Real estate in Chennai

Chennai, as it is known today is one of the four major metropolises in the country. The pace at which the obscure fishing village of Madraspatnam has grown and developed into one of the fastest developing cities in the country namely, Madras, is truly amazing.

When talking about Madras, pictures of the Tidal Park flash alongside priests clad in traditional attire, astride the latest two wheeler with a mobile phone tucked in at the waist spring up to mind as spontaneously as a silky soft idli that slides down your throat at an ancient eatery and a place where authentic Italian pizzas are available at almost every street corner. Yes, Chennai paints the perfect picture of harmonious co-existence of cultures. Examples of it are evident in every sphere of the life in the city. Be it architecture, food, fashion, lifestyle or mind-sets.

Another striking element about this city is the fact that it has retained an unadulterated version of its socio-cultural and religious characteristics despite strong European (especially British) influence. The capital city of Tamilnadu had always been a political and cultural hotspot. It has also been the hub of economic activity because of its natural geographical advantages. Ports and harbours made Chennai a great place for conducting and also controlling sea trade (which was the most popular form of trading in the years gone by).

Chennai today is a thriving, pulsating metropolis with giant flyovers, high-rises and some of India's most important industrial houses have set up businesses here. The city has a very heterogeneous mix of architectural styles, ranging from the famous temple architecture to its colonial counterparts seen mainly in government offices. Then there are magnificent examples of modern architecture, which can be seen in the millions of malls, hotels and corporate buildings that are spread across the length and breadth of the city.

The industrial area is located primarily in the northern part of the city whereas; central Chennai is the commercial hub. The southern and western parts of the city which were predominantly residential areas even in the recent past are expanding rapidly to accommodate commercial spaces- especially, the Information Technology industry and financial companies.

The colonial legacy of Chennai is apparent in the vicinity of the Chennai port. Georgetown, on the other hand which is just a stone throw away is a bustling commercial centre, but its architecture is significantly different from areas closer to the Fort, with narrower roads and tightly packed buildings. Nothing much has changed in this part of the city.

Areas like Ashok Nagar, KK Nagar and Anna Nagar which are situated in the western stretch of the city and several areas south of the Adyar River, including Kotturpuram Besant Nagar and Adyar itself, started developing only in the 1960’s. Many of these places which were remote suburbs have developed into some of the prime areas in the city today.

The industrial growth in the state (mainly automobile and information technology) has led to an increase in demand for both commercial and residential land. In fact, this is the main reason for the expansion of the city.

More people, more jobs and hence more prosperity and better lifestyles. These are the reasons that have contributed significantly to the growth and expansion of the city. More importantly, to the flourishing of the real estate industry.

Today, the skyline of Chennai looks very different from what it was even a couple of years ago. Beautiful independent houses with well kept gardens have made way for high-rises (some of which are architectural marvels in their own right), Spencer Plaza which was the first shopping mall in the city has found several companions or may be competitions, the I.T and hospitality industry have engulfed large areas of the available land. In other words these changes are a perfect illustration of the fact that “the old order changeth yielding place to new” and since change is the only permanent thing in life, Chennai is definitely headed in the right direction.

Chennai’s skyline is fast changing. Today there are more shopping malls, hotels, fly overs and commercial buldings in Chennai than ever before. The city has grown and expanded- embracing what was once known as the outskirts. With industry booming and the demand for real estate escalating the city will continue to grow expand!

1.For Salaried Individuals

Latest salary slip showing statutory deductions AND Form 16 (Declaration from the employer giving the details of income and deductions, duly signed by an authorised signatory of the Company) OR Latest acknowledged IT Returns AND Bank statements for the last 3 months

2.Self-employed Individuals / Proprietor

Computation of income for the last 2 years certified by a C.A OR P&L and Balance Sheet for the last 2 years certified by a C.A. AND Copies of acknowledged IT Returns for the last 2 years AND Bank statements for the last 6 months

3.Partnerships

Computation of income for the last 2 years certified by a C.A. OR P&L and Balance Sheet for the last 2 years certified by a C.A. OR Copies of acknowledged IT Returns for the last 2 years AND Partnership Deed, Letter of Authority, Bank statements for the last 6 months, Proof of office

