Chennai realty market rates zoom ahead of guideline values

Chennai

If you need any proof of how buoyant the real estate scene in Chennai is, here it is. In the five months since the guideline values (government-notified rates for registration of properties) were revised across Tamil Nadu, the market rates have already overtaken them by 10-45%.

The guideline value is used by the state government to assess the actual value of the property for levying stamp duty. Guidelines values were revised late last year after a gap of five years so that they would be indicative of prevailing market rates.

Growing demand for housing in the city has resulted in a steady climb in apartment prices both in the city and the suburbs over the last six months. “Hence, in most areas, the guideline value is below the market price and the difference ranges from 10% to 45%,” real estate consultant S Ramaswamy of RECS Group said.

For instance, the guideline value of land on the Arch Bishop Mathias Road in Boat Club is 18,000 per sq ft whereas the prevailing market value for the street is around 33,000 per sq ft. Similarly, guideline value for RK Salai is 19,000 per sq ft whereas the market rates are close to 25,000 per sq ft. Guideline values are on the lower side even in central business districts. Guideline value on Khader Nawaz Khan Road, which is a premium shopping hub, is only 9,500 per sq ft. Guideline value on Haddows Road is also similarly low.

Experts say prices in most parts of the city have increased by close to 20% in the last six months, going by the residential price index (Residex) brought out by the National Housing Bank.

According to recent figures, Chennai is one of the fastest growing real estate markets among all metros, but this boom is not reflected in the new guideline values finalized five months ago. Guideline values were revised after a span of five years. In the meantime, prices within city had increased two to four-fold while the jump was about five to six times in the suburbs.

However, property consultants also point out that many buyers and sellers are keen on registering properties at market price. “Whenever a property is registered for a price higher than the guideline value, that becomes the new benchmark for the locality. Hence, over a period of time, the gap between guideline and market rates will reduce,” said P Ramesh, a mediator.

While guideline values in the city are higher than market values, in the suburbs it is the reverse, and that is a matter of concern, say realtors. This disparity is partly owing to the slow growth of real estate prices in suburban areas. “Even if properties are available at lower rates, we have to pay a higher stamp duty and registration fees there as they are calculated based on guideline values, which are higher than market prices,” Chitty Babu said.

There is also a section of developers who feel that in some areas, the guideline value revision has been far too steep. “With such upward revisions, middle income people will find it difficult to buy properties in the city. Already, many of them are moving to suburban locations,” PV Sanmugam, managing director, Kgeyes Residency said. But how far this argument will cut ice is a matter of debate.

Even when the guideline values were low, builders kept apartment prices high, said P Manikandan, who ended his five-year hunt for an apartment a month ago.

Source: The Times of India, Chennai