Chennai - The housing paradise
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The real estate market in Chennai has been flourishing for some time now, with property prices sky rocketing. The Chennai property market has displayed an unsurpassed potential to attract huge investments from the state government as well as from other states. Many developers have remarked that Tamil Nadu has been developing significantly, with real estate market transactions reaching almost Rs 30 billion. The growth in the IT industries and the BPO companies hasmade commercial Chennai properties very popular. To add to this, leading housing companies are coming up with innovative buildings and villas thus augmenting the housing opportunities in Chennai and adjoining areas. Along with the growing demand for Chennai properties, even ready constructed houses have attracted investors. Hence, people from all walks of life are seeking affordable flats and apartments for sale. The sheer number of buyers has made housing companies and builders in Chennai focus more on the availability of flats or apartments. Thus, it can be said that the real estate market in Chennai is on a high with huge investments being made into it and with a lot of professional activities cropping up around it.
According to a report by Property One Asia, the low interest rates and exciting home financing avenues provided by the Home Loans Companies have made owning house in Chennai possible for all even in plush localities such as Adyar, MRC Nagar, Royapettah. Owing to the influx of corporate professionals, houses on rent are available at competitive rates while the serviced apartments in Chennai can be bought by availing appropriate Mortgage Loan. The residential areas within the city are highly saturated and no new supplies are coming up in these areas. The areas include R A Puram, Adyar, Nungambakkam, Chetpet, Poes Garden, Alwarpet, T Nagar, Anna Nagar and Chilpauk.
IT/ITES Sector
The major growth in real estate sector in Chennai is because of IT, ITES, manufacturing sector and SEZs. The maximum number of IT companies and industries are located in the suburb area of Chennai. This has forced people, who are into IT, to look for properties in suburb rather than commercial areas as they would have the advantage of residing nearby to their workplace. As a result, developers are constructing large townships in places like OMR and Sriperambadur where buyers have shown positive response in buying the property. Each day new buyers are emerging and so the new trends in building have come up. With the rising new trend, the multistory apartments are changing the existing tradition of stand-alone bungalows. The city is going through redevelopment phase wherein the single floored and multi-storeyed buildings are ruling the whole city resulting in high sales. In the residential sector, the plotted developments have shown good profits and also the number of sales has increased. Overall, the present market scenario of Chennai is in a state of fluctuation. The real estate, construction, infrastructure and manufacturing have shown an increased movement in the market.
Residential Demand
There has been a change in the preference and demand in Chennai in recent months. The demand for three BHK flats has witnessed an upsurge with the area increased from 1200-1300 square feet during the recession to 1400-1500 square feet in the revival phase. The preference for two BHK apartments has also increased from 850-950 square feet to about 1100-1200 square feet in recent months. Again, the main reason for this upgrade in preferences is increased budgets made possible by improvement in the performance of the IT / ITES sector.[PAGE BREAK]
Effect Of Interest Rates
As per the report of Siva Krishnan, Head – Residential Services, Chennai, Jones Lang LaSalle India, the absence of overt speculation has also ensured that developers are moving housing prices in a stable and gradual manner. The unnatural spiking has therefore been successfully kept at bay. The interest rates are expected to decrease over the course of 2012, and this will result in greater demand for housing in Chennai in 2012. Also, the increased job security in the city has definitely helped the market to maintain buoyancy and a positive outlook. Over the last 12 months, it became increasingly evident that Chennai’s residential real estate market is significantly dependent on the IT/ITES sector. With employment stability in this sector looking a lot better now than it did in 2010, demand for housing has now reached a comfortable and dependable growth trajectory from which developers are taking their market cues.
The overall demand for residential properties in Chennai to increase once the interest rates stabilizes from their current peak. There is a very healthy demand in both the primary and secondary markets, since supply is scarce in both owing to the severe lack of land within the city. Land pricing has, in fact, surpassed the buying capacity of developers and this has put pressure on their ability to come up with viable residential products. Lack of supply and exorbitant pricing are causing both the end users and investor segments to take a closer look at suburbs with decent infrastructure.
Skyscrapers Being Proposed
If the state government heeds to the proposals of Chennai developers, the city’s suburbs will soon be dotted with skyscrapers while the supply of office space within Chennai will go up. Also, multi-level parking facilities could come up in residential apartments solving the parking problems of most city folks.
Also, conversion of one crore square feet of IT space lying idle in the state into office spaces, is another area builders are looking at. Another key proposal is to allow multi-level and stand-alone car parking facilities in residential areas. For now, such facility is allowed only for commercial projects.
The residential demand in Tamil Nadu has been strong following the entry of companies into the state. There is an influx of people from outside as more companies are moving into the state.
Demand Drivers
Going forward positive market sentiments, possible softening of interest rates, increased job security and affordable property rates in the central city Year for 2012. The residential property prices in Chennai have witnessed appreciation in a phased and rational manner, which helped in sustaining the momentum. Prices of property rose by between 8-30 per cent in different areas, but these rises took place in small compartments and in proportion to the actual sales in particular locations and projects. It is expected that similar trends are likely to prevail in CY 2012 too.
State Proposes Land Pooling Concepts
Tamil Nadu Housing Board is working on new business models such as joint development and land pooling concept in real estate development to increase supply of affordable housing, according to Phanindra Reddy, Secretary, Housing and Urban Development, Tamil Nadu.
Recently he asserted that the public sector housing provider has run out of land bank stocks and is exploring new business models. These include joint development of land and land pooling in which the land owner not only gets the market price for land but also benefits from the value addition to the land as he gets a share of the developed portion.
The State Government agencies such as the Housing Board, Chennai Metropolitan Development Authority and the housing cooperative societies are all focused on improving service delivery. Public transport is set to get a fillip with the implementation of the Unified Metropolitan Transport Authority which will coordinate with the different modes of transport. Focus is also on planned development of smaller cities and towns.
Development of satellite cities is of primary importance to bring down pressure on existing urban centres. Success stories in Delhi and Kolkata are a proof of the necessity for satellite cities.
As per the statement of the Tamil Nadu Minister for Housing and Urban Development, the housing board and the Tamil Nadu Slum Clearance Board together plan on providing over 1.85 lakh residential units at a cost of over Rs 17,230 crore over the next five years.