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

Rush for Chennai property registration before guideline value hike

Chennai

More than 150 people lined up outside the district registrar’s office at Saidapet in Chennai on a sultry Wednesday morning, brushing away rivulets of sweat as they awaited their turn to submit documents. After the government’s announcement on Monday that new guideline values would come into effect from April1, there has been a rush to get registrations done in the few days remaining this month.

Nandini P and her husband, who were at the office to register the sale deed for a house in Ramapuram, looked hassled as they made their way through the crowd while keeping an eye on their child.

“We rushed to get our registration done before April 1, when the new guideline values will be implemented,” she said. “It costs us Rs 40,000 now and this is likely to go up after April 1. Organizing funds at such short notice has been difficult.”

Chennai Port Trust employee K R Ramachandran and his brother, who bought a house in Tiruverkadu, had to borrowsome money to register the property in a hurry.

“We originally planned to register the house a month later,” he said. “But we did not want to pay more next month so we took a loan and pawned jewellery to get the money we needed.”

Officials at the registrar’s office said property owners on Wednesday submitted twice as many applications as they normally do. “Usually, we get about 70 applications each at the Joint 1 and Joint 2 sections here every day,” said an official. “We received 150 each today.”

Other registrar offices also reported an increase. “We normally receive 10-15 applications each day,” said an official in Adyar. “Today we got 25 applications.”

Source: The Times of India, Chennai

Real estate faces power crisis in Chennai

Chennai

The repercussions of the year-long power crisis have made their presence felt now more than ever before, on the real estate industry in the city. However, the fallout of this could well have an impact on budgets, even as developers grapple with the use of alternate power source.

That the State has begun to bear the brunt of an acute power shortage is by now, an understatement. For the last year, Tamil Nadu has seen its share of an acute energy crisis, which has inadvertently – and predictably – transpired into inconvenient power-cuts. One of the industries that have been affected by this to a large extent is real estate. Not only have the hour-long power-cuts (two-hour-long power outages since March) affected productivity, but have also resulted in an unavoidable reliance on diesel generators (DG).

“We can’t risk compromising on productivity and that is why we heavily rely on diesel generators for the two hours every day when we have no power,” says R Kumar, Managing Director, Navin Builders, “While this has definitely help us cope with the power outage, there’s no denying that spend a lot of money for the diesel, which has definitely reflected in our construction costs.” Of the eight projects that Navin Builders is currently working on, five major projects have made use of diesel-generated power to ensure that productivity isn’t affected. Not surprisingly, Kumar isn’t alone. Several builders in the city have begun to face a similar dilemma – that of rising construction costs, resulting from the energy crisis.

In the light of this, a few stringent measures, consultants believe, ought to be taken by developers to ensure that all is not lost in the mayhem. “Stocking up on diesel, and the construction of storage tanks is essential to ensure that you have enough fuel at your disposal,” says N Hariharan, Office Director, Cushman and Wakefield, “The problem arises when a fuel shortage occurs. For then, construction delays inadvertently take place and this could well reflect in pricing.” However, what developers fear most is a possible hike in diesel prices given the large demand that currently exists. “The government has to find a way to harness nuclear power or hydroelectric energy,” says Kumar, “There is an abudance of energy sources. All that’s left to do is find a way to harness them and make the best of their existence.”

If there’s anyone who would know a thing or two about harnessing energy from unconventional sources, it’s A J Balaji. The executive director – who also oversees facility management – at Olympia Tech Park, obtains a small percentage of the power required to run the IT complex through a wind farm located in South Tamil Nadu. However, even by his own admission, that is far from sufficient. “We face a two-hour power-cut everyday, we can’t draw power from the grid on Sundays and Tuesdays are power holidays. In addition to this, we aren’t allowed to draw power between 6pm and 10pm and our quota of 80 percent (of power sanctioned) has been reduced to merely 60 percent. We also need to shut down for eight hours every month for maintenance purposes,” he says. So not surprisingly, Olympia has had little choice but to rely – like most others – on diesel generators and power purchase. “This situation and the reliance on DGs has ensured that the cost that goes towards power supply exceeds Rs 1 crore, every month,” says Balaji. The irony here is the fact that such a situation should be faced by what is a certified green building. Quite rightly, Olympia has also taken upon itself, the responsibility of spreading awareness among its occupants on power-saving measures.

“Should this situation continue, prices will definitely go up and there are no two ways about that,” affirms Kumar, reflecting on the possible repercussions of the power outage from a consumer’s point of view. However, P Suresh of Arun Excello doesn’t quite agree. “Given the steep increase in the prices of steel (10 percent) and cement (7 percent) in the last year, this rise could well be negligible,” he says. Interestingly, Suresh says that power shortage is something that Arun Excello has been facing for a few years now, given that several of its projects are outside the city, where the situation has been bleak for a long while, now. “So we’ve become acclimatized to the situation,” he says.

