Is Chen­nai the next realty hotspot?

The year 2017 started on a pos­i­tive note for Chen­nai, the sales and unit launches has at­tained the lev­els wit­nessed in mid 2015. Talk­ing to the lead­ing stake­hold­ers of Chen­nai’s real es­tate sec­tor, Shubhra Saini, delves deeper to un­der­stand the realty mar

Realty Plus - - Region Update -

Chen­nai’s real es­tate mar­ket had faced stag­nancy dur­ing the last few quar­ters for the in­evitable rea­sons in­clud­ing po­lit­i­cal tur­moil, reg­u­la­tory re­forms and the cat­a­strophic floods. But the real es­tate mar­ket of the re­gion has turned cor­ners ow­ing to rea­son­able home loans and de­vel­op­ers’ in­creased fo­cus on com­ple­tion of projects, buy­ers’ con­fi­dence is likely to as­cend in the days to come. Also, boost­ing mea­sures within the IT sec­tor in the state is help­ing cre­ate more job op­por­tu­ni­ties as a re­sult of which, the in­flux of mi­gra­tion into the city is ris­ing. All this will even­tu­ally in­crease the de­mand for real es­tate in Chen­nai. Re­in­stat­ing the sen­ti­ments, Haresh Kishor, Di­rec­tor, KG Builders, says, “Driven by the IT and man­u­fac­tur­ing sec­tor boom, real es­tate mar­ket in Chen­nai is one of the most sought after in the coun­try. Al­though the mar­ket slowed down in the last 3-5 years, ow­ing to po­lit­i­cal in­sta­bil­ity, cat­a­strophic floods and reg­u­la­tory re­forms, but now the mar­ket has be­come sta­ble as the worst is be­hind us. In terms of pric­ing the mar­ket has seen re-cor­rec­tion in the band width of 10- 30 % depend­ing on the dif­fer­ent mi­cro mar­kets. With em­ploy­ment pick­ing up in Chen­nai and po­lit­i­cal sce­nario be­com­ing sta­ble, 2018 is poised to be very suc­cess­ful for the realty sec­tor of Chen­nai and the real es­tate mar­ket of the city will be driven by end-user and it will emerge out to be the most suc­cess­ful buy­ers mar­ket.” Ac­cord­ing to Q3 re­port by Cush­man

& Wake­field, ma­jor­ity of the launches (60%) were in South Chen­nai, pri­mar­ily by es­tab­lished de­vel­op­ers. With a con­sis­tent de­cline in launches, the city has seen a rise in de­mand for ready-to-move units across seg­ments. In­creased trans­parency un­der the RERA regime has given buyer con­fi­dence a ma­jor fil­lip and de­vel­op­ers are aim­ing at cap­i­tal­iz­ing on this sen­ti­ment and at­tract fence-sit­ters us­ing lu­cra­tive pay­ment schemes and pro­mo­tional of­fers. How­ever, the fo­cus will re­main on clear­ing out ex­ist­ing in­ven­tory, keep­ing a lid on new launches.

Su­nil Sharma, VP – Mar­ket­ing and CRM, Mahin­dra Lifes­pace De­vel­op­ers Ltd, is of the view that as with most real es­tate mar­kets across In­dia, Chen­nai too was af­fected by de­mon­eti­sa­tion last year, with de­mand wit­ness­ing a steep drop in the last quar­ter of 2016. Adding fur­ther, she says, “The mar­ket wit­nessed a re­vival dur­ing the first half of 2017. Sales has been dom­i­nated by the sub-50 lakh cat­e­gory, and the city is ex­pected to wit­ness sig­nif­i­cant de­mand for af­ford­able homes, along with mid­premium units. Pri­mar­ily an en­duser driven mar­ket, home buy­ers in Chen­nai pre­fer apart­ments/homes in lo­ca­tions that are well-con­nected to of­fice hubs, have fast-grow­ing so­cial in­fra­struc­ture and ba­sic ameni­ties, and are promis­ing in terms of em­ploy­ment gen­er­a­tion. Putting things in per­spec­tive, W. S. Habib, Man­ag­ing Di­rec­tor, Ramky Group, says, “Post GST buy­ers are more in­ter­ested for ready to oc­cupy apart­ment to save tax. The en­tire mar­ket is be­ing driven now by end users.


