What is more beneficial? My requirement is NOT to stay there, but to resell it at a higher value. Advise please!
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  • When Govt changes every 5 years .... 1991 article 356, 1991 ADMK, 1996 DMK,2001 ADMK,2006 DMK,2011 ADMK .... Many things were not respected and built by hook or crook in these ARZ,CRZ spots.

    Govt recently ordered for detailed study and report to take stock of situation and things will be clear soon with what kind of action to be taken .

    When many lost official lands procured for Hyundai and other companies usage in Sriperumpudur what prevents them from banning unauthorized usage in these ARZ,CRZ spots .

    Many in these regions are not comfortable the moment Govt recently ordered for survey and submit reports .

    Originally Posted by maverick007
    Eco/SRajagopal/RaviCbe:

    Do you think 1G of land in the ARZ can legally construct with FSI of 0.8 with CMDA approval? I was surprised when someone said in the forum few weeks ago, about a builder claim that it is possible. I checked with my sources again and they say nothing changed in the recent times to allow approvals on 1G land. What do you think?

    Mav
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  • Originally Posted by Economist
    Potential development of small group of flats in the future is my principal criteria.


    Neelankarai is not a great place for flats. They are not easy to sell for top money. Even big builders do avoid the place. Thiruvanmayur or Besant Nagar is along the coast is the better place.

    It is better to go for standard 3-4 ground plots in city. There are many opportunities. Some are easy to get, some location are hard. Small 6 or 8 unit projects are possible. Plots with 2.5 - 3 grounds are kind of minumum to generate significant profit and completely utilize the FSI.

    I was a part of group a while back evaluating a 5 ground purchase in Purasawakkam. We did not get the place as we got outbid. This was in 2010.

    You might be able to get something like that and put a JV out with a builder. You however need to find the right parcel at right price, which is not easy.
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  • Originally Posted by RaviCbe
    When Govt changes every 5 years .... 1991 article 356, 1991 ADMK, 1996 DMK,2001 ADMK,2006 DMK,2011 ADMK .... Many things were not respected and built by hook or crook in these ARZ,CRZ spots.

    Govt recently ordered for detailed study and report to take stock of situation and things will be clear soon with what kind of action to be taken .

    When many lost official lands procured for Hyundai and other companies usage in Sriperumpudur what prevents them from banning unauthorized usage in these ARZ,CRZ spots .

    Many in these regions are not comfortable the moment Govt recently ordered for survey and submit reports .


    CMDA ordering CRZ ARZ study drama happens all the time, like i said before im not and will never put money for investing if you are going to plan to do flat development on an 1.5 FSI equation here
    But if its going to be on a 0.5 or 0.8 FSI where you are willing to deviate and build the way you want for a retirement home then ECR beach side is by far the best property
    Check out NINA reddy's house in Olive Beach in Injambakkam
    it was featured in all the magazines and now dont please tell me she has not deviated the FSI in building
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  • Most of ECR, even though FSI is 0.5/0.8, most people (sellers) valuate as if it is 1.5 FSI.

    On a 2 Ground plots, less than 3800sqft is possible @0.8 FSI.
    But the price in nicer areas would be 4C atleast, making psft cost cross 10K.

    When you add the flat development costs of 2-2.5K and interest costs for two years at another 2.5K, the break even selling point comes to 15K a sqft.

    Now, Neelankarai market is not a 15K market.

    Small builders in Adyar/Besant Nagar charge lower than that.
    Big builder projects can be bought at that rate.

    The cost dynamics for flat development does not work out with such high over inflated land prices in ECR.

    Now if the land is sold at 2C (@1C a ground - very unlikely scenario), 5200 psqft will be land cost, with 12% pa interest cost across two years and 2-2.5K construction, the breakeven boils down to 9K.

    9-10K psft is the right rate for ECR areas like Neelankarai.
    Any savings in interest costs or building costs can flow into profits.

    Somehow, land prices and flat prices never seem to correlate anywhere. The gap is getting bigger and bigger.

    Builders somehow are getting deals in land acquisition and making money through that.
    In city, many of them just rely on JV to avoid land cost and reduce interest cost.
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  • Originally Posted by k11
    Most of ECR, even though FSI is 0.5/0.8, most people (sellers) valuate as if it is 1.5 FSI.

    On a 2 Ground plots, less than 3800sqft is possible @0.8 FSI.
    But the price in nicer areas would be 4C atleast, making psft cost cross 10K.

    When you add the flat development costs of 2-2.5K and interest costs for two years at another 2.5K, the break even selling point comes to 15K a sqft.

    Now, Neelankarai market is not a 15K market.

