There has been a renewed interest in investments in plots near the peripherals of the city.Here are a few parameters you need to keep in mind while investing in a plot
Purchasing land as an investment usually pays off only as a long-term venture,with a minimum holding period of five to ten years.
SAFE PURCHASE PARAMETERS
In general terms,it is definitely not safe to buy land without thoroughly acquainting oneself with the local market,and the legislative dynamics of that area.
Buying land situated near a housing scheme calls for extreme caution,since one may inherit the covenants and restrictions applicable to the housing scheme.
While buying a plot as an investment,one should ensure reasonable proximity to key roads and access to water and electricity.
One should also acquaint oneself with the development plan for the chosen area – this can be established from the local administrative body.
One should be very clear about what taxes one will incur and whether the plot has a permit for the raising of residential/commercial structures.Raising large structures is not an option on agricultural plots,which are cheaper and have a lower tax burden.If the plot is agricultural land,one should establish whether its status can be converted for construction purposes later on,or not.
Before any land purchase,one needs to investigate into possible multiple ownership issues and zoning restrictions.
LAND PURCHASE – ASSURED ROI
The value of a plot of land in any particular location depends on what the Government will permit to be done there,and on the success dynamics of the society in which the land is situated.
You cannot add to the value of land as you can to a structure – value derives from the dynamic community that makes the land desirable.Therefore,a plot’s value will appreciate if there are developments in the vicinity to make this happen.Sometimes,investors purchase land based on anticipated value – such as if something like a mall,multiplex or office block is scheduled to come up nearby.If the anticipated development fails to materialise,or if the location does not receive water or electricity supply,the plot will fail to appreciate.
Land will also fail to appreciate if it is in danger of being taken over by the Government.No matter how good a plot looks,or how reasonable the price is,one must check everything.
As Published in Times of India, Property Times – December 2, 2012
Many people are looking at plots in the peripheries of the city as a means of short and medium-term investment.Arjun Narayanan finds out more
Land is undoubtedly emerging as a much sought after asset for investments.While purchasing a plot by end users is common,there are many who look for plots as a short to medium term investment.Since availability of plots within the city limits seems beyond question,the obvious choice is the outskirts,where a lot of manufacturing companies have set up shop.
Buying a plot calls for lower finances and allures many investors for this very reason.”I personally feel that property requires more money and the appreciation that happens in case of an apartment is not as high as in case of a plot,”says Mahipat Bhandari,a city-based businessman,who has purchased a plot in Kayarambedu.
It is areas like these that are up for grabs on the investment map today.”The area towards GST,Oragadam,Sriperumbudur and the stretch along the ECR,after Muttukaadu,are attracting investors and developers today.The connectivity is improving in these areas and many educational institutions and hospitals are being proposed here.These aspects work like a trigger for developers and investors,who are looking for plots in the suburbs of the city.It works well as a long-term investment,”says Wilson Mathews,Director,Sales and Marketing,TVH.
With increased economic activities and growing income,space for residential property has become an issue in Chennai.Employees of multinationals and manufacturing enterprises (that are set up on the outskirts) are also planning for a permanent residence in these areas and as that happens,what was once a suburb has now become a part of the city.”Even a few years ago,Tambaram was seen as a suburb.But today,it has become a part of the city.There are many IT professionals residing in the area there and facilities are increasing there,”says Rakesh Jain,a city-based entrepreneur,who has invested in a plot near Guduvanchery and has plans not to sell the plot for at least the next three years.”After seeing some appreciation,I am planning to get into a joint development with a builder,”says Rakesh,who holds the plot jointly with another investor.
“Most real estate developments being proposed in recent times follow the joint development route.In such a case,a developer doesn’t invest money in land;both partners join hands to develop property,”says Wilson.Rakesh also sees a lot of merit in investing in a plot over a house.”Apartments require a lot of maintenance and that becomes cumbersome if you are living in another city.Besides,you can do a lot with a plot.Selling it becomes easier,”he says.
