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Resilient Chennai rising to chart a new growth trajectory: JLL

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JLL report finds Chennai market rising to new high.

Chennai City, Chennai real estate market, Chennai property, India real estate news, Indian property market news, Track2Realty, NRI investment in ChennaiChennai’s is amongst those Indian metros which has more than one economic growth driver, says JLL market report. Interestingly Chennai’s economy has a broad industrial base with the port along with IT/ITES and BFSI sectors contributing to its growth.

Manufacturing sector in Chennai mostly includes the automobile industry, computer, technology and hardware manufacturing. It is known as the Detroit of Asia as it accounts for over 60% of the country’s automobile exports.

In addition to this Chennai’s economic development has been closely tied to its port and transport infrastructure. Showing their faith in India’s economic growth after a long time after the global financial crisis the corporate occupiers also have been in an expansion mode Chennai.

Companies especially in the sectors of e-commerce, telecom and health care have expanded strongly and drove the demand for office space.

Lately we have seen a shift in global and Indian economy towards technology driven enterprises out of which several cities which are a hot bed to such activities emerged as big commercial centres.

Chennai continues to be a preferred growth market for BFSI. Scope Intl, Citibank, BNP Paribas, BNYM & Yes Bank transacted over 1.2 million sq ft in 2015.  Although the contribution of space take-up by start-up firms has not been very significant they were seen to pick up pace and leased over 0.1 mn sq ft of space in 2015.

Private Equity investments have also seen a tremendous growth in the country. Income yielding projects were a major attraction for Private Equity Investments and Chennai stood third in the country by attracting 14% of the share of these investments.

Market highlights

  • Housing sales remained stable in 2015 and was around 20, 500 units which were close to sales reported in 2014.
  • Chennai witnessed a 62% drop in launch of units in 2015 as compared with 2014. This indicates that developers have been cautious to launch projects and have check on the piling inventory.
  • Absorption rate increased to 31.3% in 2015 from about 26.6% in 2014. Even though there was a decrease in launches this year the sales rate showed a rise. This resulted in the much needed sales of the piling unsold inventory and helped in the correction of the market. Chennai stands last amongst the top four metros in India in terms of to be sold inventory.
  • Rents stagnate across all sub markets. Rental values and Capital values remained stable across all sub-markets over the past year.
  • Most of the sales were registered in projects in Southern Suburbs followed by Western Suburbs and Northern suburbs. Increasing activity in office space in these location are attracting buyers towards these sub-markets.

Outlook

As the state government went all out to bring investments by conducting a Investors meet, heightened economic activity can be expected to further support the residential market.

Developer’s initiatives like offering attractive deal terms and schemes coupled with the lowering of interest rates by RBI have given the fence sitters a much-needed inspiration.

The improvement in the overall business scenario will prompt the developers to build fresh supply in order to meet with the growing demand.

Key demand drivers

  • Senior Living: Gone are the days where only youngsters and middle aged people are the major investors. Lately, seniors have marked their presence in the market owing to the fact they are independent and are better equipped to take decisions post retirement. This offers a tremendous growth opportunity to the service providers.
  • Luxury consumerism: The current increasing prosperity in India’s economy has resulted in the increased number of rich people. Thus, luxury consumerism is seeing new heights. More developers are now looking to tie up with the international brands and are working towards launching more units.
  • Foreign Direct Investment: Foreign Investors interest in real estate sector is on a rise after almost five years. Recent easing of FDI rules is expected to bring in more capital into the property sector.
  • Make In India: Once the GST is rolled out, warehousing sector will take a huge leap forward reaching an inflecting point. Developers / Investors acquire corporate owned land parcels across the city with deals in excess of INR 1,100 crores. 1.5 –1.8 mn sq. ft. of Grade A Industrial / warehousing space leased in Chennai

The government at the Centre has been actively working towards formulating positive measures to boost up the economy and promote business expansion in all the sectors. The effort is clearly reflected by the increased demand in the year of 2015.

Occupiers’ expansion and growth plans in the city have continued despite the recent floods. However, they are now engaging in the study of flood plains, proximity of water bodies to their facilities and indulging in rigorous technical due diligence to assess possible risks and mitigation measures.