    Small builders in Adyar/Besant Nagar charge lower than that.
    Big builder projects can be bought at that rate.

    The cost dynamics for flat development does not work out with such high over inflated land prices in ECR.

    Now if the land is sold at 2C (@1C a ground - very unlikely scenario), 5200 psqft will be land cost, with 12% pa interest cost across two years and 2-2.5K construction, the breakeven boils down to 9K.

    9-10K psft is the right rate for ECR areas like Neelankarai.
    Any savings in interest costs or building costs can flow into profits.

    Somehow, land prices and flat prices never seem to correlate anywhere. The gap is getting bigger and bigger.

    Builders somehow are getting deals in land acquisition and making money through that.
    In city, many of them just rely on JV to avoid land cost and reduce interest cost.


    Yes thats precisely the problem of valuation in ECR its not valuated with FSI and flats in mind , its being valued based on personal choices and preferences to live by the beach and amount of color money you want to hide.
    a ground of land in Pattipulam near burial grounds is priced at 36 lakhs a ground
    It falls under CRZ no approval panchayat land with restrictive FSI,
    that is much more pricier than Kelambakkam , Thaiyur, Ponmar, even Navalur some areas.
    Go figure
    it makes no sense but it is the fact
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  • Originally Posted by Love4land
    You are asking for sufficiently long duration of 10-20 yrs to compare plots with gated communities on the other hand you say gated communities are new phenomenon, just 10 yrs old. How to give 20yr data for 10yr old concept?

    Also major real estate appreciation of all asset class happened only in the past 10 yrs. Suburban mega townships are still more recent phenomenon. The first batch of mega townships were delivered only a year or two back. People have just started to shift from city homes to townships. I know a propreitor of a software company in OMR who recently shifted from his city house to Arun Excello Estancia just a few months back. He is very happy about it so far, he often posts pictures of it on Facebook and invites comments from NRI friends like "Chennai looks so modern", "do we have such things in chennai", etc... The curiosity factor is slowly building up.



    L4L, Gated Communities as we call it now are no doubt there only last 10 years, but we did have multistoreyed apartment complexes aka flats right from 1980s...

    So the right thing is to compare the ROI on the flats that were built and invested in 1980s with the ROI on plots that were sold in primary/secondary market in same time.

    Any investment, can be judged to be superior or inferior only in a long duration period - 10 or 20 years.

    Please note that when I argue plots give higher ROI than Flats it does not mean any plot in any location will give better ROI than flats.

    Location always matters - buying a plot in middle of nowhere (say acharapakkam, inside, far away from railway station) in 2013 will give much less ROI even in 30 years, than buying a pricey flat in kelambakkam/OMR.

    RE is very much about Location

    To compare Flat Vs Plots from investment POV, we should consider somewhat similar locations.

    As I said, for all the difference, 60-65% of value of flat is about the underlying UDS, so what makes difference is the price the built up value of flat is sold.

    That is a depreciating one. That is why flats start with disadvantage vs plots from investment POV.

    That disadvantage can and shall be reasonably mitigated by renting it out and diligently reinvesting rents (through recurring deposits etc) but this is always missed out.

    Originally Posted by Love4land

    Even in this forum experienced members with decades of real estate experience like RaviCBE have shifted to suburban townships recently.


    I have high regards for folks like RaviCBE but if person choses to live in a GC, that doesnt mean he or she thinks GCs give better ROI than flats. FYI, I live in a crowded apartment complex myself but that is based on what i think is right for my living. Investment POV and Living POV are different things.


    Originally Posted by Love4land

    There is nothing wrong in comparing 1-2 yr old data when people are making real money (20-40% pa) by flipping properties before even construction is complete.


    Your example is similar to K11's example which showcased, 100% returns in 2 years. Fine. Then why stop with 1-2 years? How about less than 2 months? If you want high returns (with high risk ) in Short Term, consider investing in Real Estate stocks. In 2006-2008 period and 2009-2010 period, Real estate stocks like Unitech, DLF , Ashiana and many others have given stupendous returns. You may argue this is not a forum for shares - but i say, what is difference between buying a project in unitech (flat) and buying a bit of their business?

    I don't remember exactly but btw 2002 and 2007, Unitech has given more than 50 fold ROI, something very few Plots or flats could give..

    Point is - short term trends can be misleading. Let me give another example. In 1997-2000 period, some apartment prices in city came down. (Plots in suburbs did not come down in value )!

    Originally Posted by Love4land

    BTW, plot investing is not less effort. Lot of buyers today are averse to plot buying because of fraudsters, difficulty to verify ownership, double document issues, difficulty in arranging funds, etc... For hassle free investing, apartments are the best.