4.Private Limited Companies

Computation of income for the last 3 years certified by a C.A., P&L and Balance Sheet for the last 3 years certified by a C.A., Copies of acknowledged IT Returns for the last 3 years, Memorandum and Articles of Association, BoardResolution, Bank statements for the last 6 months, Authority letter from all Directors to accompany the application form with photographs of authorised signatories if not specified in the board resolution, Proof of office

5. Documents required for (NRIs)

Salaried NRI Applicants

• Copy of valid passport showing VISA stamps
• Copy of valid visa / work permit / equivalent document supporting the NRI status of the proposed account holder
• Latest contract copy evidencing Salary / Salary Certificate / Wage Slips
• Overseas Bank A/C for the last 3 months showing salary credits

Self Employed NRI Applicants

• Trade license or equivalent document
• 6 months overseas bank account statement and NRE/ NRO account
• Computation of income, P&L account and B/Sheet for last 3 years certified by the C.A. / CPA or any other relevant authority as the case may be (or equivalent company accounts)
• Passport copy with valid visa stamp
• Brief profile of the applicant and business

India’s realty mart is on a high growth path with a market size of about $15 billion and currently growing at a pace of about 30 per cent annually. The real estate market is projected to touch US$50 billion by the year 2008. Besides FDI inflow, corporates that turned sick a few years ago and sitting on large tracts of land are now bouncing back with renewed vigour on seeing the real estate prices reaching dizzying heights.

India’s major cities are gearing up to face up the increase in demand due to IT and ITES sector growth supplementing both commercial and residential property growth. The secondary cities are getting a facelift at last due to their proximity to big cities and improved connectivity levels. It has been estimated that IT sector alone requires over 66 million sq ft commercial space in the next five years. According to Nasscom-McKinsey report, the size of the IT business comprising consulting, software solutions and research and development is expected to be $150 billion by 2010 compared with $18.4 billion in 2005. Significantly these estimates are considered conservative and faster innovation could spur further growth.

The report has projected BPO segment growth from $11.6 billion to $150 billion over the next five years. The BPO boom has rekindled hopes for large-scale residential property demand in major cities. So much so, smaller projects are insufficient to meet the growing residential property demand.

Though the government has reduced the area for development of townships from 100 acres to 25 acres, entrynorms at state level are still saddled with hiccups like unclear land titles, reluctance to introduce single window clearance, and lack of support to speed up infrastructure development. There is no denying that the growing demand calls for more townships to decongest the city and accommodate housing demand in major cities across the country.

Survey findings

According to Express Estates survey of 10 cities, average residential property prices rose by 24.2 per cent during 2005 in Delhi, Mumbai, Kolkata, Bangalore, Chennai, Hyderabad, Chandigarh, Jaipur, Goa and Pune. The roller coaster ride goes back to 2001 when prices rose just 10.1 per cent, fell 0.4 per cent in 2002 and then rose marginally by 6.3 per cent in 2003. The year 2004 was spectacular when prices rose 23.3 per cent compounding to 54 per cent in just two years. In fact over the past three years, prices have risen on an average by 17.3 per cent.


The fastest growth was recorded in cities like Delhi (28.6 per cent per annum), Hyderabad (24 per cent) and Kolkata (23 per cent). At the bottom of the pile are Chennai (5.8 per cent), Jaipur (6 per cent) and Goa (12.4 per cent). The survey projects the future growth in 10 cities. The IT and ITES sector continues to be instrumental in driving the real estate growth. On an average, commercial property prices rose by 15.5 per cent during last year, lagging the residential property market by 8.8 percentage points.

Yet another survey on IT and ITES companies by Trammell Crow Meghraj, international property consultants, revealed that Bangalore was numero uno destination for IT/ITES companies in the country followed by Mumbai. Hyderabad and Pune steamed ahead of Delhi with Chennai and Kolkata bringing up the rear. The survey across the country was aimed at understanding the preferential locations on varied real estate parameters. The survey also threw some interesting perceptions about Chennai and Pune. While perceptions about Pune matched expectations, Chennai offered more value than perceived to be. And Hyderabad appeared to have a better perception than what it is offering in reality.

