rates and et 75.6x3=227L or 2.27Cr.
Now does it make sense to get 2.27Cr or just 1.5Cr is the question. How many of you earn 75L for 2 years? I bet most of you dont! Again you don’t need to be a fulltime builder. Just employ a good contractor and MANAGE him!
BETTER BECOME A BUILDER IS YOU HAVE YOUR OWN LAND!
(PS. Hope this helps some folks who wanted to sell their land in Mylapore!)

Incidentally if I reduced the price of flat by even 600 rupees my net gain is 2.27cr-600x5400=1.95cr. So all I need to do is SEARCH for one serious WORTHWHILE (meaning has a safe job) buyer.
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  • Originally Posted by nabishek

    Agriculture is currently not a profitable business, farmers are heavy on debt and depend on insurance companies and government for relief for their crop failures.

    Today, unless the farmer himself does all the work from ploughing, irrigation, harvesting and selling at the market.The money earned wouldnt even equal the amount of interest the bank gives in FD.

    I personally know many farmers who sweat their blood to educate their children and even send them overseas to study, so that they dont have to continue the ordeal they are going through.


    For the last 50 years farming has been the worst profession in India unless someone had coffee estate in Coorg or Tea estates in Assam.

    This is exactly what Jim Rogers says, beacuse a farmer in India is restricted to just 7 hectares of land he/she is having limited scope. They may have money to farm in 300 hectares of land but can't hence tell their children to become IT or bank employees or settle aboard in services sector. No doubt the largest group of NRIs worldover punjabis and telugus come from the top 2 agricultural states punjab and AP.

    Something which has been battered, beaten, bruised, torn apart, suicidal with a track record of just failure in 50 years is the most favoured type of investment among the masters of Contrarian investing. Because when such things take off they appreciate in no time. Even a small amendment to some agricultural act could make a huge difference.

    When ex-finance minister Mr. P.Chidambaram made a soft amendment in june 2004 silently allowing FDI into land, this small change was not caught by media. But this small change was the seed of the real estate boom since 2004-2009.

    Originally Posted by nabishek

    Buying agricultural land and holding them is like buying a cow for a glass of milk.


    If that glass of milk is worth a fortune in few years with world wide shortage of cattle.

    See, that is what Jim Rogers is saying

    Offcourse nobody is saying that agriculture should become our next occupation as none of us know this occupation except those who may have some family background in farming.
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  • Originally Posted by contra
    For the last 50 years farming has been the worst profession in India unless someone had coffee estate in Coorg or Tea estates in Assam.

    This is exactly what Jim Rogers says, beacuse a farmer in India is restricted to just 7 hectares of land he/she is having limited scope. They may have money to farm in 300 hectares of land but can't hence tell their children to become IT or bank employees or settle aboard in services sector. No doubt the largest group of NRIs worldover punjabis and telugus come from the top 2 agricultural states punjab and AP.

    Something which has been battered, beaten, bruised, torn apart, suicidal with a track record of just failure in 50 years is the most favoured type of investment among the masters of Contrarian investing. Because when such things take off they appreciate in no time. Even a small amendment to some agricultural act could make a huge difference.

    When ex-finance minister Mr. P.Chidambaram made a soft amendment in june 2004 silently allowing FDI into land, this small change was not caught by media. But this small change was the seed of the real estate boom since 2004-2009.



    If that glass of milk is worth a fortune in few years with world wide shortage of cattle.

    See, that is what Jim Rogers is saying

    Offcourse nobody is saying that agriculture should become our next occupation as none of us know this occupation except those who may have some family background in farming.


    The link to the interview that you shared is really good.Thanks for that.

    India has huge amount of arable land and huge potential lies untapped in agriculture.India was a country that once flourished due to agriculture, we have lost focus temporarily is what i would say.

    I am not aware or heard about the 5 or 7 hectare limit before..If its true, it means people can own only 12-18 acres of land which i find is not consistent with reality.There are people who own 100 of acres of agricultural land for centuries as family wealth and they still are accumalating.

    There are lots of restrictions under Foreign Exchange Management Act from RBI that restricts NRI/Foreign nationals from buying agricultural land by direct purchase or gift deed.

    I feel its right and we should continue having strong regulations for FII/FDI.These FDI/FII's flood the market with their money, take profits by inflating demand,costs etc by artificial means and abandon the moment they see a downturn and run away with everything they brought leaving the country broke.

    Its no different than the way we have been looted by foreign invasions.Remember?British colonization started with setup of East India Company?

    The intention of NRI's are different.Many of them see buying RE as one of the legit ways to bring back their hard earned money to India more than from an investment perspective.Though, their participation is one of the main reason for the RE boom, some relaxation is welcome in that front.Atleast the money comes back to India, and these people wouldnt take the money invested and run away anywhere else.They want to have their roots back at home.