    Let us take it in separate post but let me add a thought on this - What is less difficult is always going to give less returns (with less risk). Consider Bank FDs vs investing in shares.

    Originally Posted by Love4land

    BTW, I've invested in both individual houses and apartments. I have open view about investing in plots, individual houses and apartments. All of these can give great returns, but if you want to make serious money in short term, apartments are best is my opinion. However to maximize return from apartment investing, we need to pick right apartment with following criteria:
    -lower downpayment of 20-25%
    -stretched payment terms extending to 18-24 months atleast.
    -UDS registration should be at time of handover

    If these criteria are not fulfilled, it is not worth investing in apartment with short term yield in mind. Most apartments in Chennai doesnt meet this criteria, however I see a change in trend. Builders are also slowly realizing the potential and trying to attract speculators with flexible payment terms. We are going to witness a sea change in real estate activity in the next few years.


    I agree on many of above, but on ST investing i disagree - If you have horizon of less than 3 years, don't consider any kind of RE. Do agree that 2010-2012 saw great ST returns, but that is one time , that wont repeat again. Think of shares if you are a ST Investor . or think of investing in housing finance companies, Real estate promoter shares. RE IMHO is ideally for longer duration. Also consider the effects of Long Term Capital Gain tax, which i remember is lesser only if you hold the RE for more than 3 years.
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  • Now, talking about Plots Vs Flats, there are 5 factors that right away favour a flat buyer over plots (but some of them apply only for one time buyer)

    1. Legal Issues/Legal clarity - Obviously a flat's legal cleanness (documentation ) is easier to ascertain and verify than a plot. Many times if a flat was under some home loan, the lender does the verification. Overall no denying that a flat is less likely to get into legal issues than a plot in terms of ownership
    2. Capital Gains Taxation - If you sell a flat and by another flat, you can get exemption from Capital gains . But this applies only if you have own one flat. This does not apply for plots. So flats have an edge - but this is again for a one time buyer only.
    3. Sec 24C Tax exemption clause - The 1.5 lakh exemption on interest on home loan applies only to flats, so is a big advantage . Again this applies only to one house/flat and more importantly the 1.5 lakh limit these days is not adequate so if you are a big ticket investor investing in crores, this limit is making no sense
    4. Greater power of leverage - obviously a flat gets greater value as loan (80%), and interest rates could be lower too, so leveraging to buy flats is less expensive than to buy plots.
    5. Rental Income - That a flat gives rent is also a factor.

    So, flats no doubt start with an advantage that plots dont have. But in last 30 years, there is clear data that ROI on plots has been generally higher than ROI on flats.

    This requires lot of pondering but:

    * Note that location matters more , be it plots or flats and
    * For a big ticket investor/investor with coloured money, the points 2,3 and 4 which favour a flat investor are simply not applicable
    * Even flats can have legal issues so Clean ownership is a basic entry criteria for any investment so point 1 applies to all sorts of investments
    * This leaves us with point 5, that favours flats over plots. Here lies the catch. If you are a LT investor, rental income plays major role in deciding the ROI of flats (over plots). But this is not obvious to most of us !!
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  • Originally Posted by ramki830
    Your example is similar to K11's example which showcased, 100% returns in 2 years. Fine. Then why stop with 1-2 years? How about less than 2 months? If you want high returns (with high risk ) in Short Term, consider investing in Real Estate stocks. In 2006-2008 period and 2009-2010 period, Real estate stocks like Unitech, DLF , Ashiana and many others have given stupendous returns. You may argue this is not a forum for shares - but i say, what is difference between buying a project in unitech (flat) and buying a bit of their business?

    I don't remember exactly but btw 2002 and 2007, Unitech has given more than 50 fold ROI, something very few Plots or flats could give..


    Ramki830,

    I forgot to respond to Mav's comment.
    My figures are actual numbers, I bought during the 2010 period.
    The 2 year firgure is becasue a sale happened in my building in late 2012. It is hard to know the actual prices. When the next sale happens I will post the rates. It is not like I chose the best period.

    I cannot take the quoted price and say my place has gone up X%. Quoted prices are always much higher than market many times. Apts have differnt UDS, specs, floor, amenitites, etc so it is hard to have a apples to apples comparison. Also I cannot quote apts from a different neighbourhood. At any point in time, there are only 5-10 apts are on sale in my area. Whole of central chennai has probably 40-50 apts in nice streets for sale at point in time. Somtimes there is nothing available on my neighbourhood. So frankly it is hard to asses the rates.

