Chennai, the laggard in the property bubble has finally caught up with Bangalore and other IT cities like Pune and Noida. Guideline values of agricultural land on the fringes of the city have been revised on an average of upto 270%. Hindu has more on this. 32L documents have been registered in FY2011. By this comparison the number or registrations stands at 4,000 per month. This just shows the scale of affordability in Mumbai as compared to Chennai.
Jumping on this trend Artha property, an arm of the Times Group has launched villa's off GST road, in close proximity to Mahindra World City. Gives the reach of Times of India full page advertisements coupled with Artha's marketing savvy, I am expecting huge positive response to this property. Added to this the Times Group can post surreptitious marketing articles likes this which promote their own self interest it won't be too long that these 230 villa's will be sold in no time.
I expect that the area around Artha meadows sees rapid development in the next few years, as investors and end users join in herds in anticipation of double digit returns. Areas like Adyar are over priced and OMR is flooded with investors which have pushed land prices way to high for anyone to make money in this high interest rate environment. GST road appears to solve the problem of affordability at the expense of a longer commute. For those working around GST this cannot come at a much better time.
Disclaimer :
I have been a fan of this area for some time due to its low prices and high potential and some of the investments made by me few years ago might see some fruit in the years to come.
70 comments:
Vik,
Chennai is much expensive than Bangalore and Pune right from beginning. Don't go by these articles.
I thought Chennai was, as the term goes irrationally exuberant
I remember seeing the graph from NHRB showing growth in Chennai exceeding that of Mumbai.
Ha, here's evidence, see the numbers for Chennai, it is going through the roof
http://www.nhb.org.in/Residex/Data&Graphs.php
What we always said is now available in concrete numbers:
A survey by the ASSOCHAM shows that in the last six years, spending by a common man has more than doubled than his salary. While salaries, on an average, have increased 30 percent, spending has increased 65 percent.
Link: http://www.firstpost.com/economy/spending-twice-your-income-youre-definately-aam-admi-263250.html
This whole party started in 2004 with the advent of the Manmohan Singh led congress govt. and the euphoria is going along with this govt. Wait till the next elections and the true picture will emerge.
However, I don't think there will be any good news for home buyers. As this article says, the high income group has been totally immune. And this is the group that holds all the excess RE inventory. By the time the economy bombs, the middle class will have no means left to buy.
@pawan: with due respect to your thoughts and analysis, must say that have been hearing this for the last 10 years. forget about owning a home, day to day life is hell.
i do not think a correction will ever happen. the worst looks to me to be a saturation in prices.
another unfortunate among the millions.
@Anon
i do not think a correction will ever happen. the worst looks to me to be a saturation in prices.
I never said a huge correction will happen where middle class people will be able to buy en-masse. Supply-demand equation precludes that.
If economy turns worse and interest rates rise (stagflation that is), only those 1) who can afford a substantial down-payment from their savings and 2) be able to find a desperate/ready-to-negotiate seller, will be able to buy a home.
If you don't meet condition 1, don't even think about it. Those who could not buy when interest rate was 7% will not be able to buy when interest rate is 12% and banks unwilling to lend.
//forget about owning a home, day to day life is hell.//
Why is that? Can't afford iPad, New car, Dinning at fine restaurants, Vacation, weekend outings? or it is just that you cannot afford RE? I don't see any issues with people in India, they are having party with economy booming! People are lining up to buy their 3rd home!! 1 crore seems almost nothing to many.
Why is your life hell, please elaborate.
32L registrations versus maybe 20k in Mumbai, Why is there such a big difference ?
What do local Chennaites think of of the GST road area around Mahindra World City ?
http://economictimes.indiatimes.com/markets/real-estate/news-/developers-may-strike-if-realty-woes-persist-credai/articleshow/12508448.cms
Developers to go on strike!