What is the outlook for 2006 and beyond? While residential property prices will continue to rise in 2006, commercial property spaces in select cities are expected to go up by 20 per cent in Hyderabad, 13-17 per cent in Chennai, 13 per cent in Delhi, 10-12 per cent in Kolkata and 7-10 per cent in Chandigardh, according to the survey.

Residential property scenario

The residential property market is 80 per cent of the total real estate market in India and the gap between demand and supply is estimated at 41 billion sq ft. Considering that the office market is expected to increase to 66 million sq ft over the next five years, the paramount need to proportionately increase the residential supply need not be overstressed. Is an irony that major cities are ill equipped to handle such a large requirement within so short a time. Even though FDI in integrated township projects had been allowed under automatic route, not much impact has been felt across the country.

Global construction giants have already entered into strategic partnership in select cities for township development. There are still impediments at the state level with regard to zoning regulations, absence of single window clearance, rigid floor space index rules and prolonged delay in giving planning permission. Infrastructure is yet another major hurdle in cities like Bangalore, Hyderabad, Lucknow, Delhi, Mumbai and Chennai where unprecedented growth is being witnessed in real estate development.

Lower interest rates, easy availability of housing finance, escalating salaries and job prospects have been lending buoyancy to the residential sector. The net yields (after accounting for all outgoings) on residential property are currently at 4-6 per cent per annum. However, these investments have benefited from the improving residential capital values. As such, investors can count on potential capital gains to improve their overall returns. Capital values in the residential sector have risen by about 25-40 per cent per annum in the last 15-18 months.

Commercial property scenario

The increase in demand from the IT / ITES and BPO sector has led to approximately 20-40% increase in capital values for office space in the last 12-15 months across major metros, says Knight Frank India research. Grade-A office property net yields have come down from 12-14 per cent in 2003 and currently average around 10.5-11 per cent per annum. The fall in yields has resulted from decreasing interest rates and increasing appetite from investors. This has in turn resulted from abundant liquidity options available coupled with the acceptability of real estate as an conventional class of asset.

Retail scenario

Indian retail sector is a $210 billion pie, according to a recent survey by PricewaterhouseCoopers, which is witnessing a healthy pace of five per cent per annum. Of this, organised retail now accounts for only three per cent but is expected to growth to 10 per cent by 2010. The ongoing retail upsurge is expected to translate into 8 million new jobs over a period of five to six years. Though FDI in retail is still a far cry, Prime Minister Manmohan Singh’s assurance for a major decision in six months offers scope for opening up the sector to FDI. As rightly pointed by out by CII National Retailing Committee member Krish Iyer, organised retailing in India is expected to touch a whopping Rs 1,10,000 crore by 2010. If it were to happen, it would need about Rs 20,000 crore investments.

According to Knight Frank India research, the retail market in India has been growing due to increasing demand from retailers, higher disposable incomes and dearth of quality space as on date. Though the net yields on retail property have registered a fall from 10-12 per cent per annum reported earlier to 9-10.5 per cent per annum. Currently, the capital appreciation in this sector is close to 20-35 per cent per annum. However, the risks associated with this sector are higher as retailers are prone to cyclical changes typical of a business cycle. Changing consumer psychographics combined with increasing disposable incomes will ensure further growth of the retail sector in India.

Outlook

India’s population is likely to cross 1.3 billion mark by 2020 and what is more, urban population is set to grow by 85 million over 10 years. The demand for dwelling units will grow to 90 million by 2020, according to ASSOCHAM report on real estate development, which in turn would require a minimum investment of $890 billion (Rs 40,05,000 crore). In such a scenario, the paramount need is to initiate a multipronged strategy to tackle the crucial issues plaguing the housing sector like reforms in legislation, infrastructure development and removal of barriers to ensure smooth implementation of projects.

There is no denying that with the liberalisation of FDI in real estate development and the entry of global players enormously aided by realty funds, real estate development will scale a new high in the coming years. And Indian consumers will have access to better product quality, quicker turnaround time of projects and more value for money. For investors of course, the search for higher returns will continue to accelerate the growing volumes across the Indian cities, driving improvements in market transparency and liquidity. After all for every rupee invested in housing, Re 0.78 is added to the GDP of the country.