    I am always bullish about premium properties in premium locations. I have writtern in some of my older posts too. Chennai has very few streets that figure in high end buyer's book, I am talking about end user not some NRI investor.

    Back when I bought it, all I wanted is a place for my end use do not want to worry about returns a lot. I was sure that prices would go up in future, long term not 2012 but more like 2020-2022, a 10-12 year period. I feared affordability for me could be an issue in future. My target was 20-25K at that time. But now it is clear that has already been achieved well under what I thought. I have been very conservative with my target. Well, if I have put a number again I think it would hit 40K.

    Stocks and all are very complicated for builders. It is hard to evaluate many are not doing too well. Stocks you need to use the margin. I am sure they would not allow 1:5 margin. Totally not advisable.

    Apts can be bought on 80% loan easily. Leverage juices your returns.
    If it is bought for end use, I do not see why not go for it.
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  • #202 ramki830: Good points. There is a term in Behavioral Finance, "Recency Bias". This is the most difficult for many investors to shake off. This is so powerful and even seasoned investors get caught up with this, as I have seen in many cases. I, often feel, the initial successes people have should be on sound principles of investing for it to sustain and build more on it.

    RE's positive return and successes across any region/any time frame is so prevalent, you name it and people have postulates for winning RE formula. Everyone has their secret sauce and nothing wrong about it. But, a continuous string of successes rarely give you a chance to validate the soundness of one's rationale. Very few investors assess and know the right attribution for success and know the success factors and build on it.

    Mav
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  • K11 - I wholly agree that Apartments (is probably) only investment/asset category where 80% of the value of investment can be borrowed, so power of leverage is highest among all asset categories (to tell a counter example, one cannot borrow so cheap, so much to buy Gold bullion)

    But what about Big ticket investors, cash investors and investors with coloured money? Such people will have issues in leveraging - as you may know, not every one can walk to a Home loan provider , borrow 80% and buy a flat at the standard lowest floating rate of interest... You know so many things are there - KYC, CIBIL, need to prove a regular "White" source of income , etc etc....

    Yes, people can borrow by pledging assets, but the interest rates are much higher as you would agree..
    Which is where, we should factor the cost of borrowing when computing returns. As i said, when i debate plots vs flats, I am having in mind cash investors who want to put better use their savings/cash reserves. For them, the apartments may not be the best category of investment - esp if renting is not done effectively.
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  • Originally Posted by maverick007
    #202 ramki830: Good points. There is a term in Behavioral Finance, "Recency Bias". This is the most difficult for many investors to shake off. This is so powerful and even seasoned investors get caught up with this, as I have seen in many cases. I, often feel, the initial successes people have should be on sound principles of investing for it to sustain and build more on it.

    RE's positive return and successes across any region/any time frame is so prevalent, you name it and people have postulates for winning RE formula. Everyone has their secret sauce and nothing wrong about it. But, a continuous string of successes rarely give you a chance to validate the soundness of one's rationale. Very few investors assess and know the right attribution for success and know the success factors and build on it.

    Mav


    Maverick - Very true.. Let me add two other thoughts, which everyone can ponder:

    1) Past returns may never repeat in future. Here we debated how we got 1000 or 10000 fold returns in plots (and flats) in 30-40 years. I am quite sure, people should have more realistic expectations in next 30-40 years. Unless we see zimbabwe style inflation, i dont see plots of OMR going to 500 crore a ground in 2050 ! (or does anyone think so !!!!!!!!) :bab (59):
    2) Investors in shares always fail to forget the importance of dividends. Likewise, flat investors always forget the importance/role played by rental income in overall ROI.
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  • Originally Posted by ramki830
    But what about Big ticket investors, cash investors and investors with coloured money? Such people will have issues in leveraging - as you may know, not every one can walk to a Home loan provider , borrow 80% and buy a flat at the standard lowest floating rate of interest... You know so many things are there - KYC, CIBIL, need to prove a regular "White" source of income , etc etc....


    All this leveraging and stuff is for regular people like me.
    Home loans are targeted by flat buying young salaried people.

    Property is very risky for people with colored money, I think they split and buy property under different names, cash only no leverage. These guys are more diversified than us, buying gold, movies and various other assets.
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  • The discussion seems to be heading towards plot is for cash buyers and flat is for loan buyers..I think the understanding will be clear if we set aside source of funding and just discuss the often said fact - "building depreciates, land appreciates".

    For a person looking for RoI in flat..they are looking to sell back within a short span of time 2-3 years when the building can be passed of as relatively new..The advantage is completely lost the moment it is a re-sale..A person who is going to calculate returns on a flat after 30 years will see that only the UDS part has retained value. The rental yield in my opinion is very minimum considering the cost of flat..Also discounting the maintainence cost..property tax etc it appears we flat owners are doing social service to people wanting to rent. I dont think rental yield is attractive to convince buyers towards deciding a flat. Especially on leverage when interest rates are 10% and rental yield is less than 4%. The price-rent buy ratio is skewed towards rent.

    Ok..Then why dont we see lands being sold/bought when it is relatively cheaper comparing to flats in the vicinity? Let me share my story..I had a requirement for a modern house in 2015. As you all know, I have booked a flat in a gated community even though I could have bought 2 grounds for the same cost and built a house nearby. I am buying it without leverage so I think it would make a case of equal comparision. The main reason that made me choose a flat over a plot was the fact..suburbs are still not safe and comfortable for individual houses..After looking at the area and the slow development, I decided we cannot put up with deterioration in lifestyle if we decide to move to suburb in its current state. Our lifestyle does not match with the residents who have bought land cheap and are living nearby for 10+ years, obviously there will be mismatches and I dont want my family to suffer the environment and adjust to it after so many years when there is no compulsion whatsoever. Though my decision does not make pure investment sense..I dont regret it because I know that most likely my family wont want to move to suburb..In that case, A flat is easier to let-out, easier to maintain and easier to supervise and monitor especially when we are all so busy with work and either travelling or have thousand things to handle.The comfort and security a flat/gated community gives to residents for the money invested beats all economic sense and prospect of appreciation in a plot.

    So that is for end use, what about investment? Buying plots and protecting in chennai is such a pain and too much effort..I am not discouraging anyone here..I couldnt devote much time to explore,identify,filter the right property. I kept missing opportunities.But I didnt wait and I made some small ticket investments in Tier II towns/cities well within the main commercial area. They have given me more returns than any chennai suburb plots would give for the same price. And with relatives staying nearby..I have a feeling my investment is safe. That wouldnt have been the case with barren layouts.

    Finally, coming to core point - building depreciates..I believe going forward we are seeing a change in trend..Just like a location demands premium due to the kind of people living there, like Boat Club being costly while kotturpuram on the otherside of river is comparitively affordable. Similaly Buildings will be seen as Locations in future..We will see that building also "appreciates". Certain township that sells "living space" with specific "lifestyle" to buyers will be in demand and have its own rate whose price/demand will defy all logic and be totally unrealted to the trend and land rate outside. Similarly, Many are waiting for the infrastructure to catch-up in suburbs..they dont mind paying more if its costly at that time. Once some layouts are developed we will see posh localities emerge in suburbs too that can give PG and BC run for its money. The success of land investors would lie in identifying it before it dawns on the whos-who of chennai to start living there.
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  • Originally Posted by nabishek
    Finally, coming to core point - building depreciates..I believe going forward we are seeing a change in trend..Just like a location demands premium due to the kind of people living there, like Boat Club being costly while kotturpuram on the otherside of river is comparitively affordable. Similaly Buildings will be seen as Locations in future..We will see that building also "appreciates". Certain township that sells "living space" with specific "lifestyle" to buyers will be in demand and have its own rate whose price/demand will defy all logic and be totally unrealted to the trend and land rate outside. Similarly, Many are waiting for the infrastructure to catch-up in suburbs..they dont mind paying more if its costly at that time. Once some layouts are developed we will see posh localities emerge in suburbs too that can give PG and BC run for its money. The success of land investors would lie in identifying it before it dawns on the whos-who of chennai to start living there.


    CASE in POINT - OLIVE BEACH in INJAMBAKKAM , just bcos of the neighbours and the owners in the layout, it commands a premium sometimes more than Neelangarai
    When Samsudeen and co put this layout not in a million dreams they would have dreamt this kind of hype on this layout
    It just did it
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  • Flats attracts end users.

    Suburban plot investors do not need end users.

    I am buying something for X in a barren area without roads, infra, or houses for kms at strech. As long as the next guy buys it for 2X or 3X in the next couple of years there is no worry. The guy buying it for 2X or 3X will look for next one buying it for 10X. Many NRI people buy sight unseen. Nothing to reseach or evaluate, as long as you know the next is guy is there to buy at higher price. The whole cycle is done in a very short time period.

    The latest trend is being able to take advantage of uptrends at short time periods.

    I myself have not done it, but I have seen some people do it.

    The guys who bought in layouts like ETA Karnai, etc a couple of years ago are all shifting out. The infra or ground situation has not changed nobody has built anything. I was discussing opportunities with a guy who put money in Karnai, he had a good run, now wants to get on to the next thing, he does not see prices going up further at the same rate. He got an NRI buyer pretty easily.
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