So how does a person clearly decide between investing in a plot and a house Wilson feels that one needs to prioritise his/her needs and keep the budget in mind,which means that the purpose of investment,the time in hand to remain invested,the source of funding and the desired cash flow are the key factors while making a decision.”Don’t bite off more than you can chew,”he says,with a note of caution.”If a person already has a house,then its ideal to invest in a plot in one of the locations in the suburbs.Growth is happening in the periphery of the city,”he says.A planned decision will then help a person invest in plots as a short term or medium term investment.
As published in Times of India, Times Property – December 2, 2012
The Madhya Kailash-Sholinganallur belt, along the Old Mahabalipuram Road’s Information Technology corridor, is witnessing, along with immense commercial growth, an incredible dearth of residential property. This is pitted against a strong demand for the same. ANIRUDH BELLE attempts to take a closer look
Within the next two years, according to studies conducted by Marg Properties Private Limited, the employment figure along the Old Mahabalipuram Road (OMR) is expected to grow from 1.60 lakh to a little more than three lakhs. The belt between Madhya Kailash and Sholinganallur, along the OMR, being the most concentrated phase of the Information Technology (IT) corridor, is witnessing an obvious over plus of demand for residential property. However, with just about 17 well-defined residential projects, the availability of residential units in the area barely corresponds with the shooting requirement for the same, bringing into picture a marked demand supply disparity.
“Till the beginning of 2005, OMR didn’t really boast of a plausible social infrastructure; there was not much of an incentive for developers to pursue largescale residential projects in the area,” says Sivaramakrishnan A S, Vice President, Residential Services, Jones Lang LaSalle (JLL), “The IT boom, between 2001 and 2007, encouraged IT firms from across the country, and the world, to set up office on this belt.” In addition, the Government of Tamil Nadu, in order to propel the growth of the IT sector in the region, increased the Floor Space Index (FSI) to around 3.75, roughly 1.5 times the prevailing value, for IT-related development projects on certain portions of the belt; the incentive to build commercial property augmented even further.
“From 2002, with IT projects dotting the belt between Madhya Kailash and Sholinganallur, the availability of land in the region started to rapidly deplete, thereby leading to a pronounced scarcity of the same,” he adds. The scarcity of land immediately translated into a visible escalation in its prices.
As a result, developers started facing marked impediments in supplying residential property to the region. “The exorbitant land prices have hiked the cost of pursuing residential projects and this has significantly discouraged most developers from supplying residential property in this belt,” says Ramakrishnan S, Chief Executive Officer, Marg Properties Private Limited. Also, the demand drivers in the belt consist primarily of the many IT and corporate professionals in the region. “Given that the price of land is high in this belt, those who plan to build residential units here are bound to sell it at equally high rates. Since these rates may not correspond with the price bracket that is being primarily demanded in the region, (between 30 and 75 lakhs), supplying adequately large residential units at affordable rates in the region will not yield a profitable outcome for the developer,” says N Ravichandran, Chairman, True Value Homes (TVH), who has a project called Svasthi on the Thoraipakkam region of the belt. Mehul Doshi, Director, Doshi Builders, the initiator of three more residential projects along the belt, adds, “As developers, if at all we manage to build residential units in this region, we have to cut down on the apartment sizes, thereby attempting to make the units slightly affordable to the bulk of our customers.”
The consequences of under-supply of residential property in the region are quite far reaching.
According to Marg Properties, there are just about 4,000 dwelling units in the belt between Madhya Kailash and Sholinganallur as opposed to a little less than a lakh of individuals, and their respective families, demanding residential property in the area. “The excess demand has caused the residential property prices in the belt to follow an approximated spectrum of values,” says Sivaramakrishnan, “The prices near Sholinganallur, which is further away from the city, are between 3,200 per sq ft and 3,500 per sq ft, roughly 4,000 per sq ft near Perungudi and can even go up to a bracket as high as between 9,500 per sq ft and 10,000 per sq ft near Madhya Kailash, which is closer to the city.” For instance, Prapancha, a residential project by Aishwarya Constructions at Thoraipakkam, sells its units at around 4,250 per sq ft.
