No speculation key to Chennai realty’s affordability

Absence of speculation by investors and the rise in property sales in the affordability segment has made Chennai’s residential market quite resilient to the looming threat of global economic turmoil, said a report by property research firm Knight Frank.

The city has observed healthy sales level with the vacancy level in the residential market recorded at 31 percent as stability in the market since 2010 has instilled confidence in end-users to proceed with their purchase decisions.

Nearly 42 percent of the absorption in FY 2012 has been in range of Rs 25 lakh to Rs 50 lakh, followed by the range of Rs 50-75 lakh at 23 percent. More importantly 14 percent of the residential units launched in FY12 belonged to the Rs 50-75 lakh ticket sizes, catering to the needs of the upper mid-end segment.

“The clubbing together of these categories essentially denotes the fact that the affordable and mid-end segment has been responsible for the absorption of total 85 percent of the residential units booked or sold, said Samanthak Das, National Research Head at Knight Frank.

Here are the key highlights of the report

• Nearly 82,000 residential units are under various stages of construction in the Chennai market.
• Out of the total residential units, FY 2012 witnessed the launch of approximately 14,900 units which are scheduled to be completed in the next 2-3 years.
• 74% of the total number of residential units launched in FY 2012 fell within the Rs 50 lakh ticket size category. On the other hand, just 9% of the total units launched in FY 2012 surpassed the ticket size of Rs 1 crore to fall into the premium segment.
• The preferred size for 3 BHK flats in Chennai has increased from an average of around 1250 sq.ft. during the recession to an average size of 1450 sq.ft. in the revival phase. The preference for 2 BHKs has also increased from an average of around 900 sq.ft. to about 1150 sq.ft.
• Chennai market is end-user driven and therefor has been stable. Demand has been more evident in the mid-end category, primarily towards the peripheral locations of the city where majority of the affordable projects are located. Investor participation is long term in nature, thereby mitigating a speculative market scenario.
• The absorption rate has also been helped by the cautious pricing strategies adopted by local builders. The absence of overt speculation ensured that the developers could peg their price of homes more realistically
The current scenario of job stability in this sector is at a much better position than it was during 2008-  2010. Thus, the demand for homes has reached a comfortable and stable growth trajectory, thereby leading developers to take cues for their residential projects.




Affordable housing projects continue to rule the roost in areas with social infrastructure lag and lower capital values.

Micro Market segmentation of the Chennai’s residential landscape

Central:The central part of Chennai has the highest property prices, the highest being Boat Club Road and Poes Garden North :This belt has been a little less developed than others and is dominated by small- scale industries like textiles and chemicals

West:The Western part of the city has some of the most upcoming locations. Setting up of electronic hardware corridor at Sriperumbudur has increased price in vicinity.

South :The corridor between Shollinganallur and Tiruporur in the southern belt will be the next investment destination for residential property in the city. The presence of the IT corridor and influx of IT companies has led to increase in demand for quality residential space.

Source: http://www.firstpost.com/economy/no-speculation-key-to-chennai-property-markets-affordability-397271.html