STABLE MARKET DOWN SOUTH
According to a Knight Frank report, the sops announced in the last Budget have mitigated negative sentiments in western Chennai where a 12-storey building had recently collapsed
The Chennai residential market is one of the steadiest markets in the country. It proved its resilience during one of the toughest periods in 2008–09, when it remained relatively stable in terms of sales volume and price, as compared to cities like Mumbai, NCR, Bengaluru and Hyderabad.
Additionally, the developer community in the city has historically been cautious in its approach towards buyer sentiment, and has time and again resisted the temptation to increase prices sharply, even during buoyant times.
The indigenous demand for residential apartments kept the Chennai residential market afloat till 2013. The world economic turmoil due to the global financial crisis completed its fifth year, but headwinds continued across the global economy. India and its real estate sector were not exceptions.
After being resilient to negative global factors till 2013, the Chennai residential market succumbed to the declining trend phenomenon.
All major economic parameters, such as bank interest rates, mortgage rates and inflation continued their upward movement, compelling consumers to postpone their discretionary spending plan, including buying a house, says the Knight Frank report.
The cautionary mood of end-users i s reflected i n t he volume of t he Chennai residential absorption, which reported a 35% decline in the first half of 2014, as compared to the corresponding period ( first half of 2013) in the previous year.
Taking cognisance of this trend, the Chennai residential developer community has prudently reduced the number of new launches during the last 12 months.
The growth in demand for residential units witnessed in 2010–2011 boosted the confidence of Chennai developers and prompted them to launch larger projects.
However, in subsequent years, this trend could not sustain itself, and the annual absorption levels returned to their long- term averages of 23,000– 25,000 units.
Absorption was not able to keep pace with the number of new launches. This resulted in a gradual build-up in unsold inventory.
The developer community in Chennai has historically been cautious in its approach towards buyer sentiment and has resisted the temptation to increase prices sharply