Real estate in Chennai

The residential market in India is typically an occupier or end user driven market rather than an investor driven market. Most developers confirm that majority of their sales happen to end users and not investors.


The perception amongst a few real estate investors in India that prices of real estate have never declined is false. The prices in many key real estate markets across the country fell by 20 to 25% from 1997 to 2002. It has also been noticed that prices have taken a beating during the 1975 period and again during 1982 across various markets. Real estate investors typically look at rental returns and capital appreciation. Therefore given the current sluggish market conditions, high stamp duty and high property taxes, a real estate investor who is not deriving any rental returns from his property is holding a Non Performing Asset in his portfolio.

As the number of individuals interested in investing in residential and commercial real estate is growing in India, the key to success is planning the deal from start to finish before making an offer. A number of individual investors fail in their real estate investment decisions, as they do not plan their deal from start to finish when they make their offer. Typically investors go out in search of property which is cheap and put up an offer on the same. Once the offer is accepted, he is unclear as to how he may maximise his returns from the property, the various options available to him in order to achieve the same, as well as resolve unexpected problems that may arise in future. Some of the ways in which an investor can maximize returns from his property is to value add to it in an innovative manner. Maybe add a bit of furnishing, install air-conditioning, and cordon off an area for parking space. If he is planning to rent out the place, all these will significantly help him raise the rent. Also it’s important for the investor to anticipate future hassles. For eg. Corrosion if he is living by the sea. Maintenance is the one of the key areas an investor has to keep track of when it comes to any property. Only this can retain and appreciate the value of the property, which has been acquired, else it will depreciate.

Most of us are worried on how to get started as a real estate investor. We feel that we do not have the necessary time nor the expertise to evaluate real estate investment options. The success lies in identifying atleast two hours in a week to analyze the various opportunities by driving around the neighbourhoods, learning market values and making appropriate offers. Another starting trouble which most of us have is the fear of having to deal face-to-face with owners. This may be overcome by mailing letters to them and then waiting for the owners to call, as then clearly the investor is being sought by the owner thereby giving the former an upper hand. It will also be worthwhile for the investor to review relevant articles and gather information on deals in the market at regular intervals.

Most investors ignore the fact that refurbishing real estate increases the value of the same. Investors should always remember to keep enough money in the bank to cover atleast six months of expenses before they buy a rental property. This cushion will protect him from long-term vacancies, an eviction, or unexpected expenses.

Investors should always take time to consider what type of property they would ideally like to own and preferably adhere to only those areas they are comfortable with. For eg. Service apartments are a popular trend and could be a lucrative form of investment that requires some expenditure initially. It helps investors not to be intimidated with the presence of many investors chasing a few investment grade properties, for instance. The key here is to break out from the pack, and try structuring a deal in an innovative way. Checking out Internet sources, other information sources like real estate magazines, associates, one’s social network and legal consultants can help them evaluate the property trends in the market and take a call on the kind of property to invest.

An investor should never be afraid to make an offer on the property. If he has spent enough time pre-qualifying the property and looking at it, then he should go ahead and make the offer, even if the seller is asking much more than what the investor wants to pay. He should never be afraid of the seller being offended by the price or terms quoted. He should let the seller know why the offer is what it is, highlight if the property needs any repairs or that it is located in a bad area etc.

Failure in investing can happen due to not understanding how to invest or not having a sound understanding of real estate. This is, not to say that the investor needs to know every technique and every thing there is about real estate investing before he gets started. However, it is important to know one or two investing techniques and master them rather than trying to master them all. The investor should pick out one or two ways to find and buy real estate and put them to work and he should remember to stay focused on these techniques.

To sum it up, every investor should keep in mind the areas dealt with so far and also look out for growth opportunities available in the specific corridor where he is investing, potential rental returns and the exposure to risk from various types of property.