Chennai seems to have bypassed the economic slowdown that hit the real estate industry last year with great aplomb. The year 2019 saw Chennai sail through with a 6% year-on-year rise in residential sales, according to a report from Knight Frank India. During the second half of the year, housing sales increased by 8% year-on-year with South Chennai seeing the most number of new launches.
Affordable housing and ready-to-move-in homes were the primary trends that provided most of the impetus to the sales prompting builders to plan new projects accordingly. Office space rentals also showed a healthy growth of 50% year-on-year standing at its highest ever with 5.2 million sq ft in 2019.
Clearly, the Chennai real estate market had reasons to celebrate in 2019. Will this resilient market continue the growth streak in 2020? What trends will dominate Chennai in the new year? Let’s take a look.
A JLL study in 2018 predicted that more than 13 million people in India would work out of co-working spaces by 2020. The report foresaw flexible workspaces accounting for 20% of total commercial spaces. Chennai has been at the centre of the co-working space revolution with even tier-II cities like Coimbatore being catalysts of the revolution.
According to JLL, co-working space leasing jumped five-fold from 2% in 2017 to 10% in 2018. It will continue to expand into 2020 as more millennials, the primary drivers behind flexible workspaces, are absorbed into the workforce.
The market for shared working space in Chennai is also driven by bigger and well-established companies who are now beginning to realize the monetary benefits of having flexible offices.
North Chennai to develop further
Chennai’s real estate market is primarily end-user driven and has been supported by the rapidly increasing expansion of industries and subsequent commercial activity. North Chennai is a busy industrial area, a defining characteristic that has been existing since the 16th century due to the area’s proximity to ports.
The region’s economy and evolution have always centred around maritime and trade activities, which has been the main driver behind real estate growth. Dominated by the presence of large industrial behemoths like Indian Oil, Chennai Petroleum Corporation, and Manali Petrochemicals as well as IT and ITeS corporate houses, North Chennai’s real estate future looks robust in 2020.
According to research from ANAROCK, 5,150 housing units have already been launched between 2015 and 2019, indicating steady expansion. In fact, North Chennai ranked only second to South Chennai for new launches in the final quarter of 2019.
The quick growth of infrastructure and connectivity to the region in the past few years is also expected to boost real estate demand in the area in 2020. The completion of the metro rail has already pushed up demand in the region.
Projects expected to complete soon like the Outer Ring Road stretch from Nemilichery to Minjur, the Chennai Peripheral Ring Road connecting Poonjeri junction to Ennore Port, and Corridor Three and Five of the metro rail are additional factors that are expected to increase real estate activity in 2020. Konnur, Perambur, Kolathur, and Purasawakkam are just a few of the suburbs in North Chennai that will see drastic changes in 2020 with improved connectivity.
Co-living spaces will take off
A trend driven yet again by millennials, co-living spaces has overtaken India by storm in the last few years. The proliferation of sharing facilities like taxis, workspaces, and now, residences, means that India is staring at an ownership void. The co-living market has been propelled by the 55 million migrant students and workers looking for inexpensive but well-appointed accommodation facilities and a general lack of interest in taking on home ownership responsibilities. According to Knight Frank India, at least 70% of millennials prefer co-living spaces, which are typically distinguished by affordable housing replete with amenities of quality.
While Mumbai and Delhi are the leading markets, the trend is fast grabbing the attention of young workers and students in Chennai. Tamil Nadu is one of the five states that account for a large chunk of the student population in India with 6% of the total listed universities situated here, according to a Knight Frank report.
Tenants will turn homeowners
Millennials might shirk from ownership, but a January 2020 survey by NoBroker has found that 64% of renters living across six metros in India, including Chennai, are planning to buy a home this year. Purchasing confidence has received a small boost due to stagnant prices and home loan rates being slashed. With unsold inventory continuing to be a worry, developers are inviting buyers with interesting offers.
Ready-to-move-in homes don’t attract GST, and this has been another reason for increased interest in homeownership. GST rates were also slashed for affordable housing projects, which has made them an attractive proposition for current renters. Data from the Tamil Nadu housing registration department has shown an increase of 30,000 new property registrations in November 2019 year-on-year showing indications of revival and continued growth in 2020.
Continued expansion in South Chennai
South Chennai has seen stupendous growth over the past few years with OMR and ECR transforming into IT hubs. Suburbs like Adyar, Sholinganallur, Injambakkam, Thoraipakkam, and Velachery, among others, have witnessed exponential growth in the residential market due to increased commercial activity.
Most of these suburbs are located strategically along IT corridors and industrial areas, which has led to the rapid development of new projects along with amenities like schools, colleges, hospitals and other civic facilities making them attractive to homebuyers.