Real estate in Chennai

It is raining investments in the Indian real estate sector. From foreign and domestic funds, banks and HNIs, everyone is queuing up for a piece of the expanding Indian real estate pie.
The foreign direct investment in the sector alone is expected to be nearly 16 billion dollars over the next five to six years. The newest entrants into the sector are the ultra conservative pension funds from the US that have been eyeing the steadily rising returns the sector has been offering.

On the other side, real estate developers all over the country are gung ho about new projects. From Special Economic Zones and townships with high class luxury apartments priced at Rupees 1 lakh per sq ft and swanky commercial office spaces to IT parks and mega malls, the Indian realtor sweetest dreams are coming true.

US-based Warburg Pincus, Blackstone Group, Broadstreet, Morgan Stanley Real Estate Fund (MSREF), California Public Employees' Retirement System (CalPERS), Hines, Tishman Speyer and JP Morgan Partners are keen to invest in India.

Warren Buffet's Berkshire Hathway is also said to be interested. A group of NRIs has raised $150 million under the Indian Real Estate Opportunities Fund for projects in India. Nearly $3 billion will be available for investment in Indian real estate over the next 15-month period with a slew of joint ventures with internationals funds and developers on the anvil.

Most investible funds are expected to come from North American investors, European real estate funds and multinational developers from the Asia Pacific region who have been seeking opportunities in India

Vasthushasthra facilities the development of friendly relations between human beings and the invisible, infinite and incomprehensible forces by accommadating the five elements of nature in buildings.

Our forefathers had all along known that their well-being was determined by their living in harmony with nature. They believed that the universe was determined by the five elements, the Panchabuthas, of nature - namely, earth, ether, fire, air and water. Hence, whatever they did or created, they endeavoured at maintaining the harmony with nature. So was developed many sciences, one among them being Vasthushasthra.

Vasthushasthra is defined as a science which enables human beings to develop friendly relations with the invisible, infinite and incomprehensible forces by accommodating the five elements of nature in buildings. The sciences has been in practice from the Vedic period (for over 5,000 years).

Accoding to Vasthushasthra, the Vasthu or Bhoomi, the Earth, while revolving round the sun produces electric current, and the outer space has positive and negative ions. It also says that the pumping of blood by the human heart and breathing in the 'inner space' of the individuals is because of energy.

Vasthu says that the three rhythms are not always in consonance. And its attempt is to create consonance between them, and thus create harmony and well-being.

The science says the universe and the human body are made of panchabuthas, which carries energy. The volume of these energy levels remains same even after travelling through structures.Vasthushasthra lays emphasis on the sun which is the source of one of the five panchabuthas - fire. The ultraviolet rays of the sun help the body produce vitamin D, which is directly absorbed by the blood. On the other hand, the infra red rays of the sun is harmful to health. The ultraviolet rays are more between 4 am and 6 am. Which is why, says Vasthushasthra, that more space should be allocated in the eastern side of the house for more ultraviolet rays. The evening sun (between 3.30 pm and 5.30 pm) carries more infra red rays, and so, the western side should have less space to avoid its ill-effects.

On the basis of the solar energy, the whole year is divided into two parts - the Uthrayanam and Dakshnayanam. Uthrayanam period is between December 22 and June 20 and Dakshnayanam is between June 21 and December 21.

During Uthrayanam the sun moves towards north, and has more energy. Hence, Vasthushasthra advises the allocation of more space in the northern side.

Water is also given consideration in the scheme of things. Vasthushasthra believes that all water bodies, whether stagnant or flowing, resonate bio-electro magnetic energy, which travels into the surrounding areas in the north, north-east and east directions. The current supposedly helps human beings in rejuvenating the blood stream in the body and thus preventing it from decay.

The next important element, as per the ancient science, is Vayu (air). The oxygen required for life on earth comes from plants and trees. Vasthushasthra advises that tall trees should be grown in the southern and western side of the house because the bio-electro magnetic field is abundantly available in the north-east, east and northern sides.

