Lessons from the Madras Club – Lesson 5: Residential property selection is counterintuitive

Lessons from the Madras Club – Lesson 5: Residential property selection is counterintuitive
The 19-floor aptly named H2O Holy Faith complex of 90 flats being demolished in January 2020 in Kochi, Kerala.

Don’t feel like reading? Listen to me tell the story.

Introduction and Lesson 1: Customer service is an oxymoron – “The customer is the biggest enemy in your life”
Lesson 2: India and X-efficiency – “You want to know the problem with Toyota?”
Lesson 3: Everyday is judgement day – “This is India. Forget the Madras Club. Everybody judges everybody. The minute he leaves the room I’m going to judge his arse…”
Lesson 4: There is no such thing as privacy – “They call me WHAT?”

Lesson 5: Residential property selection is counterintuitive

“Of course it was new so nothing worked.”

One fine day I came up with the crazy notion that perhaps I should move out of the Madras Club. Although the room rate was not outrageous, I could save a considerable amount by finding an apartment. Unlike many of my fellow Club patrons, I was not blessed with more than my hypothetical children and their hypothetical children needed to live happily ever after.

I sat in a friend’s apartment discussing the logistics of apartment hunting, and a number of bizarre differences in the selection process came to light.  In the West, usually the higher up in the building the apartment is, the more desirable and likely more expensive it is.  These higher apartments usually offer a better view and hence more prestige. 

In Chennai, she told me, the ground floor is the more desirable and expensive.  The reasoning? Firstly, it is very hot in Chennai for most of the year, so it is cooler towards the bottom of the building.  Next, because things have a way of breaking down regularly, one can’t rely on the elevators to always be working, so being towards the bottom of the building means you are not faced with an arduous climb when that inevitably happens.

Planning your escape before you even move in…

Next I was told people go for apartments as close to the road as possible.  In the West, we try to be away from the road to avoid traffic noise and pollution, as the ambience is generally better there.  In Chennai you never know what is going to happen and when you might need to escape the building, so you want to be as close to the ground, and the exit road as possible.

Another bizarre difference was pointed out by a regular to our group (you may remember him from such comments as, “The customer is king, but he’s still a @#$%ing arsehole.”) who was discussing the woes of his apartment building process.

His dream family apartment was two years past its completion date and still a long way off being finished.  He had issues in his rental apartment so was moving to a new one.  He lamented having to go through the moving process again, which we could all relate to, when this little pearl of wisdom came out.

“Of course it is a new apartment so nothing works,” he said with annoyance.

Old is gold

“I’m sorry?” I shook my head a little in utter confusion. “Did you just say the apartment is new so nothing works?”

“Of course,” he replied, again like it was the most natural thing in the world.

“In the West, when a place is new is usually the time when EVERYTHING works,” I said.

“Oh NO, it’s completely different here…”

He then went on to explain that getting a new place is the worst thing you can do.  None of the electrical items will work, the pipes will leak, if they are connected properly at all, the taps will all be around the wrong way, you need to arrange for gas connections, and things you can’t possibly even imagine will crop up that essentially will make the place unlivable.  Even renting a new place you are required to fit your own airconditioners, and cover all the costs of setting up the electricals.  There will be no cupboards or other fixtures either.

Basically, the ideal place is not brand new, but not too old either.  You are looking for the delicate balance of a place where someone else has ironed out all of the teething problems, but it is not yet old enough to have started falling apart.

How does this happen?

Another friend talked of being pleasantly surprised when they moved into their new house and everything was ironed out.  That was until a couple of days later when taking a shower and the drains completely clogged up.  They called the contractor who came back and fixed it in about 45 minutes.

What happened?  When they fitted out the bathroom, the drains were open.  The guys who were doing the flooring etc… had some muck and excess cement they disposed of in the drain.  Why would they do that?  Surely they must know it will block up the drains?

They said there were two reasons.  Firstly, the tradespeople in India are not that educated.  In the West most people have at least a minimum level of schooling which is not the case in India.  Secondly, the staff are not well trained or supervised.  Perhaps adding a little of the Indian ingenuity, these untrained, uneducated workers thought they were being smart by putting the excess cement in the drains and saving themselves a trip to… wherever else they would dispose of it..?

Waterfront living aint what it used to be!

If the 2004 earthquake in the Indian Ocean and subsequent tsunami which hit the east coast killing 8,000 people in Tamil Nadu and 18,000 totally in India[1] didn’t make coastal living a dangerous proposition, the government’s Coastal Regulation Zone (CRZ) is finishing the job.

There was much chatter around the Club about notices to demolish people’s beach houses over the last year or so because they contravened the CRZ legislation.  WELL!  If they contravened the legislation, surely they deserve it, right?  Like most things in India, it is not that simple…

The CRZ rules were first introduced into the Environmental Protection Act in 1991, have had various iterations over the years, but essentially cover “the area up to 500 meters from the high-tide line” and are dependent on criteria such as “the population of the area, the ecological sensitivity, the distance from the shore, and whether the area had been designated as a natural park or wildlife zone.”[2]

While the CRZ rules were put in place by the Union environment ministry, implementation is the responsibility of the state government who often defer this even to the panchayat (or local government) level.  A friend explained it to me like this:

“So when you build anything, you register the land, you pay the tax on the land, you get power supply for the land, you get water supply for the land; all official government dealings. You register it with the panchayat. The only problem is, the panchayat doesn’t care that you are violating or not violating the 500 meter zone. Because he’s not the one who wrote the law for CRZ. They are only saying, ‘Hey, you want to build in my land? That’s fine. I’ll give you the permission. You just pay your tax. That’s it.’