With ris­ing prop­erty val­ues and land parcels get­ting ex­hausted, home buy­ers in­ter­est is skewed to­wards sub­ur­ban mi­cro-mar­kets in the third quar­ter of 2017. In­ter­est­ingly, the ma­jor­ity of these mi­cro-mar­kets are ei­ther in prox­im­ity to IT/ITES hubs or en­joy seam­less con­nec­tiv­ity to these em­ploy­ment hubs. Me­davakkam, Avadi, Tam­baram, Porur, and Perum­bakkam are the top five lo­cal­i­ties that recorded the max­i­mum de­mand in Q3 2017. Ac­cord­ing to Sarita Hunt, Man­ag­ing Di­rec­tor – Chen­nai & Coimbatore, JLL , “Pri­mar­ily Chen­nai’s mar­ket is end user driven mar­ket with very min­i­mum in­vest­ment in this seg­ment from in­vestors. Buy­ers are well in­formed, ed­u­cated and strate­gic in their pur­chases. There­fore fo­cus is on qual­ity & com­pleted projects. Cus­tomer base is pre­dom­i­nantly ei­ther in the mid to low in­come range or HNIS / UHNIS.” South Chen­nai recorded the max­i­mum de­mand due to the pres­ence of IT/ITES com­pa­nies. In­ter­est­ingly, the south­ern part of the city also recorded the max­i­mum sup­ply of af­ford­able prop­er­ties in Q3 2017, fol­lowed by the Western part of the city. These in­clude mar­kets such as Sin­gape­ru­mal Koil, Sholin­ganal­lur, Me­davakkam, Ke­lam­bakkam, amongst oth­ers. Out of the to­tal units launched in South Chen­nai in Q3 2017, nearly 29% were in the af­ford­able seg­ment. These projects were priced any­where be­tween Rs 2,200 to Rs 3,400 per sq.ft. The Chen­nai - Bengaluru In­dus­trial Cor­ri­dor (CBIC) are the ma­jor projects likely to en­hance the ap­peal of Chen­nai. Fur­ther, projects like up­com­ing metro cor­ri­dors and re­vival of the Port Madu­ravoyal Road are also boost­ing res­i­den­tial de­mand in mi­cro-mar­kets like Virugam­bakkam, Perum­bakkam, T Na­gar, Per­am­bur, and Me­davakkam.

With RERA in place, the de­mand for ready-to-move-in prop­er­ties

con­tin­ued to rise in Q3 2017. This can also be at­trib­uted to short­age of RERA ap­proved un­der-con­struc­tion projects in the city. Apart­ments con­tinue to dom­i­nate the prop­erty spec­trum in terms of both sup­ply and de­mand. Nearly 49% home­buy­ers’ in­ter­est was slated to­wards apart­ments in Q3 2017 as well. This was fol­lowed by plots, vil­las, and other prop­erty types. Buoyed by the higher re­turn on in­vest­ment, about 28% prop­erty seek­ers pre­ferred in­vest­ing in plots.

IM­POR­TANT Mi­cro­mar­kets in chen­nai

A sig­nif­i­cant por­tion of real es­tate ab­sorp­tion in the city is con­cen­trated along the Old Ma­ha­balipu­ram Road (OMR) and the Guindy mi­cro-mar­ket, which is closer to Pallavaram. OMR and the lo­cal­i­ties in its vicin­ity will con­tinue to at­tract cor­po­rates from var­i­ous sec­tors and thus the de­mand for res­i­den­tial realty will in­crease po­ten­tially. Ac­cord­ing to Hunt, key growth cor­ri­dors of the city are OMR ( Til­lke­lam­bakkam), Tho­raipakkam­pallavaram Road , GST Road Till Mahin­dra World City , Mt Poona­mallee Road, Mount Poona­malle Road and Nolum­bur, Am­bat­tur. Talk­ing about im­por­tant

End users who are se­ri­ous about buy­ing homes in lo­ca­tions of their choice have con­tin­ued to closely eval­u­ate project fun­da­men­tals and scope, even post de­mon­eti­sa­tion. Su­nil Sharma