Earth, the fifth element, has a magnetic field in the south-north direction. Its gravitational force acts on the living and lifeless objects. Both these again, claims Vasthushasthra, affects human being.

Vasthushasthra claims that man-made structure like homes, industries and commercial complexes have more impact on their daily life, as the bio-electro magnetic energy from the atmosphere, in the form of successive spirals, enters the bodies through such structure.

The writer is a Coimbatore-based Vasthu consultant.

For details contact :
T. NATCHIMUTHU B.Com., C.A.I.I.B.,
VASTHU CONSULTANT
"SENTHIL BHAVAN",
34,Sri Balaji Nagar,
Ramanathapuram,
Coimbatore - 641 045,
Tamilnadu

Phone : 314779, Cell : 98422 02779,
e-mail: natch_vasthu@yahoo.com

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.

Countless buyers and sellers put in innumerable hours charily probing properties or preparing their homes for sale. Even if you’re not an experienced negotiator, there are steps you can take to improve results whether you’re buying or selling property. Negotiation doesn’t need to be a confrontational process if you set priorities, plan ahead and stay focused on issues, not personalities.

By far the largest expense related to traditional real estate transactions is the agent/brokers’ commission, and independent buyers and sellers should take advantage of this fact. Without the overhead expenses of a 5-6 percent commission, both buyer and seller have a little more flexibility to come to an agreement that’s acceptable to both parties. Here are some negotiation tips for independent buyers and sellers.

Seller negotiating instructions:

1) Set levelheaded priorities before commencing.

When selling, be sure to outline realistic goals before negotiations begin. Expect to have very different negotiations and their results from the price you originally determined for selling your house. If your aim is to sell the property inside 30 days

2) Eventually, the marketplace sets the price.

If you make your house’s price very high then it may sit on the market, becoming less enticing to buyers (some sources estimate a monthly decline of 1.5 percent). Contrarily , if you price it very lowly then you get less room to negotiate and may lose money eventually.

3) Take inventory to take advantage.

Characteristically, property sales include anything that’s installed or built in to the home. If you’ve got appliances, furniture or fixtures you’re willing to part with, you may be able to entice prospective buyers by counting them in the deal.

Buyer negotiating guidelines:

1) Fix your credit

A grand approach to brace up your case as a purchaser is to display superb credit. The time to test out credit is well before talks commence so you can square away problems.

2) Procure pre-sanctioned, not simply pre-qualified

Pre-sanction is another mode to display your buying prowess as it permits you to exhibit a probable trader that your lender is willing to grant you a loan. Numerous sellers will opt for a lower offer from a pre-approved buyer above a higher one from one who hasn’t been pre-approved.

3) Search for vistas in addition to price.

Though self-governing sellers can avoid some or all commission costs, there are still other fees that might pertain: property and termite check, escrow or attorney’s fees, a title search, insurance costs and pertinent taxes.

4) Be Primed to Conciliation.

Negotiating with a provoking “win-at-all-cost” mindset is dubious to confer encouraging consequences. Countless pros who teach negotiating put a more pragmatic aim is to hit upon a reciprocally advantageous resolution in which both parties must “win.”

5) Back up your offer

When offering to buy a property, you don’t have to explain how you arrived at a specific dollar amount. But you may do better in dialogue if you have some objective basis, such as examining comparable sales.

Ever wondered how those traffic congestions could be eased? Well there is no real solution with an estimated 750 new vehicles being registered every day in the city. In such a scenario reaching your workplace on time becomes of paramount importance as stress and congestion make it difficult to access the luxuries of commercial success.

Large spaces for luxurious amenities and leisure zones are difficult to come by in the city center. Integrated townships could be the answer to relieve the intense pressure of traffic congestion and prolonged commuting time in urban areas. In a township, scientific planning makes it possible to bring together a host of developments seamlessly.

This in turn makes it convenient for residents to access a variety of amenities and services, without the difficulties of distance and long commuting time. Townships come in as spaces where convenience beats stress. It is said that Singapore is a role model for building integrated township projects where every service can be accessible in 5–10 minutes walking distance within the area.

