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