Home ownership trends

The Indian consumer is upgrading from basic apartments of 900 – 1,000 sq ft to an average of 1,500 sq ft
apartments, with high quality constructions, leisure amenities and services.
The average age of home ownership has come down from over 40 years to 32 years.
A number of business houses are investing in residential real estate.
Over the past four years, the home loan market has been growing at a compound annual growth rate of 40 per
cent.
Over $11 billion was disbursed in 2004 as home loans; the figure is projected to grow to $15 billion in 2005.
The furniture, furnishings and home products market is estimated at $5 billion. It is growing at 10-12 per cent a

Owning a house is an important thing in one’s life. However, one needs to be careful while buying a property to avoid falling into legal hassles. Before buying a land, a number of checks need to be done to confirm that the land has a clear and marketable title. The legal status of the land is one of the first issues that should be addressed before confirming a property.

Title deeds

The first step is to see the title deed of the land, which you are going to buy.

* Confirm whether the land is in the name of the seller and that the full right to sell the land lies with only him and no other person.
* It is better to get the original deed examined by a lawyer. This is to check details like whether the seller has permitted any entry/access to others through this land and whether any other fact has been suppressed/left undisclosed by the owner of the land.
* Along with the title deed, you can also demand to see the previous deeds of the land available with the seller.
* In some cases, more than one person may own the land. So before registering, check if there is more than one owner, and if there is, get release certificate from the other people involved.

Conveyance Deed or Sale Deed

A sale agreement is a document by which the title of property is conveyed by the seller to the purchaser. Here, conveyance is the act of transferring ownership of the property from a seller to the buyer. This document will help you ascertain whether the property, which you are buying, is on land belonging to the society/ builder/development authority in which the property is located.

Tax receipt and bills

Property taxes, which are due to the government or municipality, are a first charge on the property and, therefore, enquiries must next be made in government and municipal offices to ascertain whether all taxes have been paid up to date.

* Inspect whether the latest tax paid receipts have been paid.
* Enquire with various departments of the municipality to ascertain whether any notices or requisitions relating to the property are outstanding.
* If you are buying a house along with the property, then the house tax receipt should also be checked.
* Also ensure that the electricity and water bills are up-to-date and if there any is balance payment to be made, ensure that it is made by the seller.

Encumbrance Certificate

Before buying any land or house, it is important to confirm that the land does not have any legal dues.

* Obtain a certificate called encumbrance from the sub registrar office where the deed has been registered, stating that the said land does not have any legal dues and complaints.
* You can check the encumbrance certificate for the past thirteen years or could demand verify the 30 years encumbrance certificate.

Pledged land

Some people may have taken loan from the bank by pledging their land.

* Ensure that the seller has paid back all the amounts due.
* Ask for a release certificate from the bank, which is necessary to release all the debts over the land legally.

Measuring the land

It is advisable to measure the land before registering the land in your name. Take the help of a recognized surveyor to ensure that the measurements of the plot and its borders are accurate. You could also take the survey sketch of the land from the survey department and compare for accuracy.

Purchasing land from NRI landowners

A person staying abroad can also sell his land in India by giving a Power of Attorney to a third person authorizing him the right to sell the land on his behalf. In such cases, the power of attorney should be witnessed and duly signed by an officer in the Indian embassy in his province.

Power Of Attorney

Power of Attorney is the power given to an agent by the principal to execute several acts and deeds for and on behalf of the principal. Stamp duty payable depends on the nature of power given.

When 'power' is given in respect of a number of acts in a number of transactions it is called General Power of Attorney. It is always advisable to hold a registered GPA while registering an immovable property in order to give better title to the property.

When 'power' is given in respect of a particular act pertaining to one transaction it is called Special Power of Attorney.

Agreement


Once all the matters, financial/otherwise are settled between the parties, it is better to give an advance and write an agreement. This ensures that the owner does not change his word regarding the cost as well as make a sale to someone else who offers more money.

* The agreement should be written in Rs.50 stamp paper.
* The agreement should state the actual cost, the advance amount, the time span within which the actual sale should take place and how to proceed in case of any default from either parties, to cover the loss.
* The agreement can be prepared by a lawyer and should be signed by both the parties and two witnesses.
* After signing the agreement if one of the parties makes a default, the other party can take legal action against him.