The concept of integrated township has now taken center stage due to government's liberalised investment policy allowing foreign companies to invest 100 per cent in real estate development under the automatic route. This could spell success to planned development and change the way of community living across the major cities in the country.

The unabated growth of the Indian IT sector is having positive effects on various sectors and real estate is no exception. As the industry grows and spreads across various cities and towns, demand for space has rocketed. Apart from Indian majors like Wipro, Satyam and Infosys, even global majors like IBM and Dell have joined in the quest for property space.

Development of SEZs, IT parks and integrated IT townships are what the industry is focusing on. Infosys Technologies plans to set up a 50-acre SEZ in Mysore, and has also been allotted another 311 acres of land in Mangalore for the same. Wipro currently has 2.1 million sq ft office space at its ten development centres and plans to increase the space to 4.1 million sq ft office space next fiscal. Real estate developers have joined the IT companies in developing IT parks and integrated IT townships. Recently, the IT sector attracted 49 applications for setting up SEZs, including Mahindra Gesco for Jaipur, MIDC for Pune, Ansal IT City and Parks Ltd for Greater Noida and Satyam Computer Services Ltd for Thotlakonda in Visakhapatnam and for two projects in Hyderabad.

It is estimated that by 2010, the IT sector will employ an additional workforce of about 1 million workers near five tier 1 cities, and about 600,000 workers across other towns. This increase in workforce and operations necessitates creating technology communities and hence the race for space. The Indian real estate market is expected to grow from the current USD 15 billion to USD 100 billion in the next ten years and a substantial portion of this growth will be fuelled by the IT sector.

We are already witnessing the impact of the IT sector on both residential and commercial property across not only metro cities but also tier II cities. The advent of SEZs and IT townships will further boost the prospects of small cities and change the face of realty there.

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Real estate prices surge in Sriperumbudur, a town 40 km southwest of Chennai, as it makes its mark as a manufacturing hub for global majors.

With several companies announcing their plans to set up manufacturing plants in Sriperumbudur, the town is set to see an investment to the tune of Rs 4,700 crore. It all began with Korean auto giant Hyundai setting up its plant here in 1996. The company has now commissioned its second plant at an investment of Rs 2,000 crore. The latest entrants into the region are Nokia, Flextronics and Foxconn who together account for Rs 1,600 crore of the planned investment. Foxconn has also outlined a joint initiative with Motorola to set up a special economic zone (SEZ) in Sriperumbudur. As a result of these developments, real estate activity has picked up pace in the town. Property prices have gone up by 25 to 35 per cent in recent times and an acre of land now costs Rs 40-50 lakh. As Sriperumbudur lies along the Chennai-Bangalore highway, prices are likely to rise even higher once the national highway to Bangalore is complete.

Due to the increasing commercial activity, demand for housing too is expected to rise, land purchases for which have already begun. Industrialisation is thus set to give Sriperumbudur and its realty a major face-lift.

As per a recent notification by India's Ministry of Commerce, Foreign Direct Investment in the Indian real estate sector is now permitted through the "automatic route", i.e., without requiring the additional approval of the Foreign Investment Promotion Board. This implies that the foreign investor may now by-pass some of the previously required approvals, making the investment process less cumbersome.

Within the real estate sector, foreign investment in India is now permitted in construction and project development related to both residential and commercial development in (i) housing townships; (ii) commercial office space; (iii) hotels and resorts; (iv) hospitals; (v) educational institutions; (vi) recreational facilities; and (vii) city and state level infrastructure.