    A FAQ from RBI, must read for all NRI's.

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  • Hmm..agriculture.
    1. Indian Indians do not know much about India since India is too VAST and DIVERSE. If this is the case with Indians, think about Jim Rogers and other jokers. They may be experts in acting as Vulture funds, but their advice on India and Agriculture is worth trash.
    2. I for one wont try Agriculture games in TN for sure. We have lands and unlike Nabhishek who is more than an exception, we gain ZERO out of these lands. There is no law to evict a non paying tenant in TN and our tenant has not paid for decades! So it is FOOLISHNESS to buy Agricultural land and find a tenant to cultivate for you unless you are an agriculturalist yourself.
    3. NRIs against Foreigners by Abhishek is not all hunky dory. Yes foreigners come to exploit India. We are clear about it. NRIs are worse. They are like Jai Singh (Prithiviraj's father in law). They left India without care. They will invest here when there is benefit and will leave this place when it is trouble here. Unlike what Nabhishek ignorantly feels they have very little hold to any place. Their only hold is their greed. I wont trust NRIs in general. Exceptions do exist and I dont want to hear from Anandxx on this. However in general NRIs are OPPORTUNISTS with no LASTING VALUES. Dont be deceived by another FAKE INDIAN.
    There is a tamil song which translates to
    I could win over the enemy
    but lost to my friends
    Cheers.
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  • It would be rubbish to round off all NRIs as greedy fellows. A large proportion of NRIs have invested in India and hold those investments and have come back and settled in India. For example a lot of mid east NRIs or singapore NRIs have invested in Kochi, Chennai etc coming here to settle eventually.

    Ofcourse there are those particularly the ones who went to Anglo european countries like US, UK, Canada, Australia etc who have that characteristic Anglo european superiority complex...let's ignore those and not put every NRI in same bracket.

    Still I don't think NRIs can influence the market anymore. Where else can they go today? than here.
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  • Originally Posted by contra
    It would be rubbish to round off all NRIs as greedy fellows. A large proportion of NRIs have invested in India and hold those investments and have come back and settled in India. For example a lot of mid east NRIs or singapore NRIs have invested in Kochi, Chennai etc coming here to settle eventually.

    Ofcourse there are those particularly the ones who went to Anglo european countries like US, UK, Canada, Australia etc who have that characteristic Anglo european superiority complex...let's ignore those and not put every NRI in same bracket.

    Still I don't think NRIs can influence the market anymore. Where else can they go today? than here.

    U bet u r not too wrong! However NRIs on this board are essentially Anglo-Saxonised NRIs. Also note, most middle east NRIs are of the less educated class. Fitters, plumbers are not folks who will talk about NRI status as a STATUS. Obviously I am not talking about them. Just to refresh your memory, yours faithfully was also technically an NRI in late 90s and I have held a Permanent Residence in Singapore! However my view on the NRIs here dont change.
    Remember the NRIs here are US, Europe or Aussie based. I know of African based NRIs too on this forum but they talk sense.
    Also remember one thing clearly contra. Even your friendly middle east NRIs invest ALSO in India because they cant invest in Middle east. No non Saudi, especially an Indian and worse still a Hindu can become a Saudi and this holds good from Dubai to Muscat. In other words Indians in Gulf are Indians. Indians in Africa dont choose for the worst. So NRIs irrespective of what govt declares are those SELF POMPOUS fellas who preach from their ivory towers in the DEVELPED world and very often it includes Singapore and Malaysia.
    Incase you are desperately itching for clarity, LET ME DEFINE NRI
    Indian race folks holding NON INDIAN PASSPORTS. Simple!
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  • Originally Posted by Natarajg007
    U bet u r not too wrong! However NRIs on this board are essentially Anglo-Saxonised NRIs. Also note, most middle east NRIs are of the less educated class. Fitters, plumbers are not folks who will talk about NRI status as a STATUS. Obviously I am not talking about them. Just to refresh your memory, yours faithfully was also technically an NRI in late 90s and I have held a Permanent Residence in Singapore! However my view on the NRIs here dont change.
    Remember the NRIs here are US, Europe or Aussie based. I know of African based NRIs too on this forum but they talk sense.
    Also remember one thing clearly contra. Even your friendly middle east NRIs invest ALSO in India because they cant invest in Middle east.



    Nat, iam one of the lucky few educated NRI of middle east with MS and
    stanford certified. Leaving education out, most of your statements are
    understandble. Like we keep saying time and again there is two sides to
    a coin.

    Have you noticed a chennai NRI tends to buy property in chennai and not in
    mumbai delhi calcutta. That should atleast provide some weightage that they are not exactly at the top end of greediness.......

