Realty demand slow; volumes are down greatly: Godrej Prop

Godrej Properties the real estate development arm of the Godrej Group, has created a Rs 770 crore development fund with a clutch of global investors, including Dutch pension services provider APG and Sparinvest Property Fund II.

Targeting their focus markets of Mumbai, NCR, Bangalore Pune and Chennai, the realty firm aims to develop residential properties in these cities. Godrej Properties has set-up an investment horizon of two years.

"We will fully invest the capital over that period of time and we think the projects would take four to five years from that time to execute, " says Pirojsha Godrej, the managing director and CEO of Godrej Properties.

The total life of the fund will be around six to seven years. He says that while the economic environment in the country is lagging, he feels property is quite a sentiment driven industry and should be fine.

"Property prices are holding up reasonably well. What has happened, however, is that demand is a little bit sluggish and volumes in most markets have dipped considerably," he says.

Below is an edited transcript of his interview. Watch the accompanying videos for more.

Q: What is the mood in the market itself? It is somber when you look at economic development parameters and capex parameters and not quite showing in property prices, certainly not in Bombay. Give us an idea of the markets that you operate and how property prices are behaving?

A: You rightly pointed out that the economic environment generally in the country isn't its strongest currently. But I think property is quite a sentiment driven industry. But that has not really reflected in property prices and that's true of almost all the markets we are in today. Property prices are holding up reasonably well. What has happened, however, is that demand is a little bit sluggish and volumes in most markets have dipped considerably.

My sense is given the way input costs have moved over the last year and given that prices have actually remained quite flat, it's unlikely that there is a room for a huge price correction, because developers' margins are under quite a bit of pressure. But that will depend largely on how the next few months go and whether general economic sentiment improves, because I do think ultimately property is a very sentimentally driven sector.

Q: Today Godrej is higher in terms of trade because of this property fund which you are floating with a group of investors of around Rs 770 crore. Take us through the nuances of it? When exactly would it become active?

A: The agreement on what the initial size of the fund is about Rs 770 crore and what kind of target projects we will do which is largely residential projects in the key cities of Mumbai, NCR, Bangalore, Pune and Chennai has already been put in place. Now what will happen is we will identify the actual project that we will do through this partnership and go out and actually get the land needed for those and start executing those.

We have already started working on identifying suitable projects. The great thing about this platform is it allows us as a developer to scout opportunities for land parcels at reasonable prices and be able to buy those without having to buy them on our own balance sheet, because Godrej Properties has always followed capital efficient land sourcing strategy.

This will allow us to continue to do that, but particularly in market conditions where we think there are some quite exciting opportunities to get land at good valuations this will allow us to add many new projects to our portfolio and we will also get a fee from our partners in this platform. The idea was to agree ahead of time on the types of projects we would like to do, create a platform to invest in those and then go out and do multiple projects with the same set of partners.

Q: Would they largely be Mumbai based projects?

A: We have talked about projects in five cities. The top three cities will be Mumbai, Delhi and Bangalore. The exact ratio of split between those three cities would probably depend on the types of opportunities we identify, but clearly Mumbai for us is one of our most important markets, both through projects under this platform and through our other joint venture development management fee and redevelopment models.

Q: Do you commit to an IRR or Investment Return Rate to your investors in this fund? Also share with us how your fee is structured?

A: There is no commitment or no sort of preferred or guaranteed returns at all in this structure. It's a pure equity partnership. Godrej Properties will put up 29% of the required capital. Our capital partners will put in the remaining 71%. We will get equity returns in proportion to our investments. Godrej Properties for handling the projects will also get a very substantial development management fee which will be calculated on a per square foot basis.

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Q: You do have 29% equity. Give us a sense of who the other investors are and why exactly are you all focusing more on residential projects as opposed to commercial projects? What is the rationale for that in particular? How much are you estimating in terms of investment?

A: The total investment commitment for now is Rs 770 crore and Godrej Properties is liable for investing 29% of that total amount. We have setup an investment horizon of two years. We will fully invest the capital over that period of time and we think the projects would take four to five years from that time to execute. So the total life of the fund will be sort of six to seven years. Of course we have the opportunity to increase the size of committed capital in this platform if all our partners are happy with the outcome. We think there is a good chance that over time this could be increased further in terms of size.

As to why we are focusing largely on the residential space, there are few key answers for that. One, given our capital efficient land sourcing strategy, we think residential is the more appropriate strategy for us, because typically you can sell-off plans in the residential space and your customers can basically fund the construction of the project, which is a little bit more difficult to replicate in the commercial space.

Also depending on the particular year - 70-80% of all demand for real estate in India is in the residential space. So it's fundamentally a bigger market. Lastly we think the Godrej brand while a big source of strength across asset classes is particularly advantageous to us in the residential space. So, that's why you are seeing us focused primarily in the residential real estate.

Q: Give us an idea of how many million square feet or other measures of land will come in for sale in FY13 and FY14?

A: We don't give specific guidance on the numbers in terms of square foot of new projects coming online, but we think this year will be a very robust one for us in terms of new launches. In the last couple of weeks we have launched two projects, one in Mumbai and the other in Pune. We have a launch slated in NCR this month and several launches and new phases of existing projects to be launched during the remainder of the year.

Over the course of FY13, we expect to launch either in terms of new projects or phases in existing projects about 15 as compared to five to six last year. So we do have a fairly robust launch calendar. What is exciting for us about the current environment is that while there are certain challenges with demand being weak due to economic sentiment there are also a lot of opportunities on the business development front.

I think we have been very successful in capturing those and things like the announcement of this investment platform will further our ability to add new projects which in turn will increase the amount of launches we will have over the next couple of years. So I am quite bullish in terms of the number of launches we have got slated in the next two years.

Q: There are some brokerage reports which have pointed that out there is a possibility that the gearing of the company could increase in FY13-FY14 simply because there might be increased outflow of payments going forward. Do you foresee any stress on the balance sheet of the company going forward?

A: In March of this year, in quite difficult market conditions we were able to do India's first ever IPP and through that we raised about Rs 470 crore. At the end of last quarter we actually reduced our gearing level from almost 2:1 at the end of the third quarter to just over 1:1.1 to be precise at the end of quarter four. There may in the short-term be a slight increase in debt as we get into these new projects but certainly we have a very strong focus on ensuring a healthy balance sheet.

Our borrowing costs are amongst the lowest in the industry and we will continue if there ever is a situation where our gearing gets beyond that targeted levels, we will be sure to find way to raise equities to bring that under control as we have recently done in March. For now we think we are quite comfortable in terms of the strength of our balance sheet.

Q: Your revenues in FY12 for instance were about 10-12% higher than the previous year. What could be the run-rate in the current year either in terms of volume of flats you sell or square feet you sell or in terms of the money you expect to make? Your margins were around 23%. Does it go higher? Does it stay there? Give us a broad guidance, I am not asking for specifics?

A: Last year we actually grew revenue bookings and profits from operations all by about 46-50%. Our actual net profit last year declined because of higher input costs affecting margins and because we did lower number of private equity deals for the year, but I think we saw fairly robust growth on most operational parameters last year and certainly we would like to sustain that kind of growth. It will depend a lot on frankly how the overall economic conditions tend to be later this year. We expect things to improve. We do expect further interest rate cuts and if those things happen, we think the kind of growth number I mentioned are quite repeatable this year as well.

