Emerging trends in Chennai residential mart

Chennai

Chennai has witnessed steady growth in its residential market in the past few years, with the economy springing back to action, the residential real estate market, too, has recovered strongly. Demand has returned, prices have increased substantially and a number of new projects have been launched in the market.

The growth in Chennai’s residential market may be attributed to the fact that it is primarily end-user driven. Investor participation is long term in nature, thereby mitigating a speculative market scenario. Stability in the market since 2010 has instilled confidence in the end-users to proceed with their purchase decisions.

Demand was more evident in the mid-end category, primarily towards the peripheral locations of the city where majority of the affordable projects are located. However, unfavourable global economic state of affairs and a higher rate of interest in the second and the third quarter of the year somewhat dampened the optimism in the market and slackened the sales figures. Despite the subdued economic conditions, developers went ahead with their plans and several large scale projects were announced during 2011. This may be due to the fact that the Chennai market is primarily self-sustained and is not much affected by the upheavals in the global markets.

Supply and Development

According to a study by Knight Frank India, Chennai is slated to witness the infusion of around 67500 residential units in the forthcoming three years. Chennai south leads the market in terms of number of units under construction accounting for 68% of the total number of units coming up in the city, followed by the western region with 27%.

The southern part of the city is mostly preferred by people employed with the IT/ITeS sector due to the presence of the IT corridor in the region. Majority of the new projects are situated along the OMR in locations such as Perungudi, Sholinganallur, Thoraipakkam, Tambaram and Perungalathur. Another emerging market on the OMR with several new residential launches is Kelambakkam, which is more investor driven due to its lower prices. Of late, the IT/ITeS corridor of OMR is fast turning into a self-sustaining region with a number of good schools, colleges, hospitals and organised retail, thereby further augmenting residential market growth in the region.

In the western region, mention can be made of Sriperumbudur where a number of residential projects by leading developers have been launched. Sriperumbudur is strategically located on the Chennai Bangalore highway and improved infrastructure coupled with the presence of major industries will continue to drive residential prospects in the region. Other prominent micro-markets in west Chennai witnessing residential development include Mogappair, Oragadam, Vanagaram and Porur.

The northern and central parts of the city have minimal supply lined up for the next few years. However, the dearth of developable land notwithstanding, several prestigious projects are scheduled to become operational in central locations like Kilpauk and Egmore.

These locations house smaller projects in the premium category catering to HNIs and have demand for individual bungalows as well as re-sale properties. On the other hand, Purasawalkam, Tondiarpet and Ayanavaram are some of the key micro-markets in the northern region which have witnessed the launch of residential projects by reputed developers.

Another important observation regarding the Chennai residential market is the demand for 3 bedroom apartments exceeding other unit configurations. Around 46% of the total number of units under construction belongs to the 3 BHK category, followed closely by 2 BHK at 44%. While 1 BHK and 4 BHK apartments are lower in numbers, 5 BHK apartments understandably have a marginal presence in the number of units underway in the city. Significantly, the projects under construction have seen encouraging absorption with all the regions witnessing more than 50% of residential units sold. Barring the central locations, which saw around 51% absorption, 60-64% of the total number of units in the residential projects under construction in the other regions has been booked or sold.

According to a United Nations study, Chennai has a deficit of around 60000 housing units.

About 6000 of them are in the high income group segment, 12000 in the middle income group and 18000 in the low income group. The economically weaker sections in Chennai need 24000 housing units. While around 67500 residential units are in the pipeline, they will be catering to the housing needs of the high income and the mid income segments only. This has led to the demand for a change in the city’s development control rules to facilitate more residential growth.

With the quantum of supply lined up in the aforementioned categories, developers may be faced with pressure on pricing in the forthcoming quarters. However, prices are unlikely to decline drastically due to the rising cost of construction.

V Nagarajan, Property consultant

Source: http://content.magicbricks.com/emerging-trends-in-chennai-residential-mart