Thinking about OMR- Think Twice

In the recent times, OMR has being in the news for all wrong reasons. delayed execution, poor planning, Lack of clarity on STPI tax gains rapid growth leading to poor trafic. I see that the problem has been only increasing for OMR even though the contruction is going on-Slow and Steady(?).

Adding to the problem is oversupply of Apartments in OMR region. OMR is estimated to have atleast 10000+ apartments by 2010-11. There is a huge debate whether the demand-supply ration equilibrium would be maintained. I doubt it would be over supply and less takes. A lot of areas around OMR has poor drinking water and areas around perungudi and thoraipaakam is marred by growing pollution- thanks to the garbage dump yard.

And finally we hear the land prices are going down there. Will the apartment prices follow the land price?. Already prices which were quoted around 4000+ has fallen to 3500-3700 around perungudi- thoraipakkam areas. Prices around SIPCOT which was hovering around 3100-3300 a year back is now qouted at 2800+ thanks to DLF,TVH.

Think twice before you leap in OMR. Read this.

Real estate prices on the much-hyped Rajiv Gandhi Road (IT Highway), which had started softening a year ago, are falling now.

An approved residential plot measuring 4,800 sq ft, located hardly 200 metres from the IT Highway in Karapakkam, was recently sold for Rs 56 lakh per ground (2,400 sq ft), almost 20 percent less than last year’s price.

Subbiah, a realty agent who brokered the latest deal, said he had arranged a buyer for an adjacent plot of land in March 2007 for Rs 70 lakh, but that deal fell through.

Unlike last year, 2008 has seen very few land deals in the area. Subbiah said, “I handled two sales in the same layout in 2006. The first one went for Rs 50 lakh per ground in October 2006 and the second for Rs 54 lakh per ground in December the same year. In March 2007, I organised a buyer for seven grounds in the same layout. The owners, who initially demanded Rs 65 lakh per ground, increased it to Rs 70 lakh in a matter of one week. After much haggling, when the builder agreed to pay that price, the owners pulled out of the deal. Perhaps, they thought the prices would further go up.”

All through 2006 and the first quarter of 2007, prices along the IT corridor had risen steeply due to anticipation about a bigger boom in the software and knowledge industries.

Layouts promoted in 2002 at Rs 2.4 lakh per ground saw 20 times appreciation. Even those who sold land for Rs 50 lakh per ground 18 months ago and reinvested it in outlying and undeveloped areas got 300 percent appreciation.

However, with the downturn setting in, those who delayed the sale of their land in the hope of reaping higher profits have been stranded. This applies especially to some of the layouts promoted by the Tamil Nadu Housing Board in Sholinganallur.

Satheesh, an agent who brokered the resale of many plots there, said, “Last year, one ground in TNHB layout fetched Rs 45 lakh. Now many plots are available for Rs 30 lakh per ground.”

Pandian, a veteran realtor on the OMR, said, “Investors on the OMR used to get 50 percent to 100 percent profit per annum till a year ago. Many businessmen used to take overdrafts from banks at 14 percent interest and invest on land on the OMR. They are not willing to take such risks any longer.”

One of his customers, who had invested on a property measuring 15 acres on the OMR at the height of the boom, is now struggling to sell. “Today, he will sell off the plot even if he just gets his investment back. There are many like him. Most of them waited so far thinking prices would pick up again. Their hopes were shattered when DLF launched its new residential project near Semmancherry recently at Rs 2,800 per sq ft. By pricing it at Rs 1,000 to Rs 1,200 less per sq ft than other ongoing residential projects in the area, DLF not only hit other builders hard but also shattered the hopes of landowners on the OMR.

Apartment prices are good indicators of land prices too. What justification can one give for increasing the price of land when apartment prices are falling? Further, over the past one year, cost of construction had almost doubled. Against this backdrop when somebody sells built-up houses at Rs 2,800 per sq ft, land prices are bound to fall,” he said.

A builder, who is promoting an apartment complex on 9,600 sq ft land on the OMR, said, “The infotech highway is highly overrated. Prices on OMR went through the roof even without any basic infrastructure in place. We all came here because government gave sops for constructing IT parks. But nobody thought of providing the basic infrastructure like sewerage, water supply and uninterrupted power supply. I had to buy water for even construction because the groundwater is brackish and saline. After investing Rs 2 crore on land and another Rs 2.3 crore on building, I will hardly get 8 percent profit in the project.”