Source: http://www.moneycontrol.com/smementor/news/finance-capital/realty-demand-slow-volumesdown-greatly-godrej-prop-725639.html

Office rentals remain stable in Chennai

Chennai

The office market in Chennai has absorbed 1.7 million sq ft of space till the end of second quarter. This includes SEZ space as well. A significant development is that most of the transactions has been reported in and around the IT corridor (OMR). Industry sources attribute to the spurt in the number of ongoing residential projects and improved connectivity levels in and around the IT corridor. According to industry sources, rentals for office space across all micro markets are stable and are unlikely to show any marked improvement during the coming quarters.

The absorption level during the second quarter was mostly attributed to the spill-over effects of office space requirements initiated by corporates during last year. No new transactions for large floor plates could be seen recently which, according to the market sources, is again attributed to the slow decision-making process aggravated by the cascading impact of global meltdown. However, a major thorny issue in Europe has been resolved as a result of which new enquiries are expected to trickle in the coming quarters, say market sources.

Vacancy levels are coming down and rentals are stabilising across all micro markets and in some cases there is a marginal pressure on the rentals, say realtors. Though transactions beyond the toll gate on OMR are said to be on a limited scale, large floor plate requirements can be catered only in this market as availability and multiple options abound in and around the area.

According to property consultants, vacancy levels are expected to remain higher amid influx of new supply level at 6.24 million sq ft before the end of the year. There are others who feel that the absorption level is likely to improve in the second half of the year, as an employer survey has revealed optimistic hiring trend during the period.

Leased commercial properties continue to be in demand across all micro markets and the expected yield ranges from 9 to 10 per cent per annum. A few developers are not keen to sell the leased commercial premises in anticipation of the continues demand from MNCs and corporates. This is one reason why the options are getting narrowed across the city for investors in commercial property.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/office-rentals-remain-stable-in-chennai

Velachery sees rise in residential sector

Chennai

Velachery, located in southern Chennai, is one of the most popular and rapidly growing suburban areas in the city. It has emerged as an upscale locality and is witness to huge demand and supply. “Velachery noted a hike of 10-20 per cent in the capital values of apartments during the last two quarters and this trend is expected to continue in future as well,” informs Praveen Kumar of Kumar Enterprises. Strategic location, near Old Mahabalipuram Road (OMR), an IT corridor, is the key for Velachery’s popularity as a realty hub.

Velachery is well-connected through MRTS, bus, rail, metro and other private transport and is accessible from different parts of the city and suburbs. “Convenient location, availability of transports and well developed infrastructure are the other advantages attracting end users and buyers,” says Abhijith Kumar of Utsav Group. Availability of good schools, malls, entertainment hubs in the neighbourhood, along with provision of basic facilities such as drinking water, power make it a favourable residential destination.

The area sees transactions by young IT professionals from neighbourhood areas as well as HNI’s and NRI’s, ensuring a balanced demand in both the affordable and premium housing categories. “Demand for luxury villas and studio apartments is also picking up,” Abhijith Kumar added.

Few of the new projects coming at Velachery are ‘Viena’ by Topographical Pvt Ltd, ‘Vedanshi’ by Shrusti Builders, ‘Arcadiaa’ by Malles Construction, ‘Meadows & PrimRose’ by KGS Group and ‘Utsav’ by Proper Ties. The new segment is witnessing a decent number of transactions, the reason why many developers have launched phase 2 & 3 of their projects.

“The current capital values of apartments here vary from Rs 5,500-Rs 10,500 per sq ft depending upon location and facilities. The rental values too saw an increase of up to 25 per cent during past four months,” informs Kishore Sen, Konnect Constructions. He attributes this to enhanced demand for rental housing and improved office leasing, which has opened numerous employment opportunities in and around the city.

Nidhi Vashisth, MagicBricks.com Bureau

Housing sector hit on the back of steep hike in guideline values

Chennai

At a time when land values started stabilising in and around Chennai, the Tamil Nadu government has increased the guideline values for land registration purposes by hiking the values from 60 per cent to 300 per cent effective April 1. This has sent shock waves among the industry and the land owners and property developers are in a piquant situation now.

The government’s reduction in stamp duty by 1 per cent has not gone well with the industry when the guideline values were raised to abnormal levels. The real estate sector is in for turbulent times due to sudden and abnormal hike in guideline values and the worst hit sector will be affordable housing segment.

According to official sources, though the revenue for the two month period (April and May) was up by Rs 100 crore, the volume of transaction has come down drastically. Industry sources say that city area transactions fell through due to reluctance on the part of buyers to absorb the hike in stamp duty.

In vibrant commercial areas like Whites road, the guideline value soared to Rs 16,000 above the market value, say property consultants. In other city areas like Abhiramapuram, the value for residential area is more than the commercial value (see table). The state government in their anxiety to curb the unaccounted money in real estate transaction has sent a wrong signal to the market which will adversely impact the housing development.

Land transactions are not happening nowadays not because of the steep hike in guideline values alone but due to the cascading impact of RBI restrictions on bank funding to realty sector, uncertainty in FDI investment, global meltdown, higher expectations of PE funds and soaring land value. What has aggravated the whole scenario further is the sudden hike in guideline values.

The worst hit in the current scenario is the affordable housing segment and the common man for whom the dream of owning a shelter will only get longer. Though official sources claim that the hike in guideline values range from 60 per cent in suburbs and peripheral areas, lack of infrastructure and diminishing margins for developers will not encourage them and only prolong the overall development of affordable housing in the coming months.

Yet another segment that bore the brunt of the hike in guideline values is the land owners in exigencies. The distress sale is not happening due mainly to the hike in guideline values, say industry sources.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/housing-sector-hit-on-the-back-of-steep-hike-in-guideline-values

Tamil Nadu CM announces various infrastructure projects

CHENNAI: As part of her government's efforts to decongest suburban Chennai, Tamil Nadu CM J Jayalalithaa on Friday announced various infrastructure projects totalling over Rs 230 crore.

A road expansion of upto one km at the busy GST Road connecting southern suburbs to the city, near the airport at a cost of Rs 1.75 crore, was also sanctioned by her.

Further, Jayalalithaa allocated Rs 231.68 crore towards road over bridges and subway at other suburban areas of Tambaram, Velachery and Kolathur, an official release here said.

The release said these efforts would help decongest these parts, which have of late become favoured destinations of real estate activity in Chennai.

Source: http://timesofindia.indiatimes.com/city/chennai/Tamil-Nadu-CM-announces-various-infrastructure-projects/articleshow/14495168.cms

Super luxury projects attract niche market in Chennai

Chennai

Not everybody can own a super-luxury project. You probably figure it is because not everybody can afford to buy one? If developers in the city are to be believed, sometimes, even the power of money may not be enough to land yourself a super luxury project. “Everybody dreams of owning one,” begins Wilson Mathews, Director – Sales and Marketing, True Value Homes, which is constructing Quadrant, a super luxury project in the heart of Adyar.

“Purchasing a unit in such projects is a matter of great pride. It is the ultimate aspiration of every person, as the amenities and the quality of the construction of such units are of the highest class.”

