Retail property values remain stable in Chennai

Chennai

The trend in the absorption of retail space in malls remained dormant in third quarter as limited options in existing malls have made the city’s high street locations more attractive to retailers. However, with significant amount of mall space in the advanced stages of construction, preleasing in upcoming malls is taking place at a brisk pace. Therefore, the malls scheduled to become operational over the coming quarters are expected to open with good occupancy levels, according to a survey by Jones Lang LaSalle.

Vacancy rates in third quarter remained stable at 11.2 per cent given the lack of major leasing activity in the quarter. They have been declining for the past year as Chennai has seen no new malls entering the market for almost 12 months now.

During third quarter, Pothys, a large Chennai-based department store, leased around 60,000 sq ft at GN Chetty Road in T Nagar. In addition, retailers such as Sony Center and Blackberry ready-made store opened stores in CBD locations, while a prominent eat-out outlet, Adyar Ananada Bhavan, opened a restaurant in Chrompet on GST Road.

Retailers on Chennai’s high streets have started preparing to cater to increased demand during the upcoming festive season, erecting temporary structures to accommodate their expanded product portfolios and extra inventory.

Supply

No new supply was added in third quarter, although a massive 2 million sq ft is expected to be on the market in the short-term as Prestige’s Forum Mall in Vadapalani, the Market City Mall and the PS Grand Mall in Velachery, and the Ten Square Mall in Koyambedu are all expected to become operational over the next six months.

Domestic macro-economic conditions and, more importantly, the lack of quality mall space resulted in no major transactions in the quarter, which in turn kept financial indicators stable. Nevertheless, with pre-leasing taking place at significantly higher rates, it is expected that rents may increase in the short term as the new malls become operational.

Cautious leasing by retailers largely kept high street rents stable, although emerging high street locations on GST Road, Velachery and the neighbourhood are expected to see rental growth in the short term.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/retail-property-values-remain-stable-in-chennai

A rise in plotted development projects in and around Chennai

Chennai

Industrial growth, better connectivity and infrastructure development have led to a spurt in the number of plotted development projects in and around the city. While there is a constant demand for apartments, villas and other housing projects, over the years, there has been a rise in the demand for plots as well. S Ramaswamy, Assistant director, RECS Group, says, “GST Road, Sriperumbudur-Oragadam belt and ECR are the top three growth corridors that have seen a surge in the demand for organised plots. There is a good demand for plots in and around Chennai due to factors such as good road connectivity and the horizontal industrial development in the suburbs. The availability of transportation facilities plays a major role in the organised plot development market, especially on the outskirts of Chennai.” S Mohan, MD, Wisdom Properties, says, “Individual plot development in and around Chennai is on the rise.”

Mohan says, “The primary areas include the Southern Suburbs comprising Chengalpattu, GST Road, Oragadam till Kanchipuram and the Eastern Suburbs – areas till Mahabalipuram. Development in the Central suburbs that include prominent localities such as MRC Nagar, Triplicane, Teynampet, Nungambakkam and T Nagar will gradually pick up over the years.”

He adds that with the number of software and manufacturing industries foraying into the city, the demand for plots in peripheral and suburban areas of Chennai has increased manifold. “There are a number of employment opportunities in the city, and people migrate not only from other states but countries as well. This has further increased the demand for plots,” he adds.

Highlights of the three primary growth corridors

GST Road

- Proximity to already developed areas such as Tambaram and Guduvanchery

- Connectivity by rail and road to localities such as Oragadam and areas along OMR

- The presence of a number of industries such as the Maraimalai Nagar Industrial Estate, for instance

- A viable investment for future developments, thanks to the kind of residential and industrial development along this belt

Sriperumbudur-Oragadam

- Hub of industrial development in the city – An affordable alternative to investing in apartments

ECR

- Good connectivity and proximity to the city centre – Proximity to OMR and prominent IT establishments – Scenic beachway with good social infrastructure

Source: The Times of India, Chennai

Spurt in housing development on Vandalur-Kelambakkam road

Chennai

The 18-km stretch from the IT corridor in Kelambakkam to the Grand Southern Trunk (GST) road junction at Vandalur was lying low for quite some time due to the hectic real estate development activity on either side of the corridor. With the soaring land prices and acute scarcity of land for housing development, the perpendicular road that connects both the corridors is bristling with activity, thanks to the improved connectivity levels and willingness on the part of Chennaiites to shift from city areas.

There is another reason for the sudden shift in trend. With the availability of large land parcels, property developers could plan large projects with a comprehensive range of amenities that will convince the people that it is time to live in a gated community development for varied reasons.

