RESIDENTIAL DEMAND and SUPPLY ANALYSIS OF CHENNAI..!

The advent of the IT sector along with the setting up of large manufacturing units by multi-national companies (MNCs) have changed the dynamics of Chennai real estate market. Apart from generating thousands of new jobs for the local residents, Chennai has been attracting a large pool of migrants into these sectors from across the country. This has enabled the real estate market to grow at a tremendous rate during the last 5 years especially residential segments which witnessed the launch of more than 1,05,236 flats (units) since 2007.

During 2010 and 2011, more than 49,955 units were launched in Chennai. However, only 33,938 units were absorbed during this period resulting is a significate jump in the unsold units percentage. the percentage of unsold units during the first nine months of 2012 has further increased despite the number of new launches falling drastically.

This is primarily because of the supply overhang of the previous years. Chennai is land locked on the eastern side by the Bay of Bengal, thereby restricting its growth to the remaining three sides. Backed by excellent rail and road connectivity, the city has been expanding three (3) ways over the last few decades.

However, development on the northern side is subdued as compared to West and South Chennai mainly due to the presence of various industrial pockets and port related activities here.

Over the past few years, the focus of developers has been shifting from Central Chennai to the peripheral areas of South and West Chennai due to greater availability of jobs here.

Year      % of Unsold Units

2007                5%

2008                4%

2009                7%

2010                12%

2011                21%

2012               * 25%

* Till September 2012

Knight Frank - Chennai

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Source: Knight Frank Research

Realty values of Chennai-suburbs expected to rise

Chennai

Chennai’s real estate sector showed buoyancy and resilience in the past few months. “There has been a 20-25 per cent increase in the number of queries generated for residential investment, whereas a 12-15 per cent rise in the number of transactions in July-Sept 2012 quarter says,” Sree Kumar of Kumar Enterprise. Expanding sectors of IT, financial services, telecom and other allied services are the major economic drivers of the city’s real estate.

“Chennai is witness to huge housing demand but due to lack of social infrastructure in suburban areas, city-based properties continue to fetch more buyers. This trend is expected to change in the coming months as land prices in the city are becoming unaffordable,” added Kumar.

According to Harish Gopal of Vinayak Properties, “the city is witness to a growing commercial sector in the suburban areas such as Kelambakkam, Thaiyur, Oragadam, Karapakkam, Navalur, Kazhipattur and Thalambur. New automotive, manufacturing and semi-conductor sectors are expanding their businesses in these suburban locations resulting in job opportunities and development of physical and social infrastructure.”

The State government is also taking various initiatives in providing better connectivity to the upcoming suburban areas with the city centre and improving basic facilities of these areas. Land prices are inching high in view of the anticipated improvement in infrastructure by both public and private players and improved accessibility levels. “On an average the capital values of properties in the suburban areas noted an escalation of 5-12 per cent in the past quarter.”

Majority of the upcoming residential and commercial real estate supply is concentrated in the suburban areas owing to limited availability in the CBD regions, added Gopal. Social facilities like schools, malls, multiplexes, restaurants and supermarkets are in the proposed development plans to promote these upcoming locations.

Chennai real estate market is expected to undergo a change with large-scale migration to suburban locations. In the coming months the property prices of the suburban locations are estimated to appreciate. There will be more ready-to-move-in projects with lifestyle features attracting buyers and investors from southern region as well.

Nidhi Vashisth, MagicBricks.com Bureau