So, what makes for a super luxury project? “Being able to buy privacy in the centre of the city,” says Suresh Jain, Managing Director, Vijay Shanthi Builders, which is constructing Rain Forest, a group of 16 super-luxury units spread lavishly across 10 grounds of land in Kilpauk. “Top-notch facilities, high-end finishing, and the highest quality of design are a given.” Interestingly, with the exception of two units, all of them have already been sold at a price of Rs 6.5 crores each. “We take particular care to understand potential customers before allowing them to buy these units,” he says. It is only in the area of super luxury apartments that builders get the liberty of choosing their clientele. “We do so to ensure that the sheen of our project remains long after customers move in,” he adds. “Customers, apart from merely possessing the financial means to acquire such units, must have a certain taste to appreciate their life here, and to make the most of the available amenities.” From their status to their jobs, every aspect of a potential buyer is taken into consideration before accepting their bid to buy a unit.

The marketing strategy of such projects also differ considerably from the usual methods employed. “The idea is to let people become aware of the existence of such a project,” says Wilson of True Value Homes, whose Quadrant comprises of almost 100 units spread across 2.2 acres of prime land on LB Road. “Once that is accomplished, we merely await the calls. There is absolutely no cold calling or aggressive selling of these projects.” Most of the potential buyers, according to Wilson, are references. “That also enables us to find people with similar backgrounds, and often, behavioural patterns, which, in turn, helps make for harmonious living at the property,” he says.

Despite fears of an impending global economic meltdown, and concerns over the falling rupee value, business, as far as super luxury projects are concerned, continues unabated. While Wilson feels that developers could face difficulties trying to sell units that cater to a larger customer base, where people depend on their monthly income for survival, Suresh Jain points out that it may well work out to the advantage of developers in the business of creating super-luxury projects. “NRIs from America and the Europe will be more tempted to invest here under such situations,” he says. Clearly, everything is fine with the super-luxury segment, what with other developers like Lancor Holdings and ASV Constructions jumping on the bandwagon too. As Wilson concludes, “Our target customers are those who have immovable assets. Most of them are usually migrating from one residence to the other, and so, market conditions hardly have a say in our business. There is no challenge in selling super luxury units really.”

Sudhir Srinivasan, Times Property, Chennai

Professionals drive demand for PG accommodation in Chennai

Chennai

Chennai is a major commercial, cultural and educational center in south India. It is home to some of the best education institutes and research centers. The emergence of industrial growth and employment opportunity in the city attract a steady stream of skilled professionals, which further fuels the demand of PG accommodation. But unlike Delhi, the city attracts more working population who come to establish their careers than students across India.

The non-Tamilian populations that migrate to Chennai for jobs prefer to stay in PG accommodation as it provides the best and cheap temporary staying options. “Demand for PGs is driven by the working class in Chennai. This is due to the fact that most of the educational institutes have accommodation facilities and students prefer to stay within their campus,” says Ramesh Babu from Bhairv Foundations, a local realtor.

“This demand is comes more from boys as most of the non-Tamil working population is male. Men have more mobility for employment as compared to women,” he adds.

According to realtors in Chennai there is a huge demand for PG accommodation but supply is lower than the demand. Therefore the rents are high in a few localities which can be afforded by working section of the society.

“The advance for a rented apartment is as high as 6-10 months whereas for PG it is limited to just 1 month. 90% of the IT professionals do not settle here and hence PG is safer bet for them,” says Vipul Chaudhry, a local realtor from Earth Homes.

MagicBricks.com finds out which are the localities in Chennai that offers good PG accommodation and at what price.

The areas like Anna Nagar, Triplicane, OMR, Thrivanmiyur are few localities which high in demand for PG accommodation owing to its high residential occupancy rate, accessibility and connectivity. These areas are well surrounded with many schools, colleges, IT Parks, plus all facilities like shopping complex, transportation facility, such as buses, electric trains, etc.

Also, these areas offer a rent that easily fits into the pocket of a working population.

The PG accommodation in Thrivanmiyur and Triplicane areas are almost same. The rent varies between Rs 1200-8500 per month, depending upon the occupancy whereas the PG in locality like Anna Nagar starts at higher price.

This is because the area is one of the prime residential areas in Chennai that hosts number of well established schools and colleges, places of worship, shopping areas with both independent shops and chain stores and numerous restaurants. There are also a number of mid size hospitals and nursing homes catering to the local population.

Anna Nagar is also well connected with roads and railways. The locality has two bus terminuses and railway station. Therefore the area is best suited for outsiders who come with concerns of getting to know their way about, and learning to deal with people in an alien land. Here the rental values for PG accommodation starts from Rs 5000 and can goes up to Rs 8000 per person depending upon the facilities.

Another locality Chennai which has seen the spurt in demand for PG accommodation is Oragadam. The town is known for its various industries and workshops pertaining to the automobile sector. Oragadam has seen major investments from foreign companies in recent times. International Automobile majors like Daimler, Renault – Nissan, Komatsu have set up their car manufacturing plants here and will use it as a base for sourcing for their international markets. This has further open many job opportunities, and hence, the rush of working population looking for PG accommodation is obvious. Looking at the commercial development happening in the locality, the local realtors, said that today Oragadam is high in demand for PG accommodation by the migrants coming to work in the city.

Neha Nagpal, MagicBricks.com Bureau

Visuals by Harsha Khattar

Source: http://content.magicbricks.com/professionals-drive-demand-for-pg-accommodation-in-chennai

Real estate recovering from the bottom

India’s real estate sector, which has been seeing a prolonged slowing in sales and huge pile-up in property companies’ debts over the last few years, seems to have started recovering from the bottom, says a new report.

Robust demand across micro markets, stabilising debt of realty companies, continued strength in underlying demand in Mumbai and a sharp reduction in exposure of the banking sector to retail home loans are auguring well for the sector, says Aashiesh Agarwal, real estate analyst at Edelweiss Securities, in a report released today. Edelweiss has maintained an ‘overweight’ stance on the sector.

Quoting realty research firm Liases Foras, Agarwal said sales volumes remained robust, except in Hyderabad. The National Capital Region (NCR) and Chennai led the pack among major cities, driven by resolution of the land row in Noida and a pick-up in approval process, respectively. Pune saw an increase in volumes, while Mumbai remained sluggish, he said.

For instance, NCR saw a 14.8 per cent jump in volumes on a year-on-year (y-o-y) basis in the March quarter, while Chennai saw a jump of 29 per cent. Pune saw 34 per cent increase in volume offtake.

Led by strong revival in sales reported by real estate developer DLF, sales volume across the 11 major real estate companies increased 28 per cent quarter-on-quarter and 29 per cent y-o-y in the three months ended on March 31. DLF accounted for 42 per cent of the sector volumes.

The report further said aggregate net debt of top the 11 companies declined marginally to Rs 41,400 crore in the March quarter against Rs 41,700 crore at the end of the previous quarter, driven by a reduction in debt by Sobha Developers Ltd and Godrej Properties Ltd which went in for an institutional placement programme to bring down the promoter stake and reduce its leverage.

Pointing out that “bright spots are emerging” in Mumbai, the report said the pace of percentage decline in property registrations has been losing momentum, indicating signs of bottoming out.

“Property registrations for March and April were 5,830 and 5,150, respectively, well above the January-February numbers of 4,100-4,300, indicating an uptrend in registrations,” it said.

The Maharashtra government’s recent move to introduce amended development control rules for Mumbai is a positive and will spur new launches in city, the report said. Further, exposure of the banking sector to retail home loans has reached an eight-year low, which lessens potential concerns of a credit-led bubble in real estate, while also providing headroom for future growth.