Since the rampant demand for dwelling units between Madhya Kailash and Sholinganallur cannot be satiated, it has eventually spilled into areas beyond Sholinganallur, where the availability of land is adequate and where property developers receive an over-THE GREAT OMR PROPERTY DIVIDE
whelming incentive to supply residential property. As a result, depending upon the age of the project, the residential property rates in this region span between 2,500 per sq ft and 3,100 per sq ft. “With coastal regulations preventing development towards the extreme right of the Madhya Kailash-Sholinganallur belt due to the presence of the Buckingham Canal, and with low social infrastructure in regions towards its left, many developers have responded to the belt’s residential demands by building property in areas beyond Sholinganallur - like Semmencherry, Navalur and Siruseri,” says Ajit Chordia, Managing Director, Olympia Infrastructures. “The increase in residential development beyond Sholinganallur has really helped in boosting the region’s social infrastructure. Three schools – namely Hiranandani Upscale School, PSBB Millennium School and Bala Vidya Mandir - are planning to establish themselves in the area in the near future. In the realm of social infrastructure, multiplexes like the Riverside Mall, (initiated by Marg, and allied enterprises) for instance, are quickly sprouting in the region, making it a more independent and significant entity on the city’s map.”
Although it is unfortunate that the supply for residential property in the Madhya Kailash-Sholinganallur belt is not adequate to meet the consumer demand in the region, a seemingly satisfactory solution has been arrived at in areas beyond Sholinganallur. Moreover, the demand-supply mismatch has implicitly caused less developed areas on the OMR to drastically develop their infrastructure. “At the rate at which the property market is pacing in OMR, it is only a matter of a few years till it transforms itself into a developed adjunct of the city, just as Velachery did a few years ago,” says Sivaramakrishnan.
Property Times, Times of India 12 March 2011
RESIDENTIAL REAL ESTATE:
The outlook for Chennai’s residential property market remains positive in 2011. This is a stable market, and the prices have risen rationally in tandem with normal market trends. With the IT sector on the upswing and job security once again strong, Chennai’s residential real estate market will see accelerated demand in 2011.
So far this year, property pricing has improved by 20-25%% within city, by 10-15 % in OMR and by 1-5% in select pockets of GST and Sriperumbudur. Overall, 2011 is going to be year of optimism for residential real estate in Chennai.
We have witnessed preferred flat sizes reducing from 1700-2000 square feet to 800-1300 square feet over the last two years. While pricing stabilized in sync with the market, pricing gradation in projects themselves was more gradual, with 3-4% at the launch to 90% at the completion stage. This unlike the trends seen earlier, where price movement was more rapid and illogical. Year 2009 was the year of affordable housing in Chennai, with a number of projects being launched in Rs. 20-30 lakh band.
One major issue for residential real estate activity in Chennai has been the lack of social infrastructure in peripheral business districts (PBDs) even as housing in the central business districts remained unaffordable. The lack of social infrastructure in the PBDs is hurting both absorption and positive price movements.
COMMERCIAL REAL ESTATE:
2011 has already begun ushering in renewed interest in commercial office space in Chennai – especially from firms wishing to relocate their offices to better Grade A buildings. The expected fresh supply of commercial office space should bring about active absorption at the right rentals.
In terms of IT office space, OMR remains a favoured destination, with most of the absorption expected before the toll plaza because of easier and more cost-effective commuting. There will be greater demand for Grade A office spaces within the city, since there is a severe dearth of high quality office buildings in the central areas.
Attractive rentals will drive demand for office real estate in projects after the toll plaza. Vacancy levels will plateau our, and rentals will remain favourable to tenants through the third and fourth quarters of 2011.
