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Nina Varghese

Chennai , Dec. 23

THE real estate market in Chennai has been buoyant for the past few months with a number of companies announcing new projects and the space in the existing ones getting sold fast, say market sources.

The buoyancy has been attributed to the fall in interest rates, the entry of a large number of players and the migration towards the suburbs.

This year, the floating interest rates for housing finance has fallen from 9.5 per cent in the beginning of the year to 7.5 per cent now. The fixed rate is around half percentage point more, the sources said. According to the RBI figures, credit to housing forms the bulk of the banks' exposure — from Rs 14,100 crore in March 2000 to Rs 34,654 crore in March2003.

Mr Ramesh Nair, Senior Manager, Jones Lang LaSalle, said that in the residential market, a number of new and smaller developers had come up. This was a marked change from a couple of years ago when there were only a few large players in the market.

Housing projects coming up in Porur and Velacheri cost around Rs 1,000-1,200 per square foot.

The growth is from the mid segment of the market, according to Mr C. Subba Reddy, Managing Director, Ceebros Property Development Pvt Ltd.

This segment is willing to move away from the city centre and the going rate of around Rs 1,200-1,300 per square foot for apartments in places such as Arcot Road and Valasaravakkam.

Mr Reddy said that earlier, customers wanted only a good building, but now they were seeking more facilities such as ample space for car parking, lobbies, children's play area, association rooms and a well-equipped gym.

Three mega projects are coming up on the outskirts of the city — Mahindra City at Maraimalai Nagar, Sahara Housing at Poonamallee and the Lee Kim Tah Township at Siruseri on the Old Mahabalipuram Road.

One of the largest of the these projects is one by Sahara Housing, which is a division of Sahara India Ltd. This division is coming out with housing projects in Chennai, Coimbatore, Tiruchi, Madurai, Salem and Pondicherry for the mid-segment of the housing market.

Each of these will have 6,500 houses ranging from a single room-kitchen unit, which will cost Rs 3 lakh to a triple bedroom room apartment, which will cost Rs 25 lakh.

However, the project is behind schedule mainly because in Chennai, the company has had problems with land acquisition. Sources said that 150 acres is required for a large project and in this particular case, the company has had to deal with around 100 different owners.

In addition, there is the formality of `change of land use' from agricultural to commercial. The land acquisition is on in Coimbatore and is almost complete in Tiruchi, sources said. The Chennai project is at Veeraraghavapuram, which is on the Avadi-Poonamallee bypass road.

Chaitanya Builders & Leasing P Ltd is coming up with a project in Aynavaram for 300 apartments in five acres, according to Ms Nirmala Rajan, Executive Director.

Ms Rajan reiterated that the problem in putting up large projects lies with land acquisition as large areas with one owner is difficult to find. Chaitanya is also developing upmarket apartments in MRC Nagar and at CP Ramaswami Road.

But rising input prices may play spoilsport

THE gradual increase in the price of construction inputs such as cement, steel, sand and copper has more than offset the benefit of the recent reduction in stamp duty in Tamil Nadu, according to builders.

Steel and cement make up about 40 per cent of the construction cost. The firm trend in their prices, especially steel over the last year, has increased construction cost by Rs 50-60 a square foot, said builders who attended a press conference on Tuesday to promote a property fair in Chennai.

Mr P. Suresh, Managing Director, Arun Excello Foundations, said the recent reduction in stamp duty helped buyers save Rs 15,000-25,000 for a flat that cost Rs 10-25 lakh. The reduction only served to mitigate the increase in prices of inputs. A recent Union Environment Ministry notification that requires their approval for projects that cost Rs 50 crore and more may also add to an increase in cost by delaying projects, felt builders. One of the builders said about 10 outstanding projects in Chennai would require an additional clearance.

Explaining the pattern of real estate development in Chennai, builders said outlying suburbs such as Valasaravakkam have attracted a lot of investment. A builder identified two reasons for the development.

Groundwater reserves tend to be higher in outlying suburbs and there is a Central Government tax incentive for projects that need more than an acre of land. The search for water and land has taken builders to outlying suburbs.

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