Source: http://www.business-standard.com/india/news/real-estate-recovering-frombottom-/477300/

Chennai records one of the biggest jumps in residential prices

Chennai

A recent study points out that Chennai has recorded one of the biggest jumps in the residential property market in India. What can this be attributed to? Chennai, as we have come to believe, is a conservative market. But the recent price rise in the city’s residential market paints a different picture.

The National Housing Bank (NHB) Residex Index shows that Chennai has registered a 204% increase in prices of residential property in the period between 2007 and 2012. While the price rise may seem exponential, developers argue that it’s not really the case.

S Ramakrishnan, CEO, Marg properties, says, “It is true that there has been an increase in prices, but that’s the case with all the cities. The main reason behind the increase is the fact that, to begin with, base prices in Chennai were much lower than other cities. This correction is inevitable. The city is still not as expensive as Mumbai or Delhi. Property prices tend to go up in anticipation of infrastructure development which is why the growth corridors continue to see a lot of real estate activities. Having said that, Chennai remains an end-user driven market and hence, the price rise is a normal phenomenon.”

Some developers like Devesh Bhuva of Prince Foundations believe that the increase in guideline value has contributed to the huge price hike. He says, “In addition, prices of construction materials, labour and fuel have gone up. All these factors have added to the price of a residential property. With prices set to rise further, this seems to be the right time to invest in a property.”

Vineet Singh, Business Head, 99acres.com, sees this as a healthy sign of growth and stability. “Chennai is a relatively strong and stable market as indicated by the year-on-year healthy increase in price. There is adequate supply and demand in this market and the increase of 11 percent is not abnormal. Therefore, end-users/first home buyers can look to buy property at the current rate as prices are expected to grow at a similar pace over the next twelve months as well,” he says.

As per a study by the portal, property prices in both Ambattur and Anna Nagar witnessed a 16% increase in Q1-12 over Q1-11. Mogappair saw a 22% appreciation during the same period with per sq ft rates being around Rs 3,500 in Q1 2012 . T Nagar, Urapakkam and Medavakkam saw prices appreciate within the range of 15% and 23% in Q1-12 over Q1-11. During the same period, Madipakkam and Pallikaranai saw prices move up by 6% and 3% respectively. Thoraipakkam, on the other hand, saw prices dip by 2% during the same period.

A steep rise in demand, according to Ganesh Vasudevan, Business Head and Vice President, Indiaproperty.com, is undoubtedly the main reason why prices in the city have hit the roof. “Buyers are looking at homes that range between Rs 25 lakh and 40 lakh, which falls above the affordable-home range,” he says, “Inadvertently, a bulk of the ready-to-occupy homes, that these buyers opt for, lie in Urapakkam and Medavakkam, which also explains why these areas have seen a significant price rise.”

As a matter of fact, these areas have seen a far steeper price rise than a locality such as the Old Mahabalipuram Road (OMR), which has recently been the hotbed of real estate in the city. “That is simply because the ready-to-occupy homes on OMR are far lesser than those under construction,” says Ganesh.

Mukund Ramakrishnan (27), a city-based investment banker, recently purchased a 750-sq ft apartment in Sholinganallur. However, for the time being, he has moved in with his family to a rented apartment in T Nagar. “Buying an apartment close to OMR was a great investment and could well serve as an ideal home in the near future,” he says, “However, in my opinion, proximity to quality schools and social infrastructure is still something that the locality lacks.”

According to Mukund, living within the city does have its share of benefits, most of which, the suburbs lack. Since buying an apartment within the city has become close to impossible for the middle-class buyer, renting one out seems to be the only option. “It isn’t a bad option either,” Ganesh points out. “Despite the rise in prices, rental rates haven’t seen a proportionate increase because supply is abundant.”

Although most of the areas that have seen a sizeable price rise lie in South Chennai, Anna Nagar and its suburbs are perhaps the only exception to this rule. Prices in areas like Mogappair, Kolathur, Ambattur and Anna Nagar itself, have seen an average increase of 15.26% this year, over the last, with Mogappair topping the list at 22.07%.

“Mogappair is perhaps the closest you can get to Anna Nagar, whose homes like most other urban havens, are virtually impossible to purchase,” says R Rajarathanam (28), software professional, “Luckily I bought an apartment in Collector Nagar, Mogappair, last year, before prices hit the roof.”

Although these skyrocketing prices might just point to an industry in the pink of its health, Ganesh feels that a slight demand-supply mismatch is perhaps the only fly in the ointment. “Madipakkam, Mogappair, Medavakkam, Urapakkam and even Nolambur have seen a significant price appreciation owing to the large demand that exists in these pockets,” he says. “However, strangely, many new apartments are being constructed in areas like Porur and Sriperumbudur, which means that demand in the former might well continue to exist.”

Is the price hike justified, though given the fact that most parts of the city and the suburbs have poor or no infrastructure to support growth? “I agree,” says Ramakrishnan, “The Government needs to take proactive measures to improve the infrastructure in these areas. People are ready to invest if there is adequate social infrastructure. And it is not a good idea to earmark more than 25 percent of your salary towards investment in property, as repaying your loan and managing your finances may prove to be a burden. The good news is that there are projects in the suburbs that are well within the reach of an average homebuyer. So, this is a good time to invest and there is really no need to panic over the price hike.”

Harini Sriram and Jude Sannith, Times Property, Chennai

Source: http://content.magicbricks.com/chennai-records-one-of-the-biggest-jumps-in-residential-prices

Chennai witnesses rise in demand for villas

Chennai

According to a recent survey conducted at a property fair at Edison, New Jersey, an estimated 31% of the visitors preferred Chennai for investment. The report also revealed that the Chennai real estate market is witnessing a growing demand for villas as compared to conventional apartments.

Rajesh Babu, Founder of RECS Group, a city-based real estate consultancy firm says the main advantage of owning a villa is having complete ownership of land. “Such properties have better resale value and, if not bound by a clause, the owner has the right to demolish and reconstruct a structure in the future as well. When compared to apartments, a villa does cost more, as the cost of land is involved, but they are ideal investment options and come with a range of amenities.”

S Ramesh, a city-based business professional feels investing in a villa is beneficial in the long run. “I have been on the lookout for viable investment options in the city and I have booked a villa on an upcoming project on OMR. The range of amenities that they offer cannot match any apartment,” he says. Elaborating on the preferred locations for villa projects, Rajesh adds, “The top locations include ECR, OMR, Sriperumbudur/Oragadam and GST Road. Suburban and peripheral locations are preferred for villa developments and there is limited development of such projects within the city due to the non-availability of land parcels inside the city and their high costs,” he says.

Considered a viable investment option, there is a rise in demand for villa projects on the outskirts of the city, especially among NRIs (mainly the US, South Asian countries). The Town and Country Project, being developed by Lancor Holdings at Sriperumbudur, is said to house over 400 villas and caters to this very niche segment. R V Shekar, Managing Director, Lancor Holdings, is confident that the first phase of the project will witness 50% investment from NRIs. “The trend of NRIs investing in villa projects within the city is on the rise and they make for perfect summer homes, besides being great investment options.”

Each villa comes with its own exclusive garden, two car porches, terrace, sit-out areas and combines the luxuries of an independent home with the advantages of a the lifestyle of a gated community ,” he says. Suresh Jain, Managing Director, Vijayshanthi Builders, says villa projects cater to a premium and niche segment of buyers. “Investing in a villa has a range of benefits such as amenities, privacy, no overhead costs and security. With land prices being on the rise, villa projects fare better than conventional apartments, from an investment perspective,” he says.