Certain guidelines exist within the reform measures:

Project Conditions

1.In residential development, the minimum land area must be 10 hectares (approximately 25 acres)

2.In commercial development, the minimum land area must be 50,000 square meters (approximately 540,000 square feet)

3.If the project combines residential and commercial development, either one of the above conditions may be satisfied

4.At least 50% of the project must be completed within five years from the date of obtaining all statutory clearances

5.The project must comply with all local land use guidelines

6.The sale of undeveloped land is not permitted, i.e. the developer may purchase undeveloped land but must develop the land before selling it further

In addition to the above project conditions, the following financial conditions must be satisfied:

Financial Conditions

1.Minimum capitalization requirement of US$10 million for wholly-owned subsidiaries of foreign companies and US$5 million for joint ventures with an Indian partner

2.Capital must be brought into India within six months of incorporation of the subsidiary or joint venture

3.Holding period of three years on repatriation of any of the initial investment unless with the prior approval of the Foreign Investment Promotion Board.

Chennai is the fourth largest metropolitan city in India with a total population of 7 million and annual growth rate of 19 per cent. The city is a major trade centre, well linked by road, rail and air to important cities besides being a seaport. Dubbed once as a sleepy and slow-paced city for long, it is today abuzz with activity in business, industry, entertainment and leisure.

A new policy by the state government has a clear focus on state-level second-generation reforms, namely building worldclass infrastructure, including supply of quality energy, changes in labour laws, taxation reforms and business deregulation.

With names like Ford, Hyundai, Hindustan Motors, TVS, Ashok Leyland, MRF, etc., Chennai city is known as Detroit of India. Recently, BMW has opted for the city to set up a car assembly plant at the Mahindra City and Hyundai has decided to put up a second plant near its existing facility on the outskirts of the city. This coupled with Prime Minister's recent announcement that one of the automobile testing centres would be set up near Chennai, the city is all set to become 'Detroit of South Asia'.

Leather, biotechnology, floriculture, horticulture and construction industry are the potential growth areas in the state in future with IT industry. In the context of changing industrial climate, there are a host of industries where the State is strengthening and deepening its presence.

Chennai has traditionally been the hub of economic, geographic and political activities of south India. Its economy is well balanced with the info-tech , entertainment, industrial and other service establishments playing equal role in city's growth. Unlike other metros, there was no significant steep rise and fall of the real estate market in the post liberalization era in Chennai. This was due to the fact, that not many multinational companies had chosen Chennai to start their operations. It can be attributed to the large floating stock available in the market during this period.

In high street retailing, Chennai has major retail chains like Shopper's Stop, Lifestyles, West side, Pantaloons, Landmark, Globus etc. Retailing corporates like Food World, Vivek & Co., Subiksha, are headquartered in Chennai. Though Chennai faces a shortage in terms of good quality retail space with good signage, it continues to be the favourite location for highpowered national retailers due to the relatively low cost of real estate as compared to other metros.

Organised Retail - Shopping Malls and Complexes

Chennai has been the city where the concept of organised retailing had its origin. It was this city, which saw the rise of Indian retail chains like Food World, Nilgiris, Saravana Bhavan etc. It was Spencer Plaza that has changed the concept of retailing in Chennai and brought in the first organised mega format for retailing. The Mall, located on Anna Salai road, was developed by Mangal Tirth Estate Limited and has become an important retail cum office destination in the city over the years.

The mall, which started with a super built up area of 300,000 sft, has now become the mega mall of city with a total of 1.05 million sqft. The pricing has gone up tremendously as in the year 1991 the mall started leasing retail space at Rs18 - Rs 22 per sqft per month on super area, which is currently hovering at Rs 60 - 100 per sqft per month.

Promoted by the ETA group, Chennai City Centre was recently inaugurated on Dr Radha Krishnan Salai. The mall has an area of 3,00,000 sqft and out of which 2,00,000 sqft is for shopping and multiplex theatre. The remaining 1,00,000sft is for office space.
The Ampa Mall on Nelson Manickam Road, with 4,00,000 sft BUA is coming up on a 3 acre property on Nelson Manickam road and Poonamallee High Road.

Keeping in view the fast pace of development of commercial and residential developments in the city, the number of malls coming up in the city are very few. There are speculations of development of malls towards the southern part of the city by many private developers as well as malls as part of township projects.

Two upcoming malls will add approx 8 lakh sft of retail space in the city. Chennai has a huge demand for organised malls due to increase in the number of IT companies entering the city.