“The government now suddenly wakes up and says, ‘All these houses have been built, how dare they build? It is within the CRZ.’  Somebody wakes up after… you know, they should have clamped down on the panchayat to say, ‘You cannot give permission.’ They don’t do that. You see that? But the problem is, the owners are not at fault, it’s just the system is not tying up the panchayat with the state government and the central directorate of the CRZ.”

What IS the high tide mark?  And with global warming, what happens when that moves?  All of these things are in dispute so it is no wonder there is a lot of confusion and dispute still going on.  Of course while some people legitimately thought they were operating within the law, there are others who knew they were in violation the laws, but did it anyway.  Some of them even opted to demolish their own places already so the government didn’t mess it up for them.

Bring it all down!

It is interesting to finally see there are consequences for blatant violations of the CRZ, but is it the people responsible who are really paying?  In the state of Kerala in January, four large apartment buildings with more than 300 apartments on the backwaters, housing thousands of people, were ceremoniously demolished.[3]

The private developers got permission to build them from the panchayat in 2006, and in 2019, 13 lucky years later, the Supreme Court ruled they were built in breech of the Environmental Protection Act in an ecologically sensitive zone.  The long-term apartment owners refused to leave, but the local authorities finally turned off the power and water which eventually forced them all out. 

Some residents went to watch as their homes were finally demolished (this post’s picture depicts this) and others couldn’t bare it.  The irony is, environmental experts were extremely concerned about the impact demolishing those four high rises would have on the fragile Vembanadu Lake.[4]

The residents of the towers bought their apartments in good faith believing they were all approved, lived in them for years, and now face a lengthy battle to get compensated for their losses as well as the quest for new places to live.  But is this the big stick that is needed to finally bring the Union, state, panchayats, and landowners onto the same page? 

“Directions are not given in a simple fashion,” my friend said. “It’s always complicated. And so it leaves a lot for interpretation. When you say it is black or white, there’s no interpretation; when you say it’s always grey, then you make money both ways. And real estate is the most corrupt business.  That is not unique to India alone, it is just more prevalent here.”

Environmental and social consequences

I spend a lot of time in a hill station that was once a pristine haven away from the heat of the plains for American and English missionaries, but because of rampant building and visitor violations, at peak times it can now resemble an overcrowded rubbish tip.

Many passionate locals lobby the panchayat, tour companies, and even the visitors themselves to do the right thing by the town and its ecology, and stop the illegal activity.  Many hotels and residences were forcibly closed over the past couple of years for happily violating the building codes, which many celebrate.  The two main violations are:

  • Building a hotel where you didn’t have permission to build one – i.e. not in a commercial zone, and
  • Building six levels when you were only given permission to build three.

But why suddenly were they cracking down now?  Another friend explained.

“And the reason why they’re doing it is because the government has changed, and this government wants to make money. And so if you go and say, ‘Well, I’ll give you this much, just keep your mouth shut,’ they will do it.  But who’s to cough up the cash? It depends on the asking rate. It’s a racket.”

Guideline values…

Interestingly the state government assigns ‘guideline values’ or ‘circle rates’ to residential properties which may just be assigned to the land value, or the value of the land and buildings on it.[5]

This is the minimum rate the property must be registered with the authorities, and thus is the minimum amount of ‘white money’ or declared / taxed money which must change hands for the property.  The market rate is usually higher than the guideline value, and sometimes the difference or a portion of that difference will be paid in ‘black money’ or undeclared / untaxed money, others will keep it all legitimate.

Don’t live near Indians

One woman showing me around an apartment took great delight in telling me there were no Indians in the building, but all mostly Asian expats. It was like this was some kind of bonus to be living in India, but be as far away from Indians as possible.  I thought that was weird and a bit offensive, but then an Indian friend from the Club ‘put me straight.’

“We are noisy and particularly if we are renting, we will have no respect for the property and leave it in a terrible condition,” they said.

With all of this crazy advice, I decided it was easier to just stick to the Madras Club…  This is of course, the mere tip of the Indian property craziness iceberg, and when you get into agricultural, industrial, and commercial, your mind might explode….

What is the real lesson here?  It is less risky to have friends with beach houses than to have one yourself at present, but if you DO want to buy property, don’t just trust the panchayat, check ALL of the rules from all of the government levels, because the moment the government changes, you are again at risk of at best, having to bribe some of them, or at worst, bringing the whole thing crashing Kerala-style down around you.

Want more Lessons from the Madras Club?

The next topics I planned to cover in the Lessons from the Madras Club might be a little too hot for the internet so I am switching to new content.

But if you want more, there is plenty I have left to say!

If 100 people to sign up, I will send you exclusive NEW Lessons including on:

  • Politics and leadership
  • Sex and fidelity
  • The trials of extreme wealth

I want more Lessons from the Madras Club!

[1] https://en.wikipedia.org/wiki/2004_Indian_Ocean_earthquake_and_tsunami accessed 11 September 2020

[2] https://indianexpress.com/article/explained/explained-what-are-crz-rules-which-the-demolished-maradu-flats-violated-6213125/#:~:text=In%20India%2C%20the%20Coastal%20Regulation,fragile%20ecosystems%20near%20the%20sea. accessed 11 September 2020

[3] https://www.dailymail.co.uk/news/article-7875789/India-blows-luxury-high-rises-environmental-violations.html accessed 11 September 2020

[4] https://apnews.com/4fd34b65e734c696f76eae6373e5adb9 accessed 11 September 2020

[5] https://content.magicbricks.com/property-news/legal-matters—significance-of-guidance-value/91214.html#:~:text=The%20guidance%20value%20is%20the,set%20by%20the%20State%20government. accessed 11 September 2020

To be continued…

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Until next time!


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