Highlighting the advantages of such projects, Rajesh adds,”Well-made roads, gardens/landscaping, parking areas, play areas, swimming pools, gymnasiums and club houses are common amenities found in any such project. Different formats are available to suit the needs of different categories.” Pratish Devadoss, Managing Director, VGN Properties, says the concept of mixed development caters to a wider segment of buyers and has its own benefits.

“Constructing apartments and villas as part of the same project offers buyers a range of options. Villas are mainly purchased by individuals from high income groups. Chennai is catching up with the trend after cities such as Delhi, Bengaluru and Hyderabad.”

While most villa projects are developed in the outskirts, Naresh Jain, Managing Director, Influence Infrastructure, decided to set up a project in the heart of the city. “Apart from two similar projects on ECR, the current project ‘Masterpiece’ is coming up at Nungambakkam. There is a huge demand for such projects even within the city and thus I decided to venture this untapped segment.

People are willing to invest 15-20% more than a conventional apartment and the wide range of world-class amenities that we offer make it a wise investment option. Also, the per sq ft usage is more in a villa rather than an apartment which is a hidden advantage,” he says. Each villa sprawls across 4,250 sq ft and will cost Rs 9 crore on an average. “In my opinion, the amenities offered in a villa project make all the difference. An underwater gym, snorkeling bay, indoor gaming arena, swimming pool, spa are some of the amenities that will be part of every villa,” he says.

Nidhi Adlakha, Times Property, Chennai

Source: http://content.magicbricks.com/chennai-witnesses-rise-in-demand-for-villas

Investors Clinic witnesses 20% demand rise for Indian properties

DUBAI — Investors Clinic Infratech, a leading real estate marketing and brokerage firm operating under the brand name of “Investors Clinic”, has successfully marked its footprint in the UAE within just six months of starting Dubai operations.

In a short span, the company has successfully served over 1,000 NRI families and have witnessed a strong 20 per cent increase in demand from Indian expats in the second quarter of 2012. The UAE-based NRIs are generally looking for investment property back home (rather than end use) within a price range of Rs7.5 million to Rs15 million with an assured return.

In the GCC alone, an estimated 5.5 million to six million NRIs are working today including semi-skilled and unskilled labourers. According to banks in the Gulf, the average home loan size is Rs3-7 million and the predominant demand revolves around apartments. The overall home loan business in Dubai alone ranges from Rs7.2-8 billion, according to an Economic Times report.

Honey Katiyal, CEO, Investors Clinic, said: “Rupee falling might be a bad news for India but real estate tends to gain from the development. It is the time when Non Resident Indians will benefit the most in Indian real estate market. The real estate market especially in Delhi NCR is vibrant with offerings for every segment. The NCR is the largest residential market in the country by sheer volume of residential units launched. Currently, it has more units than the combined tally of the other five metropolitan cities of Mumbai, Chennai, Bangalore, Kolkata and Hyderabad.”

Source: http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/uaebusiness/2012/June/uaebusiness_June92.xml§ion=uaebusiness

Chennai’s office space demand slows down

Chennai

Chennai’s office market has slowed down with less than a million sq ft of office space being absorbed till May this year. While corporates are deferring their decisions to commit large spaces, smaller deals in the area range of 10,000–25,000 sq ft are happening across micro markets. This is because of the availability of good quality office spaces in CBD areas.

According to market sources, commercial property developers are only servicing the existing requirements of clients, whereas new enquiries are slowing down, a clear indication of the impending overall slowdown in the market. Even the existing requirements were initiated during last year and in the beginning of this year and the spill over effect are only seen now.

There is another reason for the reduction in supply level. Most of the property developers and landowners prefer residential development which has resulted in the restricted supply level of office space in non-IT building both in city areas and suburbs. As a result, in the medium to long-term, supply level of good quality non-SEZ office space will be restricted in the coming years.

Rentals for office space are firming up across micro markets but they are marginally up in CBD areas. Rentals are marginally up on OMR before the toll gate, but they are softening for buildings located after the toll gate. However, the preferred locations among corporates continue to be OMR, as there is organised supply level in the corridor. Whereas for non-IT sector, a few office buildings are coming up in CBD areas like Anna Salai and Greams road.

A significant development is that supply level of office space in the non-IT sector is getting restricted both in city areas and suburbs. With the result rentals may harden in the coming years if adequate development is not forthcoming for commercial space, say property consultants.

Though the vacant spaces across micro markets in the city look high in today’s scenario, it is not in the preferred locations by corporates and MNCs. Land owners in city’s prime areas are not even contemplating commercial development but predominantly focus on residential development. The cumulative impact of all this will be negligible non-IT office supply level in the coming years, according to realtors monitoring the supply movements of office space in the city.

The demand for SEZ space is growing with the supply levels on GST road, Mount Poonamallee road and OMR firming up.

Outlook:

According to industry sources, those who have already taken a plunge for expansion requirements in Chennai may go ahead with their plans. But others who are in the process of decision making on expansion may slow down and even postpone their requirements, a situation that does not augur well for the commercial property market in the city. The city is likely to witness absorption of 5.3 million sqft by the end of this year.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/chennais-office-space-demand-slows-down

How southern cities escaped the real estate bubble

Everybody cribs about how costly buying real estate in Indian cities is. It's a national pastime of sorts. But nowhere is the collective griping greater than in cities like Mumbai and Delhi, where prices have moved northwards faster than the rest of the county.

In comparison, realty prices in south India are saner and everybody, from banks to realty developers to the first-time buyer feels a lot more comfortable. Like RV Verma, chairman of the National Housing Bank (NHB) puts it, "For banks, Chennai and Bangalore are one of the best centres. They feel comfortable as these markets are stable and the potential for NPAs [non-performing assets] is lower."

The past year has seen home sales slow down across the country. The slump in sales has been pronounced in Delhi-NCR and Mumbai, over 40% compared to the previous year. A combination of exorbitant property prices and high home loan rates made buyers balk. Realty sales in south India were down too, but thanks to an improvement in the fortunes of the IT sector, not as sharp.

"Bangalore and Chennai are still more affordable compared to other big cities," says Hariharan Ganesan, manager, research at property advisory firm Jones Lang LaSalle (JLL) India.

Land as Gold

So what's keeping prices in check in southern cities? "Scarcity and expensive land parcels have hit the affordability factor in Mumbai and Delhi. However, land is not priced out in the south," says JC Sharma, managing director and vice-chairman of Sobha Developers, which had reduced property prices by 10% post-2008 slowdown.

The north has also seen a rise in property prices because of the speculative nature of the market. It is also largely an investor-driven one. "In the north, a passion for real estate along with the need to park black money has pushed up property prices dramatically in recent times," says Anckur Srivasttava, chairman of GenReal Property Advisers.

Says Anshul Jain, CEO of DTZ India, a real estate consultancy: "Around 70% of the realty market in NCR-Delhi and Mumbai is investor-driven." An investor-driven market sees more distortions and is less transparent. Residential property prices in Bangalore, Hyderabad and Chennai have seen a rise of 1-35% since the fourth quarter of 2009, says JLL in a recent report. In contrast, Mumbai and the NCR have seen residential values run up between 20% and 40% in the same period.

The Steady South

Southern realty's absorption rate has been helped by the cautious pricing strategies adopted by local builders. In contrast, in Mumbai and NCR, property prices have already crossed the peak levels of 2007. New launches in south India are still predominantly in the Rs 4,000 per sq ft range compared to many parts of the NCR and in Mumbai where project launches are in the Rs 7,000-10,000 per sq ft range.