Source: TOI -Chennai
http://timesofindia.indiatimes.com/Chennai/Land_prices_nosedive_on_IT_Highway/articleshow/3003135.cms

8 Comments

  1. Ram

    Check this out

    http://www.bsstrategist.com/common/news_article.php?leftnm=10&bKeyFlag=BO&autono=321621

    Developers are cutting price tags. DLF recently sold projects in Chennai and Manesar in Haryana at Rs 2250 per sq ft, which were sold in a space of 3-4 days. This underscores the point that there’s a market if prices are affordable.

  2. shri

    A high end builder is quoting 4900 per sqft in Perungudi.
    The location is near the upcoming toll plaza on OMR.
    Is this too expensive for the area? Any first hand info on the locality?

  3. murugan

    i dont think price will decline already bad news going around in world economies priced in,with banks cutting interest rates,this decline could give good opportunity to buy.dont get panic and leave good chance to buy lands………….cheers

  4. lingam

    i think omr is best and safe place in chennai to buy properties.with new companies queing up in omr,price will only go up.dont get carried away about bad news people give.go and check@ ground reality.

  5. Manoj

    I think now the real estate prices are picking up in OMR. It may take little time more. So much of money is pumped in the same road development will b there.

  6. senthil

    Railway line may derail special zone on OMR
    TNN 4 September 2009, 03:38am IST
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    CHENNAI: The proposed IT special economic zone (SEZ) at Taramani on the Old Mahabalipuram Road, to be developed jointly by the DLF and Tamil Nadu
    Industrial Development Corporation (TIDCO), has run into rough weather with the union commerce ministry raising objection to the site, stating that it does not measure up to a contiguous stretch of 25 acres.

    The 26.64 acre land, which the DLF had bought from the Tamil Nadu government at Rs 26 crore per acre, is divided by the elevated railway track of the Mass Rapid Transport System (MRTS). About three acres of land lies on one side of the track and the balance on the opposite side.

    People in the know of things said TIDCO had obtained an “in-principle” approval for the SEZ even before the land was sold to DLF. However, the commerce ministry insisted that the joint-venture firm apply afresh. When a fresh application was submitted, the ministry raised objection stating that the land was not contiguous.

    A senior official of TIDCO, when contacted, said, “The DLF’s SEZ at Gurgaon also faced the same problem. It is divided by the Delhi Metro Rail. But the project has been given approval. The same yardstick should be applied by the union ministry here too.”

    The DLF has been repeatedly sending representations to TIDCO to speed up the SEZ approval process, failing which, it has made it clear that it would pull out of the project and demand its money (land cost is roughly Rs 700 crore) back. As an alternative, the DLF has asked the government to identify some other land adjacent to the present site to expand the contiguous stretch to 25 acres, the minimum requirement for an SEZ. TIDCO officials, however, have pointed out that there is no such land available in the region for further expansion.

    As per the proposal, the first phase (2.5 million sq ft) of the IT SEZ was expected to start functioning by 2009 end. The balance 2 million sq ft was to be readied by 2011. In all, the investment was expected to touch Rs 1,500 crore and about 45,000 people were expected to be employed there.

  7. Karuna

    Last week I went along with a broker to seek for plot and in thoraipakkam. I really surprised to hear for the prices as it shows the prices are shooting up again. They told that 2000 sqft of land near jain college is rated and Rs.6000/sqft and says that there are lots of apartments under construction nearby and with in this 2010 year rates will shoot up high again and convincing me to go for property as this is the right time.
    So my question is, Is the prices stated is correct and are the prices will shoot-up shortly in this area?
    Please guide me, if any body know well about this locality.

  8. Srini

    Thinking about OMR- Think Twice: A good caution… not only on Apartment price.. but various other infrastructures too..

    With Recent booming trends in OMR in 2011, there are few questions… Assume that there are approximately 15000 – 20000 Apartments coming to OMR in 2011 – 2012, Is there any sufficients schools to accomodate atleast 20000 students from these residents? Very Few Schools are coming up (One in Hiranandani, DLF, Dewy Terraces, One in CeeDeeSss. Assume each school accomodate 2000 students.. this OMR stretch requires much more schools. Similarly the no. of hospitals is still not sufficient. Every Builder refers to Chettinad Hospital at this time.

    But once people move to this stretch, work life balance of the IT people in OMR would considerably improve. There would not be much traffic congestion as it is a single stretch of road. Huge gated communities provide secure and community living…

    Let me know your opinions… I am planning to look for an apartment on OMR stretch..

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