mi­cro­mar­kets in Chen­nai and lo­ca­tions ideal for af­ford­able hous­ing projects, Habib, says, “The prime cri­te­ria for af­ford­able lo­ca­tions are com­pet­i­tive price with good con­nec­tiv­ity. The ar­eas like Ura­pakkam, Gudu­vancherry, Poona­mallee, Avadi, Ke­lam­bakkam are all the de­sired lo­ca­tions. These lo­ca­tions of­fers bud­get friendly homes with all so­cial in­fra around. Perum­bakkam area is at­tract­ing lot of young home buy­ers as it is near to West Chen­nai and OMR belt, which are ma­jor IT hubs in the city and the flats range are within 50 lakhs, so it’s a great end user mar­ket, ex­plains, Kishor.” Em­pha­sis­ing on the lo­ca­tion, which are im­por­tant from af­ford­able hous­ing per­spec­tive, Sharma, says, “Avadi, a fast-de­vel­op­ing sub­urb lo­cated off NH 48 and close to the Outer Ring Road, to the North West of Chen­nai, is to­day an af­ford­able hous­ing hub. Avadi is well con­nected to­core city ar­eas via bus and train ser­vices; its strate­gic lo­ca­tion also en­sures easy ac­cess to in­dus­trial clus­ters like Sripe­rum­budur and Ora­gadam. Avadi is sur­rounded by ma­jor de­fence es­tab­lish­ments and boasts renowned ed­u­ca­tional in­sti­tu­tions and hos­pi­tals. Fur­ther­more, en­ter­tain­ment op­tions abound, in­clud­ing cin­ema halls, an amuse­ment park and restau­rants.”

Mar­ket Op­por­tu­ni­ties:

Judg­ing by the num­ber of qual­ity projects that are seek­ing and se­cur­ing fund­ing from Grade A in­vestors, the con­sumer con­fi­dence is def­i­nitely on the up. Ac­cord­ing to Hunt, “Trans­parency in sale, for ex­am­ple: se­lect promoters are us­ing “all in­clu­sive” price per sq. ft. as their mar­ket­ing tag is at­tract­ing buy­ers in the post­gst era. Buyer cer­tainly has the as­sur­ance that RERA will pro­vide the nec­es­sary safe­guard to two vi­tal fac­tors of qual­ity of de­liv­ery and timely com­ple­tion.” “Con­sumer con­fi­dence is get­ting back on track. De­mon­e­ti­za­tion has im­pacted the sen­ti­ments of real es­tate buy­ers’ in a sub­tle way, how­ever, post GST we are see­ing a lot of buy­ers com­ing for­ward to buy ready to oc­cupy homes. Also, de­vel­op­ers’ are of­fer­ing at­trac­tive deals, dis­counts and free­bies on ready to oc­cupy in­ven­to­ries. So, this is the best time for buy­ers’ to in­vest in the ready to oc­cupy homes than wait for un­der con­struc­tion homes,” says, Rocky Is­rani, Man­ag­ing Di­rec­tor, Paci­fica Com­pa­nies.”

Talk­ing about the com­mer­cial real es­tate sce­nario in Chen­nai, Habib, says, “There is a slow­down in IT/ ITES space take up al­ready. The av­er­age an­nual ab­sorp­tion is also 2.5 – 3 mil­lion sq ft only. A ma­jor­ity of these de­vel­op­ments are in var­i­ous stages of con­struc­tion and are ex­pected to be com­pleted be­tween 2018 and 2019. There will be some equi­lib­rium be­tween de­mand and sup­ply but good projects may not face is­sue of leas­ing.”

Com­mer­cial & re­tail leas­ing in Chen­nai is to re­main sta­ble. How­ever, due to higher dis­pos­able in­come in the ur­ban pop­u­la­tion, de­mand is ex­pected to rise. Thus, strong in­vest­ment & higher in­ven­tory ad­di­tion is ex­pected. Rocky Is­rani

DE­MAND AND sup­ply sce­nario

New launches shall re­main low as de­vel­op­ers are now fo­cus­ing on re­duc­ing un­sold in­ven­tory. Ac­cord­ing to Is­rani, Mid-seg­ment in south­ern pe­riph­eral dis­tricts and cen­trally lo­cated high-end prod­ucts should steer end-user de­mand in 2017. On the rental mar­ket, we ex­pect an in­crease of 5-10% in south­ern pe­riph­eral dis­tricts near IT cor­ri­dors in the medium term. De­mand is ex­ceed­ing sup­ply, lim­ited new ad­di­tion till 2018. How­ever be­tween 2019 – 2020 close to 15mnsft of of­fice space is pro­posed to be com­pleted with key pan In­dia de­vel­op­ers like Em­bassy, Brigade, KRC en­ter­ing the Chen­nai mar­ket.” “Whereas in res­i­den­tial sec­tor the mar­ket has been flat and sales have been mod­er­ate. Over­sup­ply is seen in few se­lect pock­ets, how­ever projects which are wit­ness­ing steady con­struc­tion and timely han­dover are see­ing mod­er­ate to good de­mand,” states, Hunt.