Likewise, developers are also taking precautionary measures such as revaluating the placement of electro-mechanical equipment in the basement, gradient of land and building to alleviate the possibility of damage from future floods. When the tide turns the other way local developers and domestic investors with their familiarity in the micro markets are the ones to rely on.

Chennai residential real estate market 2012

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Siva Krishnan, Head – Residential Services (Chennai) Jones Lang LaSalle India

DEMAND, SUPPLY AND PRICING

- india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, Delhi NCR real estate, Mumbai Real Estate, Bangalore Real Estate, Pune Real Estate news,Track2Media, Track2Realty, ravi sinha In contrast to what was been witnessed in many of the more volatile cities over the last couple of years, Chennai’s residential property market saw steady growth in terms of pricing, demand and supply. Chennai’s residential property market is predominantly end user driven, and this fact did a lot to sustain consistent absorption throughout 2011. The absence of overt speculation has also ensured that developer has move pricing of homes in a stable and gradual manner. Unnatural spiking has therefore been successfully kept at bay.

We expect interest rates to decrease over the course of 2012, and this will result in greater demand for homes in Chennai in 2012.

Increased job security in the city has definitely helped the market to maintain buoyancy and a positive outlook. Over the last 12 months, it became increasingly evident that Chennai’s residential real estate market is significantly dependent on the IT/ITES sector. With employment stability in this sector looking a lot better now than it did in 2010, demand for homes has now reached a comfortable and dependable growth trajectory from which developers are taking their market cues.

CONFIGURATIONS IN DEMAND

The preferred size for 3BHK flats in Chennai has increased from 1200-1300 square feet during the recession to 1400-1500 square feet in the revival phase. The preference for 2BHK sizes has also increased from 850-950 square feet to about 1100-1200 square feet. Again, the main reason for this upgrade in preferences is increased budgets made possible by improvement in the performance of the IT / ITES sector. This is a welcome trend which is enabling architects, planners and developers to come up with better quality dwelling units. Affordable housing units continue to rule the roost in areas where social infrastructure lags and capital values are therefore lower.

We expect overall demand for residential properties in Chennai to increase once the interest rates stabilizes from their current peak. There is a very healthy demand in both the primary and secondary markets, since supply is scarce in both owing to the severe lack of land within the city. Land pricing has, in fact, surpassed the buying capacity of developers and this has put pressure on their ability to come up with viable residential products. Lack of supply and exorbitant pricing are causing both the end users and investor segments to take a closer look at suburbs with decent infrastructure.

Suburban Demand Drivers:

  • Positive market sentiments
  • Possible softening of interest rates
  • Increased job security
  • Unaffordable property rates in the central city

Year 2011 saw residential property pricing in Chennai moving up in a phased and rational manner, which helped in sustaining the momentum. Prices rose by between 8-30% in different areas, but these rises took place in small compartments and in proportion to the actual sales in particular locations and projects. We expect a similar trend to prevail in the year 2012.

Expected Price Movement For 2012:

  • OMR – 15-30%
  • GST – 10-15%
  • City – 20%
  • NH-4 – 5-8%

AREAS TO WATCH

  • Madhya Kailash – Sholinagnallur

This stretch is witnessing a clear supply-demand mismatch, with demand outstripping supply. With new employment being generated in this corridor and corresponding absorption of IT space, this area and its peripheries are witnessing extremely healthy demand for residential property. Its proximity to the city adds to the appeal of this area, which will see good appreciation over the coming years. Encouragingly (and in contrast to other parts of OMR) all completed projects here are fully occupied.

  • Velachery

Velachery is seeing consistent growth, because it is one of the few areas which are seeing holistic and self-sustaining development. With malls and other social infrastructure improving, Velachery is definitely next in line for good appreciation. In fact, near-lying areas such as Medavakkam, Pallikarnai, Pallavaram–Thoriapakkam, the 200 FT. MMRD Road and Rajakilpakkam are already experiencing the positive fallout effect of Velachery’s growth as a residential property destination. These areas are also witnessing good absorption and capital appreciation. There is also significant demand for homes in Porur along the NH4 corridor up to Urapakkam on the GST Road.