There is a definite slowdown in the sale of houses in Chennai against the backdrop of overall sluggishness in the industry. But it will not be accurate to generalise as demand continues in some well-established residential areas in the city, especially near suburbs and in areas where developers have not priced themselves out of the market, argues Ravi Appaswamy, Managing Director, Appaswamy Real Estates Ltd . Sales in the far suburbs have been hit, he says, but better connectivity and social infrastructure will help open out these areas.

Why are residential sales in Chennai continuing to be sluggish — is it supply mismatch or a pricing issue?

There is a slowdown in transactions with too many offerings in the market. But it is wrong to generalise about low offtake as you need to segment the city market based on geographical location and price.

Developers who get this right are seeing sustained sales. But you also have to take into account the overall slowdown in the industry. This is making buyers more cautious. The slowdown is apparent in the far suburbs as commuting becomes an issue; there is also concern about infrastructure. Buyers now have a wide choice of projects and locations in the market.

What are the active markets and what is driving sales?

Sales in the immediate suburbs, whether up to Sholinganallur or Tambaram in the south or Porur in the West are of no concern. There are transactions happening. Housing is not just about investment, there is a real need. It is in recent years that the quality of housing and amenities have improved. Last year, over 6,000 houses were sold in the areas between the airport and Porur against 4,000 houses the year before last. This year, the numbers could stagnate or drop. There has also not been any major increase in sale price since the projects were launched.

But why are developers not cutting prices in line with market trends?

We cannot say prices are not correcting or dropping in Chennai; developers are coming out with a range of offers to encourage sales. But it is not viable to cut prices in ongoing projects. Look at the way the cost of steel, cement, labour and land is increasing.

There is no assurance of stability in cost of inputs even during the 12 to 18-month period from when a project is launched to when it is handed over to the buyer. Prices are continuously increasing.

In your experience, what are the active areas in terms of markets and pricing?

The company has a healthy pipeline of projects in the heart of the city and immediate suburbs. In the suburbs, depending on the location, prices range around Rs 3,000 a sq. ft to over Rs 7,000 a sq. ft. In the heart of the city it has projects in Kotturpuram and Mylapore —– the Shanti Vihar property in Luz for instance — for about Rs 15,500-16,000 a sq. ft which means about Rs 2.5 crore to Rs 3 crore.

Within the city apartments up to Rs 4 crore are not hard to sell. It is only in the higher segments that there is a concern.

In the suburbs we are planning to launch a township-scale project in Pammal near Tambaram, over 7.5 acres with about 800 apartments. The first phase of the project has been sold out.

How do you open out the markets in the far suburbs?

Developers need to address the challenges of physical infrastructure and amenities to bring in large tracts for development, and pricing has to be realistic. Sewerage and water supply, particularly sewage disposal, is the major issue in these suburbs.

We are trying to push for organised development by a group of developers. This will have a significant impact.

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