Chennai witnesses consistent demand for residential space

Chennai

Chennai has witnessed steady growth in its residential market in the past few years, barring the period of economic slowdown in the country. While the downturn brought the real estate market to a standstill, Chennai’s residential market has seen a rebound sooner than anticipated. 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, according to a survey by Knight Frank India.

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. 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

Chennai is slated to witness the infusion of around 67,500 residential units in the forthcoming three years. Chennai’s south leads the market in terms of number of residential units under construction accounting for 68% of the total number of units coming up in the city, followed by the western region with 27%.

According to a United Nations study, Chennai has a deficit of around 60,000 housing units. About 6,000 of them are in the high income group segment, 12,000 in the middle income group and 18,000 in the low income group.

The economically weaker sections in Chennai need 24000 housing units. While around 67,500 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. While OMR has transformed to a preferred high-end residential destination micro-markets like Perambur and Tondiarpet towards the north and Sriperumbudur in the west are emerging as newer growth corridors with the launch of several residential projects.

Another micro market that is gaining prominence is the ECR stretch in the south which has a number of premium villa developments coming up in the next few years. However, a major issue that needs to be addressed is the lack of social infrastructure in the peripheral locations of the city which have seen majority of the projects being launched with affordable prices. Without social infrastructure, these projects shall not witness positive price movement and will have an adverse effect on their sales.

V Nagarajan, Property consultant

Source: http://content.magicbricks.com/chennai-witnesses-consistent-demand-for-residential-space