Chennai’s residential real estate is
largely driven by end-users. This has made the southern metropolis one
of the stable markets across cities in India even during the worst
economic crisis in the past. Unlike Mumbai and NCR regions, the price
upheaval is not wide-spread in Chennai but limited to only a few pockets
within the CBT.
Known for their conservative mind-set,
which has its impact on the residential property market trends, people
buy properties in and around Chennai either for investment or
residential purpose. For instance, home buyers in Chennai generally
used to give importance to location to any other considerations like
infrastructure and amenities, and this had put limits on the demand and
possibility for community living in the city.
“The growth in Chennai’s residential
market can be attributed to the fact that it is primarily an end-user
driven. Investor participation is long term in nature, thereby
mitigating a speculative market scenario which is prevalent in Mumbai
and NCR,” says Suresh Krishn, Secretary, Confederation of Real Estate Developers’ Association of India (CREDAI), Chennai.
Since the market is more or less stable
and not volatile, the buy-today-and-sell-tomorrow trend has not yet seen
the momentum here. Anything and everything do not sell here and
developers know the preferences of the home buyers and accordingly
choose the locations and design projects. Due to lack of speculation,
prices are steady in most of the areas over the last few years.
People in Chennai are known for their
unyielding preference towards living within the CBD region because of
lack of good schools, convenience stores, entertainment and restaurants
in fringe areas of the city. Due to lack of space, developers had been
constructing projects with lesser units with or without amenities,
little or no green cover and extremely restricted open spaces. But
things are changing now.
Paradigm shift
The change in mind-set with regard to
the preferences of seeking home is visible in Chennai. Thanks to the
economic growth coupled with the large influx of people from other
regions due to growing opportunities in IT/ITeS, engineering, auto
sectors etc., there has been a spurt of integrated township projects
coming up along the peripheral areas like OMR, ECR, GST, Oragadam, Porur
and Sriperumbudur, offering world-class amenities and facilities.
Projects like Estancia by Arun Excello,
Chennai Pattinam by Cee Dee Yes Infrastructure, Hiranandani Palace
Gardens by Hiranandani Group, Prestige’s Bella Vista, Geo Inno
City in Oragadam and most recently, Golden Homes’ Golden City near
Ponnamalle are the testimony to people’s change of approach towards
community living as these projects offer office, retail, hospitals and
educational institutes along with club house, swimming pool, walking
track, community hall, gym, etc., in their precincts.
In the coming months, Chennai will see
more township projects by developers of national stature under execution
and nearing completion. These projects have minimal plot coverage,
which paves the way for large green cover and ‘lung space' within the
project. This is an added incentive to opt for community living, which
was largely unheard-of until as late as 2006, says Badal Yagnik, Managing Director, Chennai & Coimbatore, Jones Lang LaSalle India, a leading real estate research firm.
“Community living in the true sense is
finally emerging in Chennai. We anticipate that once these large
projects are fully executed, we will see a decisive forward momentum in
the concept of large, well-equipped residential communities in Chennai,”
he says.
Chennai’s periphery is also witnessing a
series of villa launches by leading builders with notable being Isha
Homes, Unitech, Artha Properties, Green Tree Homes, Sare Homes, Shri
Janani Homes, Radiance Realty etc., which offer a gated-community of
exquisite villas with modern facilities. Importantly, most of these
villas have energy efficient features and ‘gold’ certified by Indian
Green Building Council (IGBC).
With improved purchasing power,
residents’ preference for unit size has also changed considerably. The
preferred size for 3 BHK flats in Chennai has gone up from an average of
around 1250 sq.ft. to 1450 sq.ft while the preference for 2 BHKs has
increased from an average of around 900 sq.ft. to about 1150 sq.ft.
“The economic scenario notwithstanding,
developers have continued to launch their projects in Chennai,
consisting of a balanced mix of both high-end and mid-end developments.
However, affordable housing projects continue to rule the roost in
peripheral areas which lags social infrastructure,” says Dr. Samantak Das, Director - Research & Advisory Services of Knight Frank.
Supply & Demand
In contrast to many cities across India,
the growth of Chennai’s residential market has been steady in terms of
pricing, demand and supply over the couple of years. However, with more
number of mega projects coming in, the demand will be fast overtaken by
supply, say realty experts.
