Users taking Chennai realty to new heights

Chennai property market is growing steadily notwithstanding the global recession and several macro-economic conditions affecting the overall industry’s growth.  Even during the economic downturn of 2008, when neighbouring property markets in Bangalore and Hyderabad fell by 24-29 per cent, the Chennai market fell only 8.3 per cent, according to a study.

East Coast Road, Chennai

The uniqueness of the Chennai realty is that it has been driven by end users and has seen most of the property transactions within the Central Business District areas only. That speaks volumes about the growth potential of the city as well.

If the National Housing Bank’s property price index ‘NHB Residex‘ is a fair indicator, property value in Chennai has doubled from the downturn price of 2008, best appreciation than any other part of the country. What has helped the Chennai market beat the more glamorous Mumbai, New Delhi and even Bangalore in price appreciation?

Bottlenecks

Frequency of property fairs is yet another indication of the vibrancy of the real estate in the southern metropolis. Though the real estate has been showing steady growth, according to Confederation of Real Estate Developers’ Association of India (CREDAI)’s Chennai chapter, the growth would have been more had the local government has amended rules to expedite project clearing process, which has proved to be the main impediment for the industry. According to T Chitty Babu, the CREDAI President, “The growth now we are witnessing only 15-20 per cent and had the government taken measures to speed up the file-clearance process, we would have seen the growth jumped to even 40 per cent.”

Several project are getting delayed due to the bottlenecks created by several government departments and this is pushing the project cost through the roof and subsequently the prices of the homes to the buyers, he said and appealed to the state government to look into the industry’s genuine concerns.

Areas of interest

Real estate in Chennai has been undergoing a shift in its trends recently. Chennai property prices have been on rise since long, especially the commercial property rates. The rates of commercial properties are very high in areas like IT corridor, T Nagar, Anna Nagar and Adyar. As these localities have reached saturation and new industries & software companies are coming up at NH4, GST Road, Oragadam and OMR. These new developments are coming in affordable limits and larger areas, according to Track2Media Intellisearch.

The booming commercial segment and growing influx of IT professionals have pushed the residential demand and prices to a new high in Chennai over the last few years. The Chennai office market has witnessed remarkable growth which is due to the offices built for the IT industry (as IT Parks or IT Special Economic Zones), which constitute 86 per cent of the operational office stock in Chennai.

According to a report by Real Estate Intelligence Service of Jones Lang LaSalle India, 2011 had ushered in renewed interest in non-IT office space in Chennai – especially from firms wishing to relocate their offices to better grade buildings. The expected fresh supply of non-IT office space should witness active absorption at the right rentals. There will be greater demand for investment grade office spaces within the city, since there is a severe dearth of high quality office buildings in the central areas, the report said.

Old Mahabalipuram Road

Chennai’s high streets continue to remain a favourite location for retailers as conversion rates in high streets are higher compared with those in malls. The neighbourhood of premium residential catchments, ample space for a hassle-free car park and proximity to the city centre are the key demand drivers for high-end high streets. The high streets of Khadar Nawaz Khan Road (KNK Road) and Wallace Garden Road have emerged as important retail destinations for global luxury, fashion and premium brands, the report further added.

Changing scenario

While, the commercial properties of Chennai have reached a point when it is very difficult to purchase a property in prominent locations, the residential property preferences are also changing. Apartments in Chennai are gaining popularity day-by-day due to the increase in population and lack of space. Many prominent builders in Chennai are building projects comprising of luxurious apartments, providing ultra modern facilities. With young professionals going in more for rented units, the lifestyle apartments are attracting huge investments from NRIs.

With the announcement of the monorail project in Chennai, the land value in Chennai is going to see another dramatic change. A crisscrossing network of four monorail corridors, running to a total length of 111 km is expected to add to the beautification of the city and make Chennai by and large traffic free. Chennai infrastructure is looking forward to match to the international standards.

Unlike other metro cities land prices in suburbs are yet to reach the peak and the concept of satellite town yet to catch fancy even after Jayalalitha Government is keen to develop more satellite towns with the latest being thirumazhisai in Thiruvallur district near Chennai. In most parts of Old Mahabalipuram Road, GST Road and the Chennai-Bangalore Highway, realtors say, land transactions are very few. Surprisingly, many new residential projects were launched along these corridors over the past two years and even received good patronage from buyers. But that has not translated into an increase in land prices along these stretches, says Kevin William Albert, Associate Director of Jones Lang LaSalle.

“This indicates the potential of Chennai’s suburbs to emerge as an attractive retail destination. Bigger residential catchments in the suburban areas combined with more reasonable rentals compared to those in the prime city are expected to act as key driving forces for retailers to increase their presence in the suburban precincts of Chennai in the long term,” the JLLI report added.