Over 15 developers have ongoing residential projects on either side of the Vandalur-Kelambakkam road. These range from affordable housing, plotted development, luxury apartments to villas. Among the developers who have ongoing projects, specific mention must be made about Puravankara Projects, Sobha Developers, Unitech, Real Value Promoters, Vijayshanthi Builders, Artha, Isha Homes, SSPDL, Emaar MGF, DABC, Provident Housing Development, among others. A number of affordable housing projects are likely to change the skyline of the area in the coming years, according to industry sources. Apartment prices for ongoing projects range from Rs 2,500 to 3,900 per sq ft whereas row houses are quoted at Rs 3,500 per sq ft. Developed plots in areas like Vengambakkam are quoted at Rs 1,000 per sq ft.

The presence of Chettinad Hospital, VIT University and engineering colleges have pushed the demand for housing and nudged others to shift to suburbs. A few schools are due to come up in the corridor. As the GST corridor is bustling with activity due to lack of infrastructure and soaring land prices, Vandalur-Kelambakkam road came in handy for developers to look at housing development due to availability of large land parcels and willingness on the part of land owners to opt for joint venture development. This has enabled a number of property developers to make a beeline in search of suitable land parcels for development. As the connectivity levels have improved and housing prices are competitive, those working in the IT corridor would be keen to invest in the coming years as prices are yet to touch the IT corridor level.

Though social infrastructure is lacking, Vandalur junction is poised for a major turnaround in development. Aerens Gold Souk is under construction near Vandalur on GST road. With improved connectivity levels to Oragadam via Tambaram-Mudichur road the area offers good transport connectivity for blue-collared workers to invest in housing as social infrastructure is gradually improving in the vicinity. The road widening work on GST road is long overdue and will go a long way in improving housing development in and around the area.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/spurt-in-housing-development-on-vandalur-kelambakkam-road

Chennai witnesses rise in demand for villas

Chennai

According to a recent survey conducted at a property fair at Edison, New Jersey, an estimated 31% of the visitors preferred Chennai for investment. The report also revealed that the Chennai real estate market is witnessing a growing demand for villas as compared to conventional apartments.

Rajesh Babu, Founder of RECS Group, a city-based real estate consultancy firm says the main advantage of owning a villa is having complete ownership of land. “Such properties have better resale value and, if not bound by a clause, the owner has the right to demolish and reconstruct a structure in the future as well. When compared to apartments, a villa does cost more, as the cost of land is involved, but they are ideal investment options and come with a range of amenities.”

S Ramesh, a city-based business professional feels investing in a villa is beneficial in the long run. “I have been on the lookout for viable investment options in the city and I have booked a villa on an upcoming project on OMR. The range of amenities that they offer cannot match any apartment,” he says. Elaborating on the preferred locations for villa projects, Rajesh adds, “The top locations include ECR, OMR, Sriperumbudur/Oragadam and GST Road. Suburban and peripheral locations are preferred for villa developments and there is limited development of such projects within the city due to the non-availability of land parcels inside the city and their high costs,” he says.

Considered a viable investment option, there is a rise in demand for villa projects on the outskirts of the city, especially among NRIs (mainly the US, South Asian countries). The Town and Country Project, being developed by Lancor Holdings at Sriperumbudur, is said to house over 400 villas and caters to this very niche segment. R V Shekar, Managing Director, Lancor Holdings, is confident that the first phase of the project will witness 50% investment from NRIs. “The trend of NRIs investing in villa projects within the city is on the rise and they make for perfect summer homes, besides being great investment options.”

Each villa comes with its own exclusive garden, two car porches, terrace, sit-out areas and combines the luxuries of an independent home with the advantages of a the lifestyle of a gated community ,” he says. Suresh Jain, Managing Director, Vijayshanthi Builders, says villa projects cater to a premium and niche segment of buyers. “Investing in a villa has a range of benefits such as amenities, privacy, no overhead costs and security. With land prices being on the rise, villa projects fare better than conventional apartments, from an investment perspective,” he says.

Highlighting the advantages of such projects, Rajesh adds,”Well-made roads, gardens/landscaping, parking areas, play areas, swimming pools, gymnasiums and club houses are common amenities found in any such project. Different formats are available to suit the needs of different categories.” Pratish Devadoss, Managing Director, VGN Properties, says the concept of mixed development caters to a wider segment of buyers and has its own benefits.

“Constructing apartments and villas as part of the same project offers buyers a range of options. Villas are mainly purchased by individuals from high income groups. Chennai is catching up with the trend after cities such as Delhi, Bengaluru and Hyderabad.”

While most villa projects are developed in the outskirts, Naresh Jain, Managing Director, Influence Infrastructure, decided to set up a project in the heart of the city. “Apart from two similar projects on ECR, the current project ‘Masterpiece’ is coming up at Nungambakkam. There is a huge demand for such projects even within the city and thus I decided to venture this untapped segment.