According to a latest report by global real estate consultancy firm Cushman & Wakefield,
Chennai will be witnessing a demand-supply gap for residential units
particularly in MIG and LIG segments over the next five years. The
overall estimated supply for both the segments will be around 1.59 lakh
units while the demand is pegged at 2.58 lakh units, showing a steep gap
of 60%. The demand-supply mismatch may take the prices of residential
units to higher levels, the report mentioned.
T Chitty Babu,
secretary, CREDAI National and Chairman of Akshaya Homes says, “Chennai
residential market’s absorption rate is better than the all India
average and we have not seen builders sitting on unsold stocks for more
than a year. As of now, the demand and supply is evenly-poised and there
is no mismatch at all. However, if the present economic downturn
continues both globally and locally, then, there is a chance that
Chennai market too will get affected with supply shrinking and demand
going up.”
Blaming the complex approval system which delays projects from one to two years, Sandeep Mehta,
President, CREDAI Chennai and Managing Director of Jain Housing,
argues, “Project delays due to cumbersome approval processes put
pressure on the builders to hike prices who have been sandwiched between
high input costs, labour issues and approval delays. As for Chennai, we
are working with the state government to remove bottlenecks for quick
project clearances in state level so that builders can launch projects
early, which can reduce the cost of the dwellings considerably and also
bring in more supply in the market.”
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, Badal Yagnik sums up.
Southside trend
Though Chennai real estate has been
growing at steady pace, the growth is only restricted to certain areas
or sides. For example, due to the proximity to IT companies,
multi-national automobile firms and auxiliary units and presence of
educational institutions, areas around southern Chennai’s Old
Mahabalipuram Road (OMR), East Coast Road (ECR), Oragadam and GST along
NH-45, which connects major heavy engineering industries and satellite
town of Sriperumbudur, are witnessing unprecedented realty boom over the
past five years.
Since property appreciation in these
areas are between 20-30 per cent per year, more and more people are
investing in these areas compared to north, east or west Chennai
localities. Though northern localities like Porur, Ponnamalle and
Sriperumbudur are witnessing a series of property launches, the growth
potential here is less compared to south Chennai.
More so, the proposed six-lane road
connecting Tambaram on the southern side to the next most important town
after Chengalpet, Tindivanam by the National Highways Authority of
India, has given a new impetus to the areas falling along NH-45 as land
prices have gone up considerably. A proposal by the Sothern Railways to
lay two-way tracks from Chengalpet to Tindivanam too has increased the
property prices in areas around GST.
At the same time, areas which come under
the CMDA limits in north Chennai such as Ambattur, Korattur, Avadi etc
have not seen much growth even though they are well connected by both
rail and road networks to the CBT. Some of these areas here even don’t
have basic infrastructure like road, street lights, sewerage and water
connection.
Agreeing the south-side trend, Sandeep
Mehta, says, “South Chennai has been expanding rapidly. There was the
time, when Tambaram was considered to be the city limit. Now it has
become a part of city’s most developed areas. Today, we have gone beyond
Maraimalai Nagar and even Chengalpet, from where people are commuting
to city daily. Areas like OMR, Padur and Thiruporur are also witnessing
rapid real estate growth. As the land prices keep going up within city
limit, people do not have option but to look for areas away from city
where they can afford a house.”
Of the total upcoming supply in the
Chennai residential market, the southern region accounts for a
significant share of around 59%. The southern part of Chennai is
witnessing hectic real estate development, says a Knight Frank report,
which further adds, “Growth in the region is taking place in Adyar,
Velachery and Taramani to Shollinganallur belt. Emerging corridors like
ECR have become good avenues for plot investment. The presence of IT
corridor along the Old Mahabalipuram Road and the concessions given by
the government in promoting the industry has indirectly led to the
growth of the residential market in South Chennai.”
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According
to the legal process, the owner/owners of the land should grant a
general power of attorney to the builder by signing the rights to his
name. This way, the builder receives the exclusive right to construct
and develop the project in the owners land. It also grants right to get
the No objection certificate, occupancy certificate, sanction
certificate, electricity and sewage connection on behalf of the land
owner.
