Known as the Detroit of India for contributing around 60% of the country’s automobile exports, Chennai – the capital of Tamil Nadu – is also well-known for its port-centric businesses, engineering, manufacturing establishments and IT-ITeS companies.
Chennai’s economy is currently the fourth largest in India. According to Forbes Magazine, the city features in the top 10 fastest-growing cities in the world. How does the city fare in real estate, though?
Chennai residential real estate snapshot
New unit launches in Chennai stood at 4,418 in 2017, with around 45,000 under-construction units.
Old Mahabalipuram Road, Perumbakkam, Porur, East Coast Road (ECR), and Pallikaranai are among the most preferred micro markets, with residential property prices hovering in the range of Rs 3,500 – 8,300 per sq. ft.
“Between 2013-2017 around 1.2 Lakh units have been added to Chennai’s residential market.”
Of the four zones (Central, West, North, and South), South Chennai surpassed the others to emerge as the most rapidly-growing market, accounting for 65% of the city’s total housing supply since 2013. On this front, South Chennai is followed by West Chennai with 27%.
The presence of IT-ITeS establishments, SEZs, and manufacturing units have been the primary growth stimulators for the southern region. In addition, rapidly developing infrastructure is boosting the residential real estate market along the Old Mahabalipuram Road (OMR), Thoraipakkam – Pallavaram Road (TPR) and Grand Southern Trunk (GST) Road.
Chennai has the lowest unsold inventory among the top seven cities in India, with its unsold stock of 27,000 units (as of Q4 2017) worth Rs 17,500 Crore. The estimated period for the unsold inventory in primary sales to get fully absorbed is approximately 32 months, compared to the top metros of NCR and MMR which are likely to take 75 months and 61 months, respectively.
“South Chennai tops the unsold inventory chart, accounting for 69% of total unsold units in the city.”
However, this supply was unleashed to cater to the massive existing demand in this region, and absorption will be rapid.
Dominant mid-segment
The mid-income housing segment, consisting of units priced at between Rs 40 – 80 Lakh, accounts for 44% of the overall available inventory. This segment currently dominates the primary sales residential market in Chennai, followed by the affordable housing segment (units priced below Rs 40 Lakh) which accounts for 29% of the existing primary market supply.
Considerable traction is being seen in the affordable and mid-range housing segment and is due to the various schemes and incentives offered by the Government to promote its Housing for All mission.
Reduced launches – cause and effect
Chennai’s residential real estate market took a major body-blow from the floods in 2015 and the political instability in the consecutive years. As a result, it witnessed reduced new launches in 2017. With restricted supply and stable demand, absorption improved in 2017, and unsold inventory consequently decreased by 24% in Q4-2017 vis-à-vis Q4-2016.
Despite the current sluggishness of the Indian residential property market, Chennai’s housing sector market is gradually gaining new momentum on the back of continuous infrastructure upgrades and inward migration of the working population responding to increasing employment opportunities.
This article is contributed by Santhosh Kumar, Vice Chairman, ANAROCK Property Consultants
(The views expressed here are solely those of the author and do not necessarily represent or reflect the views of RoofandFloor.)