"We have seen stable sales in the south. Sales in the last fiscal were better here than in the north," says Jackbastian Nazareth, CEO at Bangalore-based developer Puravankara Projects. According to real estate research firm Liases Foras, Bangalore sold 10.55 million sq ft of property in the March quarter, as compared to 9.16 million sq ft over the same period last year. Chennai's property market registered a growth of 26% in the quarter.

Low Inventories

All this put together has meant that unsold inventory is far lesser in south. Chennai and Hyderabad have a total of 42.75 mn sq ft and 33.38 mn sq ft of unsold stock each. In comparison, Mumbai metropolitan region and NCR have 121 mn sq ft and 233 mn sq ft of unsold inventory, which will take at least 23-40 months to get absorbed, says Liases Foras.

On the housing finance front, the southern cities accounts for nearly 40% of the nationwide disbursals of Rs 1.95 lakh crore (retail home loans) for 2011-12. "While Mumbai and Delhi-NCR have slowed down, Chennai, Bangalore, Hyderabad, Pune and Kolkata have led the demand for home loans," says VK Sharma, chief executive officer of LIC Housing Finance.

Going Strong

The commercial property segment also continued to be in an upbeat mode with Bangalore, Chennai and Hyderabad accounting for nearly 45% of India's office stock, largely due to the IT and ITeS sector.

"Commercial space supply in the southern cities is in line with demand. We have leased 99.4% of the office space and have an additional 7 million sq ft under execution," says Raj Menda managing director of RMZ Corp, a developer. Demand was driven by IT and ITeS sector, with 64% of the country's IT SEZs are housed in the southern cities.

"With a total stock of nearly 140 mn sq ft in the major cities of south India, the vacancy rate by end 2012 is expected to be 16%, considerably lower than the pan-India vacancy rate of over 20%," says a JLL report.

Source: http://timesofindia.indiatimes.com/business/india-business/How-southern-cities-escaped-the-real-estate-bubble/articleshow/13550940.cms

Demand for land picks up in Chennai

Chennai

After a considerable lapse of time demand for vacant plots is gaining momentum across all micro markets in Chennai. Among the factors attributed to the sudden revival are investment inflow into growth corridors like Oragadam, improved connectivity level, transportation and spurt in the number of housing projects under development in suburban and peripheral areas.

“There is a perceptible shift in demand for plotted development projects in that enquiry levels are up by 15-20 per cent over last year”, says Dinesh Babu, Manager, Marketing, ABI Estates Pvt Ltd. This is in spite of the fact that government has recently hiked the guideline values for land across the state.

Yet another factor that is convincing homebuyers is the postponement of homebuying decision due to a combination of factors. Those who are unable to take a firm decision due to locational preferences and price, are convinced that the only way to compensate the growing home prices is to plough back smaller investments which is one reason for the sudden spurt in demand for vacant sites across the city.

The rate varies from Rs 500 to Rs 1200 per sqft for units located in 50 km radius from city centre and Rs 250 to Rs 1,000 per sqft in 100 km radius. Here again prices vary depending on the location, road width and proximity to landmark areas. If the project is well maintained and has a club house, a premium on the sale price is demanded by select developers.

Plot loans are available from a few institutions but at a higher lending rate and the quantum of loan is restricted to the guideline value of the property which is less than the market value. This increases the upfront margin money for investors seeking plot loans. A majority of the housing finance institutions insist on construction within the prescribed period and so investors may not be able to benefit much out of plot loans if the intention is to just make medium to long-term gain.

According to industry sources, investors should enter into plotted development projects only if their investment horizon is beyond five years. This is because 100 per cent price appreciation is possible in 50 km radius in five years and in 100 km radius, it might take 7-9 years to reach that level of appreciation, say developers undertaking plotted development projects.

Though the number of organised players in plotted development projects do not even cross double digit figure, mushrooming of unorganised players in far flung areas is a disquieting feature. Apart from the 24×7 maintenance, ground realities have to be observed before plunging into investment as that will bring value to the overall investment, caution property experts on condition of anonymity. This is because a number of investors have been taken for a ride by unscrupulous elements in the industry and moving from pillar to post to seek justice.

Among the basic documents that need to be verified by investors in plotted development projects specific mention must be made about title deeds, death certificate in case of inheritance by intestate succession, Will and probate in the event of testamentary succession, revenue documents like Patta, chitta and adangal, encumbrance certificate for a minimum period of 30 years, layout sanction for the plot, proof of documents to show EB connection, MMWSS&B system, and authentic document to establish the identify the vendor.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/demand-for-land-picks-up-in-chennai

Realty sector hit as IT industry demand goes down

BANGALORE: The commercial real estate market is facing tough times, with office space absorption across India's seven largest cities dropping 12% quarter-on-quarter in the January-March 2012 period due to uncertain economic conditions coupled with the euro zone crisis.

The trend is likely to continue for the next few quarters, with absorption of office space expected to drop by 10-15 % for 2012 due to lower demand from the information technology sector.

Demand from IT/ITES sector has dropped from the peak of 68% in 2005 to 35% at present due to increasing cost pressures faced by these firms. Growth expectations of India's IT sector has been lukewarm so far, with software services exporters complaining of clients' delay in deciding on the technology spend. Compared to around 16% growth in year to March 2012, trade body Nasscom has forecast an 11-14 % growth rate for the year to March 2013. "Things are not as rosy as they were in 2010.

Most corporates are adopting a 'wait-and-watch' policy . The majority of demand in the first half of 2012 was spillover of work-in-progress deals from 2011. The demand thereafter will be influenced by the Indian economic performance and outlook of global markets," said Rohit Kumar, head of research, DTZ India, a real estate consultancy firm. Total commercial office space absorption for Q1 of this year was 7.4 million sq ft, representing a decrease of 12% q-o-q and 15% y-o-y. Vacancies across cities are expected to rise in 2013, except Bangalore," a recent report by DTZ India said.

Currently, demand for Grade A office space is driven by foreign companies from the US and European Union, which contribute a lion's share of lease transactions across major cities in the country. Demand for office space from the US-based companies have been stagnant; these companies have been contributing 48% of the total office space demand in the country, followed by India and European countries.

Larger IT firms such as Infosys and Wipro have projected negative to flattish growth in June ending quarter, and analysts expect at least another 1-2 quarters before the sector hits the growth track, depending on recovery in the US and Europe. "There has been no escalation in realty budget as companies look to reduce operating costs.

IT/ ITeS firms have reduced their real estate budget by 5-8 % this year as they wait for renewal of contract from clients before they can take on additional floor space," said Sridhar Raghavendra, founder of FM Zone India, a real estate and facility management firm representing IT/ITes firms.

Some of the companies, which are looking to occupy large space and are yet to sign deals, are Juniper Networks (500,000-700 ,000 sq ft), Intel (120,000 sq ft), Cyprus (200,000), Volvo (700,000 sq ft) and Eurospace (300,000-500 ,000 sq ft) "There are some larger commercial space requirements floating in the market, but no deals have concluded so far. Decision making by corporates have slowed down since fourth quarter of last year.

Companies are also staggering occupancy time line and do not want to occupy large space at one go," said Naveen Nandwani, director of property consulting firm Cushman & Wakefield at Bangalore.

