Chennai residential rentals take a beating

“I am paying a hefty maintenance on the vacant apartment on OMR. I need a tenant now,” says a desperate apartment owner.

His tenant has recently moved out of the two-bedroom unit to a larger apartment for a nominal increase in rent within the same township project.

“True, this is the story of Chennai’s residential rental market,” acknowledges Jayant Hemdev, Partner, Hemdev Real Estate, a leading player in the sector. “There has been no increase in rents in the last eight months or so. Tenants are finding more attractive alternatives and shifting.

“Till a year back, rental agreements provided for a 5–10 per cent hike every year. But, now, owners are happy as long as they have a tenant,” he says. Getting a new tenant often means houses are vacant for a few months, cut in rents and owners shelling out maintenance costs. This puts tremendous pressure on owners who often are paying EMI for the apartment.

Maintenance costs in large township projects range from ₹5 to ₹7 a square foot. This means the owners will have to shell out several thousand rupees a month if the apartment is vacant. Within the city, it can range from ₹3 to ₹5.

New apartments supply continues to increase across all residential areas in the city and the suburbs. “It is a tenants’ market,” quipped a real estate broker.

According to industry figures, the apartment inventory in the city and its suburbs is about 45,000- 60,000 units. That is more than a year’s worth of sales. So, potential first-time buyers do not feel the need to stick to rented apartments or pay high rents given the choice of the new apartments.

In addition, along the OMR, the IT corridor, to the South of Chennai, there is a huge supply of vacant residential space with owners who are keen on renting them out.

With social infrastructure such as schools and entertainment facilities improving, people are willing to move out to the city’s periphery. The situation is similar to the West and North of the city where the supply is on the increase.

Rents have dropped considerably in high-end apartments. For instance, in Egmore, where there has a been a huge supply of luxury apartments, rentals over the last one year have dropped from about ₹85,000 to ₹65,000 an apartment.

Abdur Ravoof, a property consultant, says the situation is particularly tough in high-end apartments – houses that fetch rent of over a ₹1 lakh a month. As companies and employees cut costs and expenses, rentals are taking a beating.

Also, with the continuous increase in supply of apartments, the tenants have a wider choice.

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