People are willing to invest 15-20% more than a conventional apartment and the wide range of world-class amenities that we offer make it a wise investment option. Also, the per sq ft usage is more in a villa rather than an apartment which is a hidden advantage,” he says. Each villa sprawls across 4,250 sq ft and will cost Rs 9 crore on an average. “In my opinion, the amenities offered in a villa project make all the difference. An underwater gym, snorkeling bay, indoor gaming arena, swimming pool, spa are some of the amenities that will be part of every villa,” he says.

Nidhi Adlakha, Times Property, Chennai

Source: http://content.magicbricks.com/chennai-witnesses-rise-in-demand-for-villas

Demand for office space down in Chennai

Chennai

The office market in Chennai witnessed an overall absorption of less than 1 million sq ft during the first quarter this year. The Central Business District (CBD) encompassing areas of Anna Salai, T Nagar, RK Salai, Alwarpet, Nungambakkam witnessed a dip in demand for office space with negligible absorption of around 0.09 million sq ft being reported in the present quarter, largely in smaller and medium format office spaces.

However, due to negligible supply addition rental values firmed up by about 2-3% on a quarter over quarter basis, according to the first quarter report by CB Richard Ellis.

The Off/Non CBD micro-market of MRC Nagar, Guindy and Taramani witnessed stagnation in market activity when compared to the previous quarter. Absorption was recorded at around 0.16 million sq ft. However rental values witnessed a marginal increase of 4-5% on a q-o-q basis, primarily due to low supply pressures when compared to the suburban micro-markets.

A nominal supply of 0.08 million sq ft was released; vacancy level was in the range of 3 – 4%. The Suburban Business District (SBD) including areas such as Velachery, Perungudi, Mount Poonamallee Road witnessed maximum activity during this quarter with an absorption of almost 0.32 million sq ft being reported, compared to around 0.25 million sq ft in the previous quarter.

On the supply side, no significant additions were witnessed during the review period. Rental values increased by about 5-8% on a quarter on quarter basis; vacancy level was around 7 – 8% in the present quarter.

The Peripheral Business District (PBD) of Perungalathur, Sholinganallur, Siruseri, Ambattur and GST Road witnessed minimal activity with absorption of only around 0.08 million sq ft, compared to around 0.45 million sq ft in the previous quarter. The region witnessed an addition of around 0.72 million sq ft of fresh IT space, the only major supply addition in the city during the review period. Supply pressures and stagnating demand led to a downward pressure being created on rental values and a steep increment in vacancy levels to around 18-20% in the present quarter.

Market Outlook

The overall market sentiment, however, continues to remain positive which is expected to translate into healthy absorption over the coming few quarters. The SEZ segment should continue to witness supply addition, thereby being a major contributor to the office market in the city. IT and back-office operations are expected to continue to remain major contributors to office demand and transaction activity. Rental values are expected to remain largely stable across most micro-markets over the coming few quarters.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/demand-for-office-space-down-in-chennai

Investment potential areas in Chennai in 2012

The year 2011 witnessed significant developments that impacted the Indian economy. Rising interest rates, global uncertainties, declining foreign investments, dip in GDP, et al. The real estate sector is by no means an exception especially with limited access to funds by developers, increasing debt and PE funds’ higher expectations.

For end users in housing, the timing is just right as the government is all set to hike the guideline values for registration purposes during January which in turn might increase the housing cost. For medium to long-term investors, developed plots offer potential scope for price appreciation. Here again location and proximity to state or national highways with ongoing infrastructure development should be considered before plunging into investment.

Sriperumbudur and Wallajabad areas are cited as potential areas in Chennai awaiting a number of integrated township projects and limited projects now on offer for blue collared workers in the area. Prices range from Rs 500 per sq ft off main road and industry analysts expect the rates to double in a span of five years, if not earlier.

For HNIs and those having liquidity, the better option is to go for pre launch offers as developers are keen to negotiate on apartment prices and offer discount for upfront payment. A typical investor keen to invest Rs 40 lakh – Rs 50 lakh for a 2-BHK unit with an area of 1200 sq ft can anticipate a return of Rs 800 per sq ft in two years in an average location in Chennai. Besides he has the option either to go in for registration of the unit or exit.

As residential development revolves around growth corridors like OMR, GST road and Oragadam-Sriperumbudur belt, even rental prospects appear better as corporate leasing demand is inching high due to the influx of skilled professionals to the city. In fact leading property developers on GST road have firm commitments for ongoing projects from select corporates for leasing once the projects are ready for occupation.

As regards commercial property, the yield depends on the scale of investment. For large scale investors, it varies from 9 to 11 per cent per annum pre-tax whereas for investors with a targeted investment limit of Rs 10 crore and below, the yield ranges from 7 to 9 per cent per annum pre-tax. Blue chip tenants do not prefer buildings strata title, as a result the commercial property transactions are now seeing a trend where developers are only selling the whole building or at least one owner per floor. This leaves limited room for retail investors, and the opportunities are limited to the high net worth individuals.

Source: http://content.magicbricks.com/investment-potential-area-in-chennai-in-2012