Source: http://timesofindia.indiatimes.com/tech/enterprise-it/infrastructure/Realty-sector-hit-as-IT-industry-demand-goes-down/articleshow/13390862.cms

Oragadam gets a facelift

Chennai

From a docile suburb to an industrial hub of Chennai, this is how Oragadam has been transformed in a brief span of five years. With the state government signing MoU for setting up auto majors’ expansion plans, Oragadam has been driving the attention of both ancillary industries and real estate developers to change the skyline of the city.

The city appropriately called as the Detroit of South Asia has six global car manufacturing companies. A few years ago the entire country produced less than a million cars. Today, six car manufacturing plants in the corridor alone account for 1.28 million cars to make Chennai as one of the top 10 global car manufacturing centres.

A number of MoUs have recently been signed by the state government with the auto majors. Ashok Leyland-Nissan joint venture will invest Rs 4,150 crore to set up a commercial vehicle manufacturing plant in Tamil Nadu and most of the investment would be for the greenfield plant in Oragadam. Daimler India which has a plant in Oragadam will double its investment in the state to Rs 4,000 crore. Allotment of 50 acre of land has been made in Oragadam by the government to set up a two wheelers factory by Royal Enfield, a unit of Eicher Motors at an investment of Rs 350 crore creating 300 new jobs. The proposed new investments would create 3,000 new job opportunities and additional 20,000 indirect jobs.

An estimated 120,000 people are currently employee in the Oragadam-Irungattukotai-Sriperumbudur corridor. This is expected to go up to 200,000 as more and more ancillary companies become operational in the coming months.

There are not many housing projects to cater to the mid-segment and lower mid-segment in the area. Arun Excello has launched affordable housing project in Oragadam.

Whereas Hirco has undertaken development of over 369 acres in the area. More developers like Prince Foundations, Inno geo city, KGS, True Value Homes, ETA Properties, Vijayshanthi Builders, and Tata Housing are developing residential projects. The state highways en route to Padappai will witness a number of residential projects in the coming months. Land values are inching high due to surge in demand.

A number of state highways from GST road and Sriperumbudur are now leading to the Oragadam junction and with the expansion of roads, connectivity levels will further improve. However, retail and entertainment centres, schools and hospitals are the need of the hour to encourage more people to shift to suburbs.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/oragadam-gets-a-facelift

Head to South Chennai for bargains

On the 30-km stretch of road to the south of Chennai, popularly known as OMR, the supply of houses for rent far outstrips the demand.

It is that time of the year — summer holidays, schools closed, travel … but not all families will be looking at an outing. It is also the time when people shift houses.

Job transfers can happen at any time of the year, but families mostly move only when the schools are closed. The neighbourhood where a young family with a child decides to live depends on the school's location.

In Chennai, house searches are on. House rents are up by about 10-20 per cent in the last one year.

This year a new feature is the increased activity in the suburbs and peripheral areas of the city; for those in the real estate business the periphery are areas over 10-15 km away from the city. But with the supply of houses far exceeding demand, rental values are subdued on the outskirts.

The heart of the city, the prime residential localities are as usual in peak demand but houses are simply not available. Land prices running into a few crore rupees for a 2,400-sq.-ft plot has made housing unaffordable and new projects are scarce. In prime residential areas, such as Nungambakkam, Alwarpet, RA Puram and Egmore in the central part of Chennai, a 10-year-old, two-bedroom apartment of about 900-1,100 sq. ft can be rented for about Rs 18,000-20,000 a month. A newer house of the same size can set the tenant back by about Rs 25,000 a month, says Mr L. Thayanithi, Vice-President, Chennai Real Estate Agents Association.

This is the fastest moving segment as the size is ideal for a family of three or four.

A three-bedroom apartment in these localities will get the owners a rent of about Rs 35,000 to over Rs 40,000 depending on the location and vintage.

LEASE RENT

For a single-bedroom unit — there are few new ones within the city — people pay up to Rs 10,000 a month. But these are available in the older sections of the city: Triplicane, Mylapore, Royapettah or Teynampet. These are localities that have a diverse market segment where houses are also rented out for up to Rs 1 lakh a month or more.

In the lower segment, a long-term lease is in practice, says Mr Thayanithi. For a deposit of about Rs 8-10 lakh a tenant can move in for about two to three years. The only monthly payment will be the electricity or other utility bills. The deposit is returned without interest when the tenant vacates.

Typically, this system is preferred by traders or people in small businesses who need the cash. For the tenants, the benefit is that they do not have to fork out the six to 10 months deposit that house owners demand when they let their house out for monthly rent.

In well-established suburbs like Velachery a two-bedroom unit of about 800-1,000 sq. ft can be rented for Rs 10,000 to about Rs 12,000 if the house is on a main road, says Mr Thayanithi. Houses further away from the main road are available for around Rs 8,000.

Chennai has the advantage of a diverse industrial and commercial base and the proportion of people moving in from outside the State is high. Local residents, even those with their own houses, shift to new localities for the sake of easier access to schools and offices. They let out their own house, he says. So this churn happens during the summer holidays, he says.

NEW SUPPLY

A unique feature this year is the spurt in availability of new apartments along the Old Mahabalipuram Road, the OMR, as it is more popularly known. This is the place to go to if you are looking for a modern apartment at affordable prices as compared with the rates in central areas of the city.

This 30-km stretch of road to the south of Chennai starting from Adyar has been the scene of major real estate development in recent years. Large projects of several hundred apartments and township-size projects are in the final stages of completion and houses are being delivered.

Mr Gautam, a real estate broker, familiar with this stretch estimates that over 5,000 two-bedroom apartments are available and ready to be moved into. Typically, in the popular areas such as Thoraipakkam, Sholinganallur, Padur or Kelambakkam, a two-bedroom house is available for rent at about Rs 15,000-20,000. These are most in demand while larger houses see no takers.

Over 1,500 apartment of three bedrooms and total space of about 1,600-1,800 sq. ft are available for about Rs 20,000 to 25,000 a month. But the owners are demanding over Rs 35,000 and prefer to wait.

In the high-end, luxury space, there are over 50 houses in the four-bedroom size but there are few takers. These are usually let out to people operating serviced apartments who furnish the place and sublet the space to companies. These fetch about Rs 22,000 a month.

For now on the OMR, the supply of houses far outstrips the demand, he says.

According to Mr Thayanithi, for a house owner on the OMR the property is a second house and is meant purely as an investment or as a gift for the kids. The owner probably lives in the city or is an NRI. So renting out is the only option for them.

A study by 99acres.com, a real estate portal, says rents in Chennai have jumped in the last one year.

A press release quoting Mr Vineet Singh, Business Head, 99acres.com, said the city has become a centre for outsourcing jobs professionals as Chennai offers good career prospect.

There are various types of homes available on rent to the prospective tenants — apartments, flats, independent homes and condos, and choices suiting every budget.

Rentals of a three-bedroom house in key localities of Chennai South show that in the residential areas of OMR and Sholinganallur, rents increased by about 27 per cent and 34 per cent.

At T. Nagar, Medavakkam, Thoraipakkam and at Chromepet on the GST Road, rents appreciated by up to 20 per cent. While at Perungudi and Velachery rents dipped by 5-7 per cent.

Source: http://www.thehindubusinessline.com/features/investment-world/article3412563.ece?ref=wl_features

Growing demand for expatriate housing in Chennai

Chennai

With the influx of global auto majors and the expansion of IT majors in Chennai, the number of expatriates looking for housing is up over the years. The city is now home to an estimated 7,000 expatriates mostly from the European countries.