Meanwhile, occupiers will continue their beeline to SEZs to capitalize on their benefits before the approaching STPI sunset clause. Projects closer to the key areas will be in demand, and great emphasis will be laid on operational facilities, rigorous adherence to construction timelines and the availability of incubation space.
Over the last couple of years, we have been observing a trend of relocation to peripheral business districts by corporate occupiers who want to gain rental advantages and avail of better facilities. There is now greater availability of smaller, older Grade B-C office spaces within the city, and there is an increasing drive towards rehabilitating older buildings.
Certain measures are required to augment commercial real estate activity in Chennai:
- A more transparent tracking system of the planned infrastructure
- A greater focus on upgrading the public transport systems to offset road traffic
- Assigning of specific zones for commercial, retail and residential use, and
- Ready availability of information on residential density in catchments to the public
RETAIL REAL ESTATE:
Chennai’s organized retail real estate market is definitely improving, with inquiries from major retailers on the ascent. Many new retailers are also planning to enter the Chennai market. The 2011 outlook remains bullish on retail real estate growth; however, supply remains a challenge.
The last couple of years have seen new retailers entering the Chennai market at reasonable real estate occupancy costs. The coming two years will see a spurt in the growth of standalone shopping centers and built-to-suit proposals.
Currently operational malls in Chennai:
- Spencer’s Plaza: 559000 sq ft
- Ampa Skywalk: 350000 sq ft
- Chennai Citi Centre: 325000 sq ft
- Express Avenue: 850000 sq ft
The proposed malls include:
- Forum Vijaya Mall: 700000 sq ft
- Marg Junction: approx. 550000 sq ft
- Market City: 1.2 million sq ft
- Spectrum: 180000 sq ft
- Ramee Mall: 180000 sq ft
It more entertainment, leisure and luxury at the MARG Junction. The mall, which is to be the first of its kind to come up at the strategic location at OMR – the IT corridor of Chennai, has announced its tie-up with the Shangri-La Hotels and Resorts, one of Asia’s leading luxury hotel groups.
It has signed a management contract with Riverside Infrastructure (India) Pvt. Ltd., a subsidiary of MARG, to operate Traders Hotel, Chennai, scheduled to open in early 2012 at MARG Junction.
Located in the middle of Old Mahabalipuram Road as part of the MARG Junction Mall, a multi-use complex, the hotel will be equidistant to both Madhya Kailash and Siruseri IT Park. The development will include a mall, office block and the 246-key hotel along with 52 service apartments. One unique feature of the complex is a perennial river flowing across the entire northern side of the mall, offering customers a view and respite during shopping.
“The addition of Traders Hotel, Chennai complements our portfolio of hotels in India - Shangri-La’s Eros Hotel, New Delhi; Shangri-La Hotel, Mumbai, due to open in 2011; and Shangri-La Hotel, Bangalore, scheduled to open in early 2012,” said Greg Dogan, Shangri-La’s President and Chief Executive Officer. “Traders caters to today’s business and leisure traveller, who is looking for simple, efficient, down to earth functionality presented with a smile.”
Commenting on the association, Mr. GRK Reddy, Chairman & Managing Director, MARG Ltd. said, “It gives me great pleasure to be associated with Shangri-La Hotels and Resorts. MARG Junction Mall was created with the purpose of providing world-class amenities to our valued customers and the addition of Traders Hotel, Chennai will add to the value quotient. It gives me great honour to bring this brand to the people of Chennai, and I strongly believe that the association will get stronger in the future.”
Guestrooms are designed to be modern and will reflect a classic yet contemporary style combined with local cultural influences. Wireless and broadband Internet access will be available in each room to meet the needs of business travellers. The hotel will provide four dining and entertaining outlets including a café, a speciality and an all-day dining restaurant as well as the lobby lounge for light refreshments. Meeting and banqueting facilities will offer over 2,236 square metres of function space. A health club, spa with beauty salon and 25-metre outdoor pool will complete the public facilities.
Times of India epaper, 27 November 2010