    Mst of the anglosax nris were not like that when they were bachelors. so what happened since, can only be imagined. trust u agree. So its nto the
    people, its the circumstances that have pushed them to be what they are.

    Having spent the best part of my life living in the city of chennai, lookas like
    i will be pushed out to exile in sriperumbudur by the time i return to settle.
    A bit unfair i think.
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  • Originally Posted by anandxx
    Nat, iam one of the lucky few educated NRI of middle east with MS and
    stanford certified. Leaving education out, most of your statements are
    understandble. Like we keep saying time and again there is two sides to
    a coin.

    Have you noticed a chennai NRI tends to buy property in chennai and not in
    mumbai delhi calcutta. That should atleast provide some weightage that they are not exactly at the top end of greediness.......

    Mst of the anglosax nris were not like that when they were bachelors. so what happened since, can only be imagined. trust u agree. So its nto the
    people, its the circumstances that have pushed them to be what they are.

    Having spent the best part of my life living in the city of chennai, lookas like
    i will be pushed out to exile in sriperumbudur by the time i return to settle.
    A bit unfair i think.

    Well Anand, blaming your spouse for your decisions is not fair. I dont want to argue about it. As for you I think there are two points you should analyse. What is wrong going to Sriperambudur if you can buy a big piece of land and live in an independant house there! It is well connected, fantastic NH4 etc. Remember the Chennai you saw as a child does not exist my friend.
    Another point is you missed the bus buying when it was cheap. That is exactly what I am telling today's folks. Infact I purchased a land for 1.2 L in late 80s in Palavakkam. Leave alone appreciation. Even today I can build a house and live there like a king. A cousin of mine bought for about 3.6L a flat in T.Nagar, near Hindi Prachar Sabha. He lives abroad. Today to me I will prefer Palavakkam to T.Nagar.
    I lived my basic life in IIT Campus and so Adayar area. I wont want to live on LB Road. It is horrific to drive there. And as for Sardar Patel road it has become a super duper (almost) one way. Is that my childhood memory? I could cycle from IIT gate to Adayar. After Stalin's wonderful flyover in front of IIT Gate much against the wishes of IIT folks, getting in and out of IIT is a wonder by itself. They have made that OMR entrance at the Madya Kailash almost a one way. So you need to travel 5 km to cross the street on this stretch.
    Why do you want Chennai city? Infact I will probably not end up in Chennai ever. So even Palavakkam is just going to be idle and in the worst case the rentals in Chennai are abysymally low in comparison to the price of RE that I will happily rent out a bungalow for a song.
    In other words Chennai managaram is not what you must have seen once upon a time. Ofcourse some confused old habitants of Chennai are yet talking of Mylapore Cheri and abusing Saligramam as if it is an outpost. Since you live in Alwar thirunagar, you should tell them the sort of growth that has happened even 15 years ago in Arcot road, then the super growth on the 100ft road and today malls are gonna come up in that locality dime a dozen. Soon we will have underground metro in that area. The same guy is talking of owning in Kormanagala which was an outpost of Bangalore in late 90s.
    My friend be happy to go to Sriperumbudur. I bet you will manage much earlier in Ramavaram or even near Porur, but till Porur it is just over populated, over dusty and horrible to live.
    Remember, you need to live. Dont bother if the average silly chennai wasi looks at you disdainingly and says, "what Sriperumbudur?". He may be living in a small block of concrete in Chennai proper. Is that life? Not really. Think of the fools wanting to pay a fortune and live in FLATS of all things in Siruseri. As a child, Sriperumbudur existed, but have u heared of Siruseri my friend.
    So much for Chennai. A home is where u make it, not where others define.
    PS. RE prices in Chennai proper will grow sky high, however that does not contradict my view of QoL. (Quality of Life!)
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  • "green shoots" have started arriving at emerging markets. Don't ever sell your land for a song.
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  • Originally Posted by contra
    "green shoots" have started arriving at emerging markets. Don't ever sell your land for a song.


    Hey Contra
    Do you think i should hold onto my Anna Nagar plot? Its near Chintamani.
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  • Still a seller to come back at a lower price!

    Originally Posted by contra
    "green shoots" have started arriving at emerging markets. Don't ever sell your land for a song.



    My information continues to convince me that the situation between March and today has not improved and can be construed to actually have deteriorated, Govt statistics notwithstanding.

    Do you recollect the euphoria by end 2007, which turned to "bottom is here" by May 2008, which turned to utter despair in Oct 2008 lasting until mid-March 2009 and in 2.5 shrt months its turned to euhoria again.

    Am looking for a swing the other way shortly. As far as I can see, the post-Mar swing has been a boon for me to sell at a firm price and not go down.