fu­ture Prospects

The In­dian real es­tate sec­tor is slowly evolv­ing into a more or­gan­ised and pro­fes­sional one. It is in­ter­est­ing to see that the sec­tor is em­brac­ing pro­fes­sional stan­dards and trans­parency with open arms. While the gov­ern­ment has ini­ti­ated sev­eral poli­cies and re­forms, there is still scope for more. ‘‘The trans­parency in busi­ness is a ma­jor ad­van­tage for the buy­ers, thus aid­ing them to choose projects from re­puted builders and make wor­thy in­vest­ments, ex­plains, Irani. Thanks to Hous­ing Depart­ment and CMDA for im­ple­ment­ing on­line ap­proval sub­mis­sion, we ex­pect sub­stan­tial time can be saved in this. The early com­ple­tion of Metro and other in­fra projects on pipe line would help the real es­tate sec­tor the most,” opines, Habib. In his con­clud­ing note, Sharma,

Talk­ing about the Chen­nai prop­erty mar­ket de­mand and sup­ply equa­tion, it may see an over­sup­ply sit­u­a­tion over the next two years, pri­mar­ily due to sev­eral large projects near com­ple­tion. Around the same time, which may put down­ward pres­sure on rentals. W. S. Habib

says, “We believe that poli­cies and in­cen­tives in favour of green homes can con­trib­ute to ur­ban devel­op­ment that is truly re­source-sen­si­tive and fu­ture-fo­cused.” Chen­nai is one of the top 10 global au­to­mo­tive clus­ters, and this sec­tor con­tin­ues to at­tract in­ter­est across var­i­ous au­to­mo­tive an­cil­lary units. The au­to­mo­bile and en­gi­neer­ing com­pa­nies al­ready es­tab­lished in the state are ac­tively de­ploy­ing their ex­pan­sion plans. Large orig­i­nal equip­ment man­u­fac­tur­ers (OEMS) are in­sist­ing that their sup­pli­ers set up their fa­cil­i­ties near their plants to en­able them to main­tain in­ven­tory sup­port for just-in-time pro­duc­tion. Ac­cord­ing to JLL In­dia Re­search, for the cur­rent fi­nan­cial year, Tamil Nadu has a po­ten­tial in­vest­ments pipe­line of over Rs. 19,033 crore. Since 2015, the state has seen over 46 in­vest­ment pro­pos­als with cu­mu­la­tive in­vest­ments of ap­prox Rs. 37,381 crore. The re­sult­ing em­ploy­ment com­mit­ment from in­dus­tries is over 30,000 di­rect jobs in the semi-skilled / skilled and un­skilled cat­e­gories. Apart from in­dus­trial ac­tiv­i­ties, the lo­gis­tics and ware­hous­ing in­dus­try is ex­tremely up­beat in the state and keep­ing the mar­ket ac­tive.

JA­PANESE in­vest­ments into tamil Nadu

At present, Tamil Nadu is home to about 600 Ja­panese in­dus­tries - Chen­nai has the largest num­ber of these, ac­count­ing for al­most 2% of the to­tal num­ber of Ja­panese com­pa­nies op­er­at­ing in In­dia (with more than 1000 Ja­panese ex­pa­tri­ates now liv­ing in Chen­nai). Ja­panese FDI in Tamil Nadu is es­ti­mated to be over US $1800 mil­lion, with ma­jor in­vest­ments by the likes of Nis­san, Hi­tachi, Toshiba, Yamaha, Ko­matsu, Mit­subishi, etc. Not sur­pris­ingly, the Gov­ern­ment of Tamil Nadu is now fol­low­ing an in­sti­tu­tional mech­a­nism for im­prov­ing the busi­ness en­vi­ron­ment for Ja­panese com­pa­nies in the state.

Tamil Nadu Govt should have com­pre­hen­sive IT poli­cies to at­tract best IT com­pa­nies, which are oth­er­wise mov­ing to Hyderabad or Bengaluru. But most im­por­tant is co­or­di­nated in­fra­struc­ture plan­ning that will give im­pe­tus to real es­tate mar­ket of Chen­nai. Haresh Kishor

Sarita hunt

Su­nil Sharma

rocky is­rani


haresh Kishor

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