Chennai Real Estate Market Scenario

CONNAUGHT PLACE, India - Oct. 22, 2013 - PRLog -- Chennai's residential property market is predominantly end user driven. The absence of overt speculation has also ensured that developer has move pricing of homes in a stable and gradual manner. Unnatural spiking has therefore been successfully kept at bay.

Demand scenario

Chennai is known for its conservative mind-set, which reflects visibly on its residential property market trends, as well. For instance, home buyers in Chennai have historically been driven by location over and above most other considerations, and this had put definite limits on the demand and potential for community living in the city.

Chennai is still a predominantly end user-driven market, with 60-65% of the buyers being people purchasing for self-use. Residential space investors in Chennai tend to take a long term view, the modus operandi being to look at off-loading their holdings within an average time-span of 5-7 years. This attribute further strengthens the market's end-user behaviour.

Increased job security in the city has definitely helped the market to maintain buoyancy and a positive outlook. It’s becoming increasingly evident that Chennai's residential real estate market is significantly dependent on the IT/ITES sector. With employment stability in this sector looking good, demand for homes has now reached a comfortable and dependable growth trajectory from which developers are taking their market cues.

Pricing Trends

Chennai is a stable market wherein residential property prices move in accordance with actual sales. Price volatility due to other factors has been completely excluded. As a result, prices have not dropped in most projects over the last few years.

Also, residential property in Chennai is driven more by locations than by specifications and amenities. The scarcity of land parcels and also the cost of premium FSI within the city have create relentless upward pressure on residential product pricing. This has resulted in the available options in these locations shooting way past the budgets of even the upper middle class. Prices for standard apartments with minimum or no amenities within Chennai city can range from Rs. 1.5-5 crore.

Chennai's residential market is witnessing considerable demand in the affordable segment - specifically for units in the price range of Rs. 35-60 lakh - in locations which offer an acceptable degree of social infrastructure.

Residential developer who want to keep the cost of units in their projects affordable need to look at suburban locations with limited infrastructure. The only other option available to such developers is to cut the unit sizes so that they can include some degree of decent infrastructure. Lack of locations with good infrastructure has hindered the supply of land, which has resulted in pricing going upwards whereas the pricing remains stable or stagnant in locations which lack good social infrastructure.

The need of the hour in Chennai's residential real estate market is a good supply of land so that new locations can be opened up and the requisite social infrastructure and other utilities can be put in place. If this happens, we will see more innovation in residential products, because developers will need to set themselves apart with uniqueness and differentiation in their products.

Upcoming residential areas to watch

I.          North Chennai:

North Chennai is a real estate market that is waiting to happen. For now it is the preserve of the local residents who drive the demand for housing unlike elsewhere in Chennai – the West and the South, which are the focus of attention of home buyers. This part of Chennai comprising Kolathur, Korattur, Madhavaram, Perambur, Puzhal, Thiruvottriyur, Tondiarpet and Villivakkam is predominantly a middle income group market. Projects offering houses under Rs 50 lakh are in demand with houses in the 700-1,200 sq.ft range, according to a report by the property portal, IndiaProperty.com.

North Chennai accounts for about one-sixth of the total property development in the city. With the implementation of major infrastructure projects including that on the Outer Ring Road, Chennai-Ennore Port Connectivity project, and the metro rail project connectivity will improve and catalyse real estate development and demand. Perambur, Tondiarpet and Kolathur and major residential areas and Madhavaram is a fast growing residential hub that has attracted the attention of developers, said the report.

The north Chennai skyline is beginning to change with a number of large-scale properties setting up base there. More builders are coming to north Chennai as several of these areas have been merged with the Chennai Corporation.

The population here is also dependent on public sector and large industrial enterprises for employment. This is also one reason that North Chennai does not see significant office space development, most of which is concentrated in the South.

The price of land is cheaper by 20 per cent in the north prompting several builders to develop properties in far flung areas such as Red Hills. Residents do not mind the distance for the sake of affordable housing, said Mr. P. Manishankar, president of Federation of Flats and Housing Promoters Association.

R. Kumar, managing director of Navin Housing and Properties, said the trend of luxury apartments was catching up in areas such as Sembium and Tondiarpet. Better connectivity and improved infrastructure are attracting more people to the northern suburbs. “In north Chennai, people can buy flats at two-third of the rates prevailing in south Chennai,” he said.

The price of an apartment ranges from Rs. 3,500 per sq. ft. to Rs. 6,500 per sq. ft. depending on the location. A majority of the customers are first-time buyers, said S. Senthil Kumar, former president of North Chennai Flat Promoters Association.

M. R. Nazeerudeen, immediate past president of Chennai Real Estate Agents Association, said: “One of the most popular areas for builders now is Kolathur. Though the number of high-rise apartments is much lesser, budget homes are available.”

Proximity of Kolathur and Madhavaram to Inner Ring Road, easy access to areas like Anna Nagar and infrastructure development such as new bus terminus and grade separators have acted in favour of these areas.

D. Viswanathan, a builder, who has two ongoing projects, entered Madhavaram five years ago because the area had quality groundwater and was close to areas such as Parry’s Corner and Perambur.

II.          Madhya Kailash ' Sholinagnallur

This stretch is witnessing a clear supply-demand mismatch, with demand outstripping supply. With new employment being generated in this corridor and corresponding absorption of IT space, this area and its peripheries are witnessing extremely healthy demand for residential property.
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