    A Hyperinflationary depression is coming (a little down the road) which will sweep across the globe not missing India and China this time. We might be better off compared to the US specifically and the developed world in general, but not by much as we will see later. All asset classes will see terrible losses even from these levels. The data I have continues to convince me that the fundamentals are deteriorating rather than improving in a secular market. We are still in the early stages of a long-term secular bear market.

    Commodities will boom, specially silver, from the investment point of view. Agricultural produce will also boom with attendant shortages of food supply. Land and property will probably stagnate or decline in real terms for some time to come. Best to accumulate cash and buy then at much lower leverage (loan to total price ratio).

    Please note that the definition of a bear market is of one that will not rise over the previous peak (in real and not nominal terms) of the preceding bull market. It does not mean that prices will keep on falling and falling till they reach zero (a big misconception). It does mean that there will be a sustained drop in the level of living in the general population and a swing towards being extremely cautious towards risk. Do we see that yet? Nope. There is still this urge to make quick money through taking large, leveraged risks. Till then, markets will keep tumbling in waves of ups and downs where downs are generally greater than ups.

    cheers
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  • Some places in Chennai had dropped more than 25% from 2007 level

    Originally Posted by contra
    Never, Never sell land in Chennai.


      Real estate(RE) developers faced with high debts are reducing flat prices which will bring down their margins but also reduce some of their debts. But these are flats which are being offered at discount. On the other hand, there is no land available for discount.
      Many RE developers are selling equity stakes through qualified institutional placements. But all this is eyewash as their immediate focus is to pay back lots of short term debt with equity dilution. (I have sold most my stocks now after making handsome profits in last 3 months rally;)). The stocks rally will end soon, it is a short term suckers rally as companies are using the rise in their share prices only for equity dilution via stake sales to pay back huge short term debts.
      Even gold will fall in India as Rupee rises(Gold is inversely proportional to Rupee).
      The biggest beneficiary of the Rupee rise is Land. Never sell land

      Agricultural land is the next big boom. Don't miss it.
      Attached NHB index for chennai.Still you guys are dreaming prices have not dropped from 2007 level
      Attached NHB index for chennai.Still you guys are dreaming prices have not dropped from 2007 level
      Attached NHB index for chennai.Still you guys are dreaming prices have not dropped from 2007 level
      Attached NHB index for chennai.Still you guys are dreaming prices have not dropped from 2007 level
      Attached NHB index for chennai.Still you guys are dreaming prices have not dropped from 2007 level
      Attached NHB index for chennai.Still you guys are dreaming prices have not dropped from 2007 level
      Attached NHB index for chennai.Still you guys are dreaming prices have not dropped from 2007 level
      Attached NHB index for chennai.Still you guys are dreaming prices have not dropped from 2007 level
    Attachments:
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  • NHB RESIDEX for India

    Attached NHB index for cities across india.Banaglore had seen the maximum drop among all cities from 2007 levels.
    Attachments:
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  • Originally Posted by BigBear
    Attached NHB index for chennai.Still you guys are dreaming prices have not dropped from 2007 level


    have you noticed the increases of 130,155 in some areas.
    the fact that you are asking of 'dreaming' based on this data of residex

    so there is a increase of a whooping 50% in some areas like puruswalkam etc 33 for aynavaram shown in the residex

    so still you bears are dreaming of a fall?
    it applies both ways BB
    the average for chennai is a correction of 5%
    now where is the big crash your Doomsday theory advocates??
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  • Originally Posted by Natarajg007
    Well Anand, blaming your spouse for your decisions is not fair. I dont want to argue about it. As for you I think there are two points you should analyse. What is wrong going to Sriperambudur if you can buy a big piece of land and live in an independant house there! It is well connected, fantastic NH4 etc. Remember the Chennai you saw as a child does not exist my friend.
    (Quality of Life!)



    Nat, i was menitioning anglosax NRI and im not one of them. Im typical
    gulf nri and i have done nothing wrong yet to blame anyone spouse.

    NRI as such in us are trying to match the local residents thats where their
    mentality had to change. All i said is they never try doing that when they
    were bachelors.

    Yes you are correct Nat the best growth in chennai has been the
    area from vadapalani till porur. This is mostly due to the fact that
    KKNAGAR AND ASHOK NAGAR is still a great layout with proper road spacing.
    It has become a hub for the area. and i still feel Manapakkam will be
    one such thing with L&T CRR Puram and all.
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  • Originally Posted by strongsville
    Hey Contra
    Do you think i should hold onto my Anna Nagar plot? Its near Chintamani.


    When was it purchased by yourself/family? what is the plot size?

    The answers to above will help provide a precise answer. without much details at a very high level can only say "Hold".
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