Stamp Duty


It is tax, similar to sales tax and income tax collected by the Government, and must be paid in full and on time.
* A stamp duty paid is considered a legal document and such gets evidentiary value and is admitted as evidence in courts.
* Stamp duty is a State subject and hence would vary from state to state.
* When an agreement is to be stamped, it needs to be unsigned and undated one may execute the agreement only after the Stamp Office affixes stamps on the agreement.

Registration

Registration is the process of recording a copy of a document, transferring the title in immovable property to the office of the Registrar. It acts as proof that a transaction has taken place.

* A draft should be prepared before actually writing the document in stamp paper. Registration is done after the parties execute the document.
* The agreement should be registered with the Sub-Registrar of Assurance under the provisions of the Indian Registration Act, 1908 within four months from the date of execution of the document.
* Make sure all the details mentioned are accurate.
* Original title deed, Previous deeds, Property/House Tax receipts, etc plus two witnesses are needed for registering the property.
* The expenses involved during registration include Stamp Duty, registration fees, Document writers/ lawyers fees etc.
* Make sure that the deed is registered within the time limit mentioned in the agreement.
* Stamp duty should be paid prior to the Registration.

Changing the title in Village office

The whole legal procedure of buying the property will be complete only if the new owners name is added in the village office records. An application can be made along with the copy of the registered deed to the Village office to get this done.
Purchase of property is a lifetime investment. A lot of care is needed from the beginning- right from site seeing till the registration of the land. Ensure that the documents of title are scrutinised for marketability with due care by an experienced advocate.

Check whether the details of approved plan have been displayed at the site.
Check whether the flat has been constructed as per the approved plan.
Check whether the promoter has a right to transfer the undivided shares of land.
Verify whether the entire undivided shares of land have been transferred by the land owner/promoter/power of attorney to you.
Check whether the completion certificate issued by the CMDA has been obtained after the completion of the building. If you have any further clarifications regarding purchase of plot/flat, kindly contact the counselling counter at the CMDA

Points to be considered before buying individual plot and construction of a residential building:

Check whether the seller has a right over the property.
Check whether the layout has been approved by the CMDA. (Chennai Metropolitan Development Authority) and the local body. (Copy of approved layout can be obtained from the CMDA for a nominal fee.)
Check whether the roads and park area have been handed over to the local body through a gift deed.
Check whether the abutting road of the plot has been maintained by the local body or has been handed over to the local body.
Verify whether the plan has been prepared according to the development control rules.

Your wish to get the keys for your dream house will become a bit more difficult now.


After ICICI bank, HDFC bank has also decided to hike the home loan rates by 50 bps by next week. HDFC Bank clarified that 1 per cent increase in rates will not impact any demand for housing loans. The bank is also expected to hike rates by 1st April.


“We have a unique situation now. It is the year-end for everyone and there is a liquidity crunch. But the government and the RBI have very clearly said that they are taking steps to improve liquidity in the system. If liquidity improves in the system and if more resources are available, then again one can bring rates down, says HDFC Chairman Deepak Parekh in an interview.

“The dynamics of floating interest rates is, it goes up and also comes down. So, I don't think that we can assume that rates will keep going up just because they have gone up once.”


SBI has increased its home loan rates by 50 to 75 bps. ICICI Bank had raised its floating reference rate by 50 basis point to 9.25 per cent.

To get a great property in India, you need to know the rules.

1.Which categories of persons can purchase immoveable property in India?

Only Non Resident Indians and Persons of Indian Origin are allowed to purchase immoveable property in India

2.What is the definition of Person of Indian origin?

PIO means an Individual who at any time held an Indian passport or who or whose parents or grand-parents were at any point citizens if India at any point in time. However citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan are not eligible to be called PIOs even if they satisfy the above conditions.

3.Is there any restriction on the type of property that can be purchased?

No. NRIs/PIOs can purchase both commercial and residential properties in India

4.How many properties can the NRIs/PIOs purchase?

There are no restrictions on the number of properties that can be purchased.

