ExpertDabbler

Okay, I am seeing a half page paper ad in front of me, which has a small girl claiming,”Yes dad, Chennai is like New Jersey”. My title is a response to that! It does not take a genius to figure out who this ad targets at. Especially after seeing they’ve given out the price tag as well, ‘Starts from Rs.99 lakhs’. This is clearly not for the 30-40K per month earning local IT masses. Someone offered me a row house in Madurai for Rs.65 lakhs. They dont realize that I am a poor fellow clearing dustbins in OMR, not NJ.

And for those of you who are wondering if its Boat club road which is being compared to NJ, hard luck. Its right next to a lake on the Sholinganallur - Medavakkam main road.

I don’t see the emperor wearing any clothes. Either something wrong with my eyes, or the whole junta is being taken for a ride.

First off, thanks a ton to folks who bothered to comment on my previous post. That did cheer me up and i am back on track:)

Sometimes I can get worked up all too much and i feel like running away from everything. But obviously I would not do once better sense prevails I guess i am entitled to my share of polambals

Let me also clarify that my gloomy post had nothing to do with the stock market crash
I have not put naya paisa into it. It may have been slightly different had it been real estate since i bought a flat last year. But having visited FAIRPRO and seen the response first hand, i guess i need not worry about real estate crash for now. So 2009 might be the right time to worry about real estate.

I have written posts like these three years back. The only difference between those times and now is that nowadays i get a few comments and offline messages from the monus and karthiks and NV sirs of the world to cheer me up. I am truly proud of my blog in moments like these

Everyone who has someone in Coimbatore will know about the skyrocketing real estate prices there. Last week I was in CBE for some personal work. As I had some time to kill, I went to some brokers in familiar areas posing as someone interested in buying a property. The rates they are qouting had me stunned.

I am one who felt even Chennai’s real estate was overheating. How else can you explain a demand of Rs. 1 Crore for a ground of vacant land in Perungudi?? I saw a quote in IndiaList.

If Chennai was bad enough, Coimbatore was just insane! The only reason people could come up is that some IT companies are planning to set up operations there. Try a google search for IT companies in Coimbatore right now and all you get is some innocous list of small time companies. Not the ones which would pay salaries high enough to settle the monthly EMIs.

Wipro has bought 12 acres of land in the TIDEL coming up in Peelamedu, TCS has got about 5 acres there. These two projects will take its own sweet time to come to reality. About 18 months is a realistic estimate. Others are expected to follow suit but god knows when. My hunch is that these two would hire about 20,000 people at the maximum. It is an irony that these companies are coming to Tier 2 cities just so that they can hire people at lower costs than metros!.

So, if a 1000sqft. flat in a decent area sells for 2500Rs per sqft in a city like Coimbatore, the EMI. would be about 22K per month (Rs.900 per lakh for 20 years). Right now, there are not many companies which would be glad to give 25K, leave alone 40K in Coimbatore. This leaves the real estate market completely at the mercy of NRIs and other local folks with black money.

Interestingly, the rentals have remained fairly stable. A1000 sqft flat would hardly fetch anything more than 6-7K per month. So, if some X, purchases a 1000 sqft flat and lets it out, he would be paying 15-16K Nett. per month out of his pocket so long as he owns the flat. In that case, I wouldn’t call that an asset. I think it’s a liability. I am no good in predictions but to me, this market trend has ‘correction’ written all over it.

But I guess people are buying because they fear prices are going to go up even further. They come to this conclusion simply because it has doubled up in the past 2-3 years. In the process they’ve forgotten a basic rule of thumb - Never buy in a seller’s market.

Indian Economy had a very good post on the real estate scenario sometime back.