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Chennai is known for its conservative mind-set, which reflects visibly on the trend surrounding residential property in Chennai, as well. For instance, home buyers in Chennai have historically been driven by location over and above most other considerations, and this had put definite limits on the demand and potential for community living in the city.
New Trends
There has, so far, been no scope for the growth of large-sized township projects within the city. Chennaites had been showing an unyielding preference towards living within the CBD because of the dearth of good schools, convenience stores, entertainment and restaurants in other areas. Developers had been more than happy to construct projects of 12-30 units with limited or no amenities, little or no green cover and extremely restricted open spaces.
In the coming months, Chennai will see a major change in this aspect, with a string of township property projects by developers of national stature under execution and nearing completion. These township projects have minimal plot coverage, which paves the way for large green cover and ‘lung space’ within the project. This is an added incentive to opt for community living, which was largely unheard-of until as late as 2006.
The new game changers in the Chennai residential real estate space are generous landscaping, serene environment, schools within the campus, big club houses, health club facilities for both indoor and outdoor sports, multiplexes in the vicinity, health care, restaurants and large swimming pools.
As a result, community living in the true sense is finally going to emerge in Chennai. We anticipate that once these large projects are fully executed, we will see a decisive forward momentum in the concept of large, well-equipped residential communities in Chennai.
General Scenario
Chennai’s residential market is witnessing considerable demand in the affordable segment – specifically for units in the price range of Rs 35-60 lakh – in locations which offer an acceptable degree of social infrastructure. Overall, the approximate absorption of residential properties in Chennai is between 28,000-30,000 a year, with most of the absorption taking place in the OMR and near the IT corridor.
It is still a predominantly end user-driven market, with 60-65% of the buyers being people purchasing for self-use. Chennai residential real estate investors tend to take a long term view, the modus operandi being to look at off-loading their holdings within an average time-span of 5-7 years. This attribute further strengthens the market’s end-user behaviour.
Chennai is a stable market wherein residential property prices move in accordance with actual sales. Price volatility due to other factors has been completely excluded. As a result, prices have note dropped at all in most projects over the last few years.
Also, residential property in Chennai is driven more by locations than by specifications and amenities.
The scarcity of land parcels and also the cost of premium FSI within the city have create relentless upward pressure on residential product pricing.
This has resulted in the available options in these locations shooting way past the budgets of even the upper middle class. Prices for standard apartments with minimum or no amenities within Chennai city can range from Rs. 1.5-5 crore.
A residential developer who wants to keep the cost of units in their projects affordable need to look at suburban locations with limited infrastructure. The only other option available to such developers is to cut the unit sizes so that they can include some degree of decent infrastructure.
Lack of locations with good infrastructure has hindered the supply of land, which has resulted in pricing going upwards whereas the pricing remains stable or stagnant in locations which lack good social infrastructure.
The need of the hour in Chennai’s residential real estate market is a good supply of land so that new locations can be opened up and the requisite social infrastructure and other utilities can be put in place.
If this happens, we will see more innovation in residential products, because developers will need to set themselves apart with uniqueness and differentiation in their products.
(The author is Managing Director, Chennai & Coimbatore, Jones Lang LaSalle India)
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