In Chennai, expatriate housing demand invariably revolves around coastal area for independent units. Gated community development and row houses are also in demand. While South Chennai is the preferred location, demand exists for Anna Nagar from Japanese expatriates who are working in North Chennai.

Among the criteria for selection of housing in particular for expatriates moving with family, specific mention must be made about the presence of an international school, access to key centres, ambience for a comfortable social lifestyle, etc. In terms of housing, they are specific about 3 BHK units with a range of amenities like guest room, study room, party area, balcony, swimming pool, garden area, power back up and 24×7 water supply.

A number of such facilities are mostly available on the coastal area which is one reason for the surge in demand for housing from expatriates in the vicinity.

Rentals range from Rs 1 lakh to Rs 1.25 lakh per month for luxury apartments and independent units built to international standards on the coastal area overlooking the sea vary from Rs 3 lakh to Rs 4 lakh per month. Of course there are properties available in the price range of Rs 1 lakh – Rs 4 lakh.

According to Anita Krishnaswamy, President, Global Adjustments Services Pvt Ltd., the demand for expatriate housing will fluctuate depending on the schooling time in the city. During the months of January and August, demand is high as new people will be joining and school reopens for the new academic year.

Apart from villas, demand for serviced apartments is gaining momentum now as short-term assignments ranging from 4 to 8 weeks upto three months drive expatriates to the city. In which case expatriates do not prefer to take an independent house but instead wish to stay in serviced apartments. Most of the relocation agencies operating in the city are able to provide pre-travel services to gear up the expatriates for a comfortable living in the city.

Most of the lease arrangements are through corporates and renewable every year. Landlords prefer company leases to individual ones in the city.

On the flip side there are cultural and communication barriers. For many, going through multiple stakeholders to resolve minor issues irks them as they are exposed to single agency in other countries. This is where relocation agencies play a key role in providing training on how to handle varied groups while living in India.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/growing-demand-for-expatriate-housing-in-chennai

Office space has no takers, builders bank on housing

CHENNAI: South India houses close to half of the country's office space. But with office vacancy rate inching higher, real estate developers in the south are eyeing the residential space for sure returns.

In Chennai alone, there is more than 30% office space vacancy in peripheral areas such as Old Mahabalipuram Road (beyond Perungudi) and GST Road (beyond Perungalathur). In suburban areas (Guindy, Perungudi, Taramani, Ambattur), the vacancy rate is more than 16%, while off-Central business district locations have a 9% office vacancy rate, according to real estate consulting firm Cushman & Wakefield.

Real estate consultants define central business district (CBD) as arterial roads stretching 2km from the Anna flyover like Nungambakkam, RK Salai and Anna Salai. Off-CBD areas include places such as Guindy, Velachery and Anna Nagar, which come after CBD.

"People will come to Chennai to build residential projects as there is an oversupply in office space," real estate developer Navin's MD R Kumar said.

The supply of office space in southern cities has been more or less met for the medium term, according to a report from global real estate consulting firm Jones Lang LaSalle. The report said the cities have chosen a strategy of pursuing selective quality development over rapid expansion. Peripheral areas - beyond Perungudi and Perungalathur - are expected to see further decline in demand and rise in supply. Slow infrastructure development is the key problem that bog down demand there, say experts.

Most builders are confident about the south Indian housing market, especially Chennai. With demand rising, the sell-outs are working as planned, they say. "Private equity players and new entrants are more interested in Chennai as sales happen as per plan," said S Vasudevan, CEO, Embassy Group. Diversified company Archean Group has chalked out plans to build their first residential project in Chennai. The company is looking at a high-end, high-rise residential apartment complex in OMR, touted to be one of tallest buildings in the city.

Generally, south India's residential market follows the affordability mantra, with more than 80% of the new launches in the past two years being priced under Rs 4,000 per square feet.

As a result, the residential markets of south Indian cities have remained resilient in the past few quarters, the LaSalle report added.

Source: http://timesofindia.indiatimes.com/city/chennai/Office-space-has-no-takers-builders-bank-on-housing/articleshow/13073290.cms

Resale property market turning hot in Chennai

COIMBATORE, MAY 9: As the property prices are on the rise and new apartments at affordable price ranges are difficult to secure within the city, resale market for existing properties is becoming hot in Chennai.

What is driving their demand, apart from the gap in the rates of new and old properties, is their location and HDFC, which organised a two-day event in Chennai recently, only expects this demand to grow.

Speaking to Business Line, Mr Mathew Joseph, Senior GM and Regional Business Head, Tamil Nadu and Andhra Pradesh, HDFC, Chennai, said around 400-450 people visited the programme organised at HDFC's branches in the city on April 28 and 29.

Enquiries were coming in even after the event ended. He said this was for the first time HDFC had sponsored such an event and it was able to ‘create a standard'.

He said apart from the difference in rates between new and old properties, what was creating demand for re-sale properties was their location. New properties might not be coming up at desired locations to meet the demand or high prices could be a barrier.

Explaining the purpose behind the HDFC initiative, he said the event was organised by HDFC with the ‘objective of assisting and counselling customers' who wanted to buy resale properties. The focus was on advising customers on the ‘intricacies of the legal and technical aspects of buying resale properties'. HDFC held the show on the basis of the feedback from customers who have regularly sought its opinion on these critical aspects.

This was the first in-house event of its kind at HDFC, Chennai. Three years ago it had conducted a re-sale show at an external venue where HDFC had invited leading property consultants to showcase re-sale properties. But this time it organised a ‘Resale Weekend' at its four city branches — Anna Salai, Adyar, Anna Nagar and Kodambakkam — to offer legal and technical guidance only for resale properties.

GROWING TREND

Asked whether there was any spike in demand for re-sale properties, Mr Mathew Joseph said there was an increase in demand year-on-year for resale properties. At present, approximately 10 per cent of the loans advanced by HDFC in Chennai was for purchase of re-sale properties.

He expected this trend to grow. One of the reasons for home buyers looking at this option was the pricing of such properties and a greater possibility of negotiating terms with the sellers. That the properties are ready-to-move-in homes was another attraction.

But a more important factor that drives the growth of re-sale property market was they are available at locations where the buyers want to live because of proximity to educational institutions, health care facilities, places of worship or music sabhas or as the buyers could live closer to their older parents.

He did not notice any particular preference for geographical areas among the buyers and the demand was for all prime locations in Chennai, with the choice being driven by need.

On factors on which HDFC would decide to clear a loan proposal, he said HDFC would approve loans for properties that complied with the rules of CMDA or the relevant applicable authority.

BUILDING AGE

With regard to the age of the building, while there was no specific restriction in terms of the age, on a general basis it considered properties which are up to 20 years old for funding.

However, HDFC's in-house technical experts would inspect these properties to ensure they are in good condition from a technical point of view and are marketable.

Mr Joseph said HDFC would fund a maximum loan of 80 per cent of the cost of a re-sale property and for a maximum term of 20 years subject to the borrowers' individual creditworthiness.

He said HDFC itself may not have a separate portal to list re-sale properties for prospective customers to choose from as it has two subsidiaries — HDFC Red and HDFC Realty — that list online properties available for sale.

Source: http://www.thehindubusinessline.com/industry-and-economy/article3401421.ece?homepage=true&ref=wl_home