5.Do NRIs/PIOs have to file any declaration / take permission of the Reserve Bank of India for the purchase of immoveable property?

No. There is no declaration / return to be submitted to the submitted to the Reserve bank of India either before or after the purchase.

6.Can the NRI/PIO take a loan from an Indian bank in rupees for purchase of immoveable property in India?

Yes.

7.Can the NRI/PIO/foreign citizen of non-Indian origin purchase agricultural land, plantation or farm house in India

No.

8.Can the NRI/PIO give the property on rent ?

Yes. The rental income can be credited to the NRE/NRO Account and even remitted out of India.

9.Can foreign citizens of non-Indian origin purchase property in India?

No. foreign citizens i.e. individuals who are neither NRIs nor PIOs cannot purchase immoveable property in India.


10. Can foreign citizens of non-Indian origin take a property on lease in India?

Yes. The foreign citizens of non-India origin can take a property on lease without permission of the RBI if the least period does not exceed 5 years.

The real estate scenario is looking quite upbeat. Real estate consultants are forecasting rising rates and home owners are definitely a pleased bunch.

The stratospheric rise in real estate prices over the last year may compare closely with the stock market indices which are at their all-time highs. The analogy seems perfect given the difficulty involved in picking out stocks that could still yield good returns at these rarefied levels.

Real estate consultants have apprehensions of an escalation of prices, but unlike stock market players they say there are still some multi-bagger locations that may yield bumper returns to investors.

Then, of course, there are the momentum plays whose value has appreciated a great deal in the last few years. Here are a few samples -- suburban Chennai, Mumbai, Bangalore, Pune, Gurgaon and Hyderabad.


We asked real estate consultants to choose five best options in real estate to put your money in and suggest the best investment options for the following budgets -- Rs 10 lakh, Rs 25 lakh and Rs 50 lakh. They have chosen Chennai as the Southern superstar

The various projects announced will make Chennai an attractive destination. The software boom and the arrival of expats have enhanced real estate prices in a major way. The government is promoting the area between Tidel Park and Kelambakkam as a software corridor and the area connecting Sriperumbudur and Singaperumal Kovil as the Industrial Corrdior

As a result, real estate prices have doubled in these areas. Prices are going up in South Chennai because that is the most preferred locality among expats. Most companies feel that Chennai offers excellent manpower, particularly in the software industry, which compares better than that in Hyderabad and Bangalore

Rising gold prices and the highs and lows of the Indian stock markets has changed the perception of upper and middle-class Indians vis-à-vis their investment value. Increasingly, the middle class is looking favourably on investing in a second home. A new trend that is responsible for altering investment opportunities and adding buoyancy to the Indian real estate market.

The ability to buy a second home is being viewed as a measure of job confidence, an increase in salaries and growth in income. As larger homes become affordable due to dual incomes and salary increases, low interest home loans, more and more people are buying first or second homes, houses that are not only bigger but in a more upscale area. While moving into the second home, first homes are being retained as rental property or a form of immovable though safe and reliable investment. India’s economic boom has given the middle-class job confidence and a confidence in the ability to pay off first house loans while going in for a second loan. In a smart move, rental income from first homes is being used to pay off the estimated monthly instalments (EMI) on the second home, an asset without a tax liability.

As India performs well on the economic scale, and salaries double at a rapid pace, increasingly, people are buying second homes to get away from the mundane routine of their lives. People are busy snapping up real estate deals in Mahabaleshwar, Haridwar, Dehra Dun, Vrindavan, Rishikesh, Khandala and Lonavala for second or leisure homes. Hitherto, an unheard of possibility for middle-class Indians, a sure sign that India is fast emerging out of the economic poverty that colonial rule brought the country.

And, as multinationals, NRIs set up base in India, they find real estate and rental properties come at a relatively cheaper price in India than abroad. This has caused a slew of foreign developers to enter the Indian real estate market looking for a share in the profits. A burgeoning population, the break down of the joint family system, a strident demand for additional housing will further fuel the surge in real estate sale prices.

For those who are listening, Indian or NRI, it makes good sense to invest in a second home while the bank loan interest rates are low and property prices in India still have a sustainable shock value.