Chennai Journal: Real Estate Woes

Sunday, July 30, 2006

Real Estate Woes
Recently I've been talking with a number of other expats in Chennai about the housing situation here. The two subjects at the top of the list are finding rental housing, and then maintaining it and getting the landlord to do repairs.

There is no multilisting service here, so word of mouth, advertisements, who you know, and who you can get to negotiate for you counts for a lot. There is a big money to be had in Chennai helping expats find housing, and there are at least three or four firms here that are into this business and critics say they are driving the prices up for everyone else. All of them operate on pretty much the same conditions: up to one month's rent from the individual or company as a fee to assist the expat, and one month from the landlord. (Landlords pay this because, nine times out of ten, the expat real estate company offers them much more than a local national would--in fact, for a while last year, several beach houses sat vacant because landlords were waiting for BMW executives to arrive).

As a result, unless they make other arrangements in the local market, most expats or their companies wind up paying through the nose. Despite a lot of building going on in the city, and what appears to be a surfeit of properties on the market-- with newer amenities such as built in air conditioning--- you will hear that there is a shortage of decent housing, that prices "are going through the roof" and that an apartment "that was 60 or 70,000 rupees a few months ago is now fetching a lakh (100,000 rupees or about $2200)." But, if you talk to a local, you will find out that no Indian in that apartment building is paying more than 40,000, including the guy who moved in last month from Delhi. Bottom line: the rent is entirely negotiable.

Many of the consulates have purchased housing and many of the consular corps stay in these government owned and maintained homes--but this is not an option for everyone, and in fact, although persons of Indian origin can buy here, other foreigners cannot. So rental on the open market is the main choice. If you have or can get the connections and can do it, it's best to go direct or through a local contact, one with the ability --and incentive--to negotiate hard. In my own building going direct means a reduction of up to 25% over what the expat rental firms will tell you is the rent. It makes sense, of course---the rental firm has no financial incentive to negotiate, since their fee is a multiple of the rent, and the landlord wants to amortize the fees as well.

However, for some people, finding a place is only half the battle. Once you move in, unless you are in a professionally managed rental (I am lucky that way), any maintenance problem tends to be yours, and tenant's rights are virtually non-existent here. I would liken the attitude of many landlords to that of commercial property in the U.S., where generally you are renting four walls and the land, and anything that happens while you are there is your responsibility. For people coming from a western framework, where a residential tenant's rights are strong, this is hard to accept---particularly if you are already paying more than a local. This situation does vary with the individual---one local woman I know said she had one landlord who was very accommodating about allowing her to deduct repairs from the rent, and another who was equally the opposite--but in general the landlord may not even view structural problems as his or her responsibility. And, there is a curious willingness to just let properties sit on the market rather than accommodate a potential tenant on something like putting in a backup generator, which also doesn't help once they are rented and plumbing and electrical that has sat for a few years finally starts to get used again. But, if you can negotiate a good deal on the rent and like the place, then money spent on upgrades or repairs may not be such a bad deal, especially with labor rates being low.

- posted by nred @ 6:29 PM

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