//Developers to go on strike!//
What was woes again? Anyways, I wish crores of new flats are built on time. This will solve problem of RE prices and also for dwelling for many. Let hoarders and richies buy more... more they buy and hold more the demand and more should be allowed to build... keep building till demand slows down.
Did I say something wrong here?
@I wish crores of new flats are built on time. This will solve problem of RE prices and also for dwelling for many.
Ha, ha, except where is power and water supply going to come from?
It's cruel but in a way, it's a good thing that many aren't able to afford and most flats are lying vacant. Imagine the misery when everyone in these vacant households switches on the lights and runs the taps.
In almost all bubble areas, the RE rabbit needs to sleep for a while so the municipal infrastructure tortoise can catch up.
"Why is that? Can't afford iPad, New car, Dinning at fine restaurants, Vacation, weekend outings? or it is just that you cannot afford RE? I don't see any issues with people in India, they are having party with economy booming! People are lining up to buy their 3rd home!! 1 crore seems almost nothing to many."
Good point. India is a very wealthy country with very enormous pockets of wealth.
Chennai real estate is extremely overvalued. Some places are up 10-15 times when compared to 12 years ago. Prices do not justify incomes.
//Some places are up 10-15 times when compared to 12 years ago. //
So are the incomes of many, in addition they are earning in their young age (< 30 years old).
Someone please explain this:
Although developers used to borrow funds at 2-2.5 per cent a month at the fag end of the year, the rate has touched a new peak of four per cent a month — cumulatively, 48 per cent per annum.
Link:http://www.indianrealtynews.com/real-estate-developers/realtors-get-by-on-cash-from-moneylenders.html
Poor developers now have to go on strike to protest their pitiable margins and profits.
Reminds me of the time during the 2008 recession when they had to request bailouts from the government. At that time, their margins were the highest across all industries, somewhere between 40-50% of gross revenues.
Now you tell me how can any industry survive at such low margins. Admittedly the real undeclared margins may be higher still, but who are people like you to decide how high is reasonable. Or unreasonable.
Look at yourselves you bunch of "Real Estate Bashers".
How can you guys even sleep at night.
Next year when Mr. KP Singh will be forced to spend only 450crs on his B'day instead of 500crs, you will drown in guilt for having brought such misfortune upon such a bunch of honest and upright developers.
Shame on you all!!!
The new real estate bill
http://mhupa.gov.in/W_new/RealEstate_BILL-2011_OM09112011.pdf
Summary in FP
http://www.firstpost.com/economy/realty-bill-to-tighten-noose-around-brokers-ensure-transparency-262998.html
If it passes in it's current format, it will be a significant improvement
//Some places are up 10-15 times when compared to 12 years ago. //
// So are the incomes of many, in addition they are earning in their young age (< 30 years old). //
AND So is the rent. I'm having hard time affording rent now. There's no fucking way one would expect to go from 15k to 25k in a single year.
@8:25am
"Why is that? Can't afford iPad, New car, Dinning at fine restaurants, Vacation, weekend outings? Why is your life hell, please elaborate."
On H1B or laid off? huh? come to India and commute daily to office and try renting+living at any metro. forget about RE, will understand why life is hell.
@5:31 AM
"AND So is the rent. I'm having hard time affording rent now. There's no fucking way one would expect to go from 15k to 25k in a single year."
This is not going to end nicely!
//AND So is the rent. I'm having hard time affording rent now. There's no fucking way one would expect to go from 15k to 25k in a single year.//
Do not fume, ask salary raise, charge more for your work. After all inflation is for everyone. OR start living 3rd class lifestyle. Your call.
//On H1B or laid off? huh? come to India and commute daily to office and try renting+living at any metro. forget about RE, will understand why life is hell.//
Hmm... been to India last year. My friends drive everyday to work, have ipads, iphones, change cars every few years, they go for fancy vacations and weekend outings. They own 2 flats and are in process of purchasing 3rd... yes, they are in living in India and growing faster than anyone on the planet. I don't see that as a hell.
May be you should start earning more or are undervaluing your service fees. Get your income on par with inflation and see problems vanish.