The fallout of the situation is quite clear. Diesel generators and power purchases have – for most developers – meant a certain rise in construction cost. Whether this situation could go on to reflect in the prices, is anybody’s guess. However, as most developers feel, a sustained power crisis could well make its presence felt in the budgets of those looking to buy a new home. The time is right, perhaps, for the government – and developers – to look beyond conventional power sources and thus tide over what could well be a long affair.

Source: Jude Sannith S, Times Property, Times of India, Chennai

Growth prescription for Chennai real estate

R Kumar, Managing Director, Navin Builders, and former deputy planner of Chennai Metropolitan Development Authority (CMDA) speaks to Times Property on the need for a comprehensive plan if Chennai wants to be counted as a global city

What are the problems that prevent Chennai from becoming a city on par with global standards?

Chennai is grappling with three major problems, the most important being violation of building rules. Most buildings do not have parking facilities, or basic fire safety standards. There is major exploitation of land and FSI violations. All this results in a burden on the public and society at large. Second is traffic mismanagement. The traffic police is not only expected to regulate traffic they are also forced to plan traffic management which they are not equipped to handle. Traffic management is a specialised subject that needs to handled by professionals. But the authorities are yet to realise this.

The CMDA as a department has failed in fulfilling its objectives. Instead of focusing on planning they are obsessed with approving layouts and violations are not checked. The big violators are let off easily while marginal developers are made to suffer.

As a former member of the CMDA, what is your growth prescription for Chennai?

The outskirts of the city are developing fast. The focus now needs to be on better planning for these areas. The authorities need to have a plan in place, have better roads, provide good infrastructure facilities and crack down on violations and encroachments. The developers who follow the rules can be given some benefits. A system can be introduced where instead of paying tax; the builder has to give up a certain part of the built-up space to the government.

Where does Chennai’s real estate market stand? Is there growth, or is it stagnant?

Chennai’s growth story has been amazing. Except for the lull in 2007-08, the market has been steady and growing mainly due to the sensibilities of the local developers, location driven attitude and focus on end users. But for the government, the real estate sector is a golden goose and the focus is mainly on revenue generation. In fact, the registration department is mainly responsible for the inflationary trends witnessed by the sector.

Navin Builders has constructed projects in all segments – villas, luxury apartments and affordable homes. Which sector has witnessed the highest demand in recent years?

All the sectors have witnessed growth due to the huge demand. Two and three bedroom apartments, high-end villas and affordable housing sector too. But the affordable housing sector needs some reforms. Once they are in place more developers will venture into this market.

What are your upcoming projects in the city?

Navin Palmfronds, a villa project at Karapakkam opposite OMR, Srishti, a middle segment residential complex in Madipakkam, Springfield in Madavakkam, high-end homes in T Nagar, another project near the Adyar river in Madampakkam, projects in West Mambalam and Kodambakkam, a mini township in Thiruneermalai and a multi-storey residential project in Medavakkam are some of our new projects. We also plan to announce the launch of Eden Park in Virugambakkam along Porur-Kundrathur road during the CREDAI fair.

Sangeetha Nambiar , Times Property, Chennai

Chennai Office Mart buoyant

Chennai

Chennai’s office market has absorbed close to 6 lakh sq ft till February. Corporates are consolidating their existing operations and are wary about market gyrations in the midst of global uncertainty. Rentals are holding steady and are unlikely to come down, according to industry experts.

The city had recorded a strong net absorption of over 1.6 million sq ft during fourth quarter last year, while net absorption for the whole year 2011 stood at 4.6 million sq ft. Transactions were dominated by the IT/ITeS firms, which contributed more than 60% of the gross leasing volumes. BFSI contributed around 10% and it was closely followed by the utility sector, which recorded around 9% during the quarter, according to Jones Lang LaSalle report.

Cognizant’s lease of 650,000 sq ft in the Ramanujan IT city was the largest lease transaction recorded in the city during last year. This, in turn has boosted the absorption figures.

Despite strong absorption figures, the city’s overall vacancy rates continued to remain in the range bound to previous quarter largely due to the new supply of office spaces during the quarter with notable vacancy.

A total of 1.38 million sq ft of new supply entered market during the quarter with over 55% occupancy level. Notable completions during the quarter include – Carr Tower of Ramanujan IT City with 650,000 sq ft in Taramani, Block 3 of DLF IT SEZ with 684,000 sq ft in Mount Poonamallee Road, and ASV Titanium with 50,000 sq ft in Perungudi.

The SBD sub-market recorded 2.5% quarter over quarter increase in rent as it grew more than the rent in CBD. The suburbs of Chennai also witnessed a notable 3.6% quarter over quarter increase in rent after prolonged stability as the leasing activity strengthens in the OMR pre-toll area.

Outlook

Chennai office market is expected to remain tenant friendly in the near term amid high vacancy levels and uncertain macro-economic headwinds. It is expected that the vacancy rates may stay higher in the SBD and PBD amid massive new supply expected in the coming quarters. As a result, there is limited scope for a significant rental and capital value appreciation in the short-term.

Source: http://content.magicbricks.com/chennai-office-mart-buoyant