Offshoring to India will end in 8-10 years: Hackett report
Link:http://articles.economictimes.indiatimes.com/2012-03-21/news/31220333_1_offshoring-business-services-european-companies
//Offshoring to India will end in 8-10 years//
Already happening. Loosing to China and other countries. Rising costs are major factor. Only talent (for offshoring) cannot retain business. Businesses are to make money/profits. Talent that offshoring needs can be hired, transferred and trained.
Look at west, they didn't have issue with talents, but rising cost forced to move back office to cost effective shops. It was India today, tomorrow IT WILL BE some other country.
It is happening. Many companies already opened shop in China, matter of few years.
// Offshoring to India will end in 8-10 years //
Well, last year we saw Philippines overtake India in call centre jobs (well - that's kinda good but still).
BUT here's a counter:
India will be world's No.1 economy by 2050: Citi
http://www.firstpost.com/economy/india-will-be-worlds-no-1-economy-by-2050-citi-258466.html
//India will be world's No.1 economy by 2050: Citi//
- What was India waiting for past many years?
- What is India doing differently than other countries to grow it's economy?
- What is India's strength over other countries?
- Why is India shinning today economically?
- USA is still #1 economy today, what characteristics are of #1 economy - what does India posses or will posses?
I am not being pessimistic, just trying to analyze why only India why not Africa or China being #1 economy by 2050.
@12:20 PM
Makes me wonder if Citi is just bullshitting. Their report came right after Hacketts.
@12:20
//I am not being pessimistic, just trying to analyze why only India why not Africa or China being #1 economy by 2050. //
Read the comments on that FirstPost article
// -- Why not by fifteen instead of fifty. Use infinite free solar heat and light about 6000 trillion kwh each year of 600 trillion dollars to beat US with GDP 15 trillion only. Use free infinite rain water to become largest agriculturalist nation with most exports. -- //
HAHAHA. That genius is our strength.
@USA is still #1 economy today, what characteristics are of #1 economy
Good point, what characteristics and who is defining them?
This whole growth/boom is a mirage. The tide of prosperity is about to wash out and the 99% will be left naked on the beach.
"Hmm... been to India last year."
Really? Um...ok.
"My friends drive everyday to work, "
Yeah, through feaces and urine-laced roads which resemble lakes during rainy season and an endurance course at other times.
"have ipads, iphones, change cars every few years, "
iPads and iPhones that cost the most anywhere in the World. Cars that, unless of crappy quality (i.e. made domestically), have 100% duties imposed on them by a bunch of thieving govt. criminals.
"they go for fancy vacations and weekend outings. "
Fancy vacations in civilization you mean, i.e. OUTSIDE India, which they pay for in a chronically-weak, non-convertible currency after begging permission to spend their own money from again, the same rapacious government criminals.
"They own 2 flats and are in process of purchasing 3rd... yes,"
Let them buy all the flats they want. Priced in EUR, CHF, SGD or any other civilized currency (USD excepted), the prices of those flats are going to fall of a cliff in the coming years.
"they are in living in India and growing faster than anyone on the planet. I don't see that as a hell. "
If you don't see India as hell on Earth, it means you really haven't lived elsewhere on the planet.
//If you don't see India as hell on Earth, it means you really haven't lived elsewhere on the planet.//
So India is now hell and everywhere is Heaven? wow! ...and lakhs of people are paying crores to live in this hell? WOW!
You gave me good laugh today. Appreciate it.
BTW, when I went to India this time after several years, to Mumbai, pollution was far lesser than before (cleaner less polluting cars). Many open gutters were covered. Many citizens were aware of hygiene. Many services were now more professional than 'chalta hai'.
GOI service (infrastructure) was same or worse than before, but general public awareness was much better and are doing what they can to live quality life.
I think you have lived long in 'your hell' and cannot differentiate or appreciate the changes. Yes, things are not rosy if you compare to western countries.
Yes, RE is extremely expensive. Only way out is to create more housing, encourage builders to build more and more till supply overcomes demand. How many investors are there to hold onto new flats and how long. Let them hold on to whatever they have, build more.... that's what happened in USA, more houses, less buyers and even when prices are falling not many buyers.
Eco 101 - supply and demand. If demand is artificial, create artificial supply.
// Eco 101 - supply and demand. If demand is artificial, create artificial supply. //
Except that won't be happening. Can't expect GoI to do anything. Own dwelling is still considered a luxury than a basic human necessity.
Food for thought; If Indians start getting the pink slip, especially the IT and MNC guys, how long would this bubble hold?
//If Indians start getting the pink slip, especially the IT and MNC guys, how long would this bubble hold?//
Don't bring in 'If'. 'If' can change any equation.. go by what is today and what is possible.
The only reason RE is not coming down is because of US and Europian economy is not doing good.
The moment US start interest rates, I am sure US funds will start pulling their money from India. Ever thought where do your 401K investment gets returns from?
Bad news is US is not planning to change interest rate until 2013. So I think RE in India will be stagnant until then.
Better ignore reports published by big banks or investment banks. They are mostly to influence people. I am sure what must have come ame to people's mind after reading Hewitt report, was to buy land in those countries :) Habbit die hard.
"I have been a fan of this area for some time due to its low prices and high potential and some of the investments made by me few years ago might see some fruit in the years to come."
Looks like the RE shills have penetrated even the editorial board of this forum. So much for the so-called "India's housing bubble".
I predict something will crash at some time.
Chennai house prices will never crash in INR terms (for a variety of cultural and other reasons). However, priced in stable currencies, they will collapse.
The current situation where even apartments and hell holes in sh*tty parts of town cost over 1 Crore (i.e. over US$200,000) each is clearly unsustainable. You can buy multiple houses with backyards in the US and other countries for that amount.
It is not clear why Chennai, a horribly polluted, overcrowded city with frequent power cuts, water shortages, non-existent roads, 19th century industry, a GDP per capita of less than $4000 and a non-convertible currency deserves to have RE prices higher than many first world countries with much higher rates of productivity.
In fact, given the fact that RE prices have more or less been stable over the past 1 year (at a time when INR has nosedived 20%), an argument can be made that the correction has already begun - again, not measured in INR, but measured in CHF, EUR, AUD, GLD or SGD.
http://www.mid-day.com/news/2012/apr/090412-mumbai-Hill-station-in-mountain-of-trouble.htm
the area around the artha meadows rapid of the developments in the next years and double digit of the investment users in the area.Ares are adyar are over priced OMR is flooded with investment
//The current situation where even apartments and hell holes in sh*tty parts of town cost over 1 Crore (i.e. over US$200,000) each is clearly unsustainable. //
I thought only Mumbai was shit expensive, now I know Crore is normal anywhere in India.
Are Indians celebrating with their net increasing by crores and increasing more Year over Year? I hope so and better be so.
I am wondering where new buyers with fresh crores in hand are going to come from ? Existing pool of crorepati buyers are done.. hardly any one left. So new buyers going to fall from sky? miracle?
99% of Indian population is a bunch of fools. All are on dope and can't see it is "Too good to be true in the long run".
RE will go down by 70% or more in the next few years and the country will go in a decade long recession.
I hope we don't see a revolt or suicides in large numbers as masses are being given false hopes on this growth story. The next round of bubble failures will include India alongwith China, Australia and Canada.
USA will emerge to be best among the worst as they were smart enough to prick their bubble 4 years back and would be back to growth trajectory in the next few years after seeing 70-80% drops in RE prices and massive unemployment. All the above counties mentioned above have yet to see high unemployment, Govt. debt. soaring, failing banks and RE as a result will drop by a huge percentage as inventory will soar to a 5 year supply.
Btw, rupee is going to 55 by July and if real recession kicks in, it will go to 65 by next year.
"I thought only Mumbai was shit expensive, now I know Crore is normal anywhere in India. "
In the metros (except for Calcutta), a decent apartment will set you back by at least a Crore. If you're looking for a house or a premium apartment, then you're looking at a minimum of 3 Crores.
"Are Indians celebrating with their net increasing by crores and increasing more Year over Year? I hope so and better be so. "
All this is paper wealth. Paper wealth will eventually evaporate just like dot-com stocks or miami condos. However, priced in INR, RE prices will appear more or less stable (and hence the mantra "RE prices can never go down in India")
However, priced in INR, RE prices will appear more or less stable (and hence the mantra "RE prices can never go down in India")
Not really true. See http://www.nhb.org.in/Residex/Data&Graphs.php
Think about the poor sods in Jaipur who bought the 'always goes up' story.
Chandigarh prices also fell almost 30% last year alone.
This movie is familiar..the house prices go up. People experience what is called the "wealth effect".
Sooner or later, people start going for 2nd/3rd mortgage's..using their houses like ATM's and piling on more debt.
This movie does not have a happy ending. House prices do not "always go up" and when they go down, they do so in a big hurry. Sensible folks please stay on rent and save your souls
// Sensible folks please stay on rent and save your souls//
You mean rents are not increasing or not increase? Rents ARE and WILL increase. Infact many don't want reneters for long in same house. They don't lease easily and cheaply to families with fear of tenants getting comfortable and not ready to leave. Legal battle in India is long, time consuming and waste.
So RE prices are not declining, rents WILL increase.... what are you going to do? Move out.. where? whole India it's same story.
The gamechanging black swan event is and always will be imperial war rather than a Malthusian crisis
http://www.zerohedge.com/news/guest-post-two-kinds-black-swans
(however in India's case it might be both)
Yes prices always go up and GDP growth never stops. Many people also confuse luck for skill.
We all know how that story ends, don't we.
Watch this video
http://www.ted.com/talks/jonathan_foley_the_other_inconvenient_truth.html
We are now using the equivalent of two continents (South America + Africa) for agriculture. Think 20 years forward and you'll understand why this guy is worried.
Book a house with your hard earned money in a law-less land and enjoy socializing....
http://economictimes.indiatimes.com/markets/real-estate/realty-trends/how-you-can-make-builders-complete-projects-or-compensate-for-delays/articleshow/12571372.cms
"Thanks for enlightening us with details. I also booked a flat in Jaypee Kosmos Noida in Aug2009 and still there is no sight of completion inspite of 3 years nearing on Aug2012. The Builder says that they will deliver possession in Dec 2013, good 1.5 years late. The cust care officers have no clue what's the progress. How can I join Mr. Trehan's group? I work in a 6000 strog employee base MNC in Gurgaon and can really connect with all the aggrieved colleagues to mobilize more people. Please suggest on how can I join."
"XX (Gurgaon) replies to Prashant
10 Apr, 2012 04:45 PM
There is a yahoogroup. Next meeting is on 12th May, Annapurna Cafeteria, Jaypee office."
@Anon 8:59 AM
Ian Morris Theorem - Change in history is caused by lazy, greedy frightened people who rarely know what they are doing looking for easier more profitable and safer ways to do things.
Be prepared for the change
http://www.amazon.com/gp/product/0312611692/ref=olp_product_details?ie=UTF8&me=&seller=
Returned to this blog after a year. Good to read the same arguments by the same people all over again. After another 3 years, one full RE cycle would have passed by since this blog started.
//Returned to this blog after a year. Good to read the same arguments by the same people all over again. After another 3 years, one full RE cycle would have passed by since this blog started.//
may be same arguments, may be same people. But it is NOT SAME RE cycle. See how everything is getting expensive every year by year... Just watch in coming days how things get more expensive. ya same argument. :-)
Bigger the bubble, bigger the sound of the bust or side effects.
Thanks for your information. By Constructions Companies in Chennai
"Returned to this blog after a year. Good to read the same arguments by the same people all over again. After another 3 years, one full RE cycle would have passed by since this blog started."
It's not the same people making the same arguments. The creators of this board for example, have done a 180 degree turn on the existence of a bubble. Here's what the original poster stated in the original post in this thread:
"I have been a fan of this area for some time due to its low prices and high potential and some of the investments made by me few years ago might see some fruit in the years to come."
I don't see any relief. What I always fail to understand is the rationale behind these high-priced real estate. Is it more important that Indians who lives in India are able to afford housing without spending all their working 40 years OR NRI investing for profits. Meh.
//Returned to this blog after a year. Good to read the same arguments by the same people all over again. After another 3 years, one full RE cycle would have passed by since this blog started.//
I agree, I have been scratching my head for years..
1.How people afford?
2.Where do they get the money?
3.Why people are risking all the money to some builders promise?
4.What makes people believe price will go up forever even though neighbour contries learned the lesson
I too wish to buy a house and build a family but before I put money my brain asks "Does it makes sense?"
may be ignorance is bliss.
@RealityFool,
"How do people afford? Where do they get the money"
I overheard a colleague (everyone knows he is over paid - managed to play politics n earns more than his peers.. for sometime now he is on the lookout for land/house) hardly 4 days back - it seems he was told that buyers were very few, only investors have bought stuff ==> people actually dont/cant afford, hence v few buyers. Those investors are blind mice - they somehow got profits around 2004 (may be unintentionally) and that has acted like a narcotic on them (and on their frens & enemies) I guess they'll lose everything they gained or everything they have. At some point of time it has to happen - may be it's happening right now? Coz all of us IT folks are scared of outsourcing to China, Vietnam, Philipines etc & are being a bit more cautious with our money now than earlier.
And by the way yday's mild tremors in some parts of bangalore might have put some new apartments to test I hope. Din check the news today.
"What makes people believe price will go up forever?"
If what I heard first hand (in the above stanza) is not wrong, most folks are NOT believing that prices will go up & are not shelling out everything the builders ask for. Only investors are caught in the trap .
http://www.indianrealestateforum.com/general-real-estate-discussion/t-re-investment-2012-suicidal-23898.html
This thread should be used as a food for thought.
there is a prediction of bubble burst in 15 yrs which somehow i tend to agree as i dont see prices coming down..
he Ministers from the Rajya Sabha who can afford to be insensitive, bureaucratic and complacent since they do not have to fight elections and their tenures are assured irrespective of whether their party wins or loses in the next elections.
It is the same with the opposition parties too. Only those political leaders who have to face the electorate need to be sensitive about real ground-level issues like price rise which affect the common man (rather than engage in political one-upmanship which does not alleviate the distress of the aam aadmi).
In conclusion, I request all politicians to please take steps to contain inflation and tackle the issue of price rise. To start with please reverse the decision of capping LPG cylinders as the new system is not only causing distress to the common man but also seems to be practically difficult to implement and is likely to lead to more corruption, confusion and cause harassment to the aam aadmi.
I also hope that the opposition parties will constructively take up such practical day-to-day tangible issues which affect common citizens.
It is sad to see opposition parties wasting their energies by indulging in futile political one-upmanship on intangible matters.
It is demoralizing to see politicians create disharmony in inter-personal relationships by engaging in political duels in the media which produce no results on the ground, as far as the aam aadmi is concerned.
These negative vibes created by politics of conflict are avoidable and it will be good to see politicians synergize together and tackle the problems facing the country and alleviate the distress of the common man. I hope they focus on taking up the issues of Inflation and Price Rise. To start with, let us see all politicians get together and resolve the LPG fiasco.
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I feel chennai is the right place to invest, it is growing rapidly. You can invest your money to buy a property in chennai and to buy a property in bangalore
Chennai has everything, IT, ITes, BPO , Industries